An Empirical Investigation Of A Canadian Organization

Published Date: 02 Nov 2017

The study focuses on the importance of ERP training by external consultants to make the employees aware of the new system. The study puts some light on the importance of adequate amount of training to the employees. Too little training and too much training can cause decrease in the outputs expected out of the training. Here, we focus on the importance of identifying the period when there are no more innovative productivity gains with further training. The reason might be that training has equipped them with the required expertise to explore the system themselves. The study would be done on a company XYZ which implemented their ERP system 2 months ago. The longitudinal study results show that the relationship of training duration and innovative productivity would have a positive relationship with time but the strength of the relation would decrease after a threshold time period. The limitations and implications for future research are discussed as well.

1. INTRODUCTION

ERP stands for Enterprise Resource Planning, and the term is used for any software system designed to support and automate the business processes of medium and large businesses. The well-known ERP systems are SAP R/3, Oracle Applications, PeopleSoft and Baan. As Chand. et.al (2005) mentioned, some of the key characteristics of ERP systems are: (Taken from Chand et al’s article for ERP definition)

1. ERP systems are pre-written software with sufficient flexibility to integrate most of the business processes of an enterprise. That is, functionalities can be added as the tools are already provided in the software. The better understanding an enterprise has of the software, the more they can innovate with the software to create different modules.

2. They are large in terms of the data items in the database. They are large in terms of the operational and management reports that can be generated. They can be used at a massive scale to integrate various departments of an organization.

3. ERP systems are very complex. Besides the usual correlation between size and complexity, there is an inherent data structures complexity in ERP systems because ERP modules do not share data by passing it from one module to another module but makes it available to different modules via common data structures.

4. ERP systems are costly to buy and more expensive to implement in an organization. It is very important to make right decisions about the features and processes required to implement ERP systems and the training required for the employees to learn and adapt to this system.

2.1 ERP TRAINING

The importance of training in ERP implementation has been extensively studied in the literature. Elisabeth et al. (2003) mentioned the ERP training as an important critical success factor in the successful implementation of ERP systems. Umble and Haft (2003) mentioned that "training is probably the most widely recognized critical success factor, because user understanding and buy-in is essential. Holland et al. (1999) mentions training and feedback as one of the tactical success factors in the ERP implementation. The training post ERP implementation is imperative for the users to get to know the system better and become experts in using that system. Since this is a long term investment, it is very important to make the employees comfortable with the system so that they can explore the system to its full potential.

The issue of sufficient or excessive training in an ERP implementation has not been studied in detail by the literature. However, certain studies provide evidence that sufficient training is one of the key ingredients for success (Al-Mashari et al., 2003). Unfortunately, numerous studies show that training time is often underestimated and training budgets are often set at very low levels (Fletcher et al., 1992; Rocheleau, 2006). Robey et al. (2000) did a study and concluded that firms that managed to overcome knowledge barriers and successfully assimilate new processes invested approximately 15–20 percent of their project budgets in formal team training. The companies that were less successful, however, spent a maximum of 10 percent of their project budgets on training. (Taken from Gil Alskoy article). These studies show that undertrained employees result in an unsuccessful ERP implementation and it is very essential to provide adequate training to the employees. But the literature is not clear as to what is the time frame of this ‘adequate’ training. Is it dependent on the employees? Is it dependent on the scope of the ERP project? Consulting costs are reported to amount to over 60 percent of all ERP project costs, including capital and operating expenses (Swartz and Orgill, 2001).

As mentioned by Plaza and Rohlf (2008), ERP training is economically justifiable only up to a certain level and the combination of formal training and training on the job is the most cost-effective strategy from the consulting-cost perspective. Training is expensive, but consulting costs also form a large portion of project costs (Haines et al., 2000). Therefore, a proper balance between the cost of training and the overall cost of consulting must be maintained.

2.2 INNOVATION PRODUCTIVITY

ERP systems have been utilized by organizations to save both financial and human resources in the long run and to make the systems more efficient. However, to give these benefits a dollar value is a complicated task. There have been studies which measure the benefits of ERP systems. They either focus on the financial aspect or the process benefits of ERP systems. One of the benefits of an ERP system is that the employees can enhance it to a greater extent and mould it according to the organizational needs. But, expertise comes as a pre requisite for improving performance and innovation. As long as the employees are not fully comfortable with the system and are aware of its strengths and weaknesses, they can’t explore the system and understand its boundaries. Studies have confirmed that there is a relationship between expertise and innovation. Faraj and Sroull (2000) mentioned that expertise co-ordination is responsible for higher performance. The article also mentioned that these experts would be imperative in innovation of the organization. They are in a better position to understand the system and its complexities. Gloet and Terziovski (2004) mention that the process of innovation depends heavily on knowledge of the systems and the management of knowledge and human capital should be an essential element of running any type of business.(Taken from Gloet and Terziovski article) So, creating expert employees in their domain would have an effect on the innovation productivity of these employees. In this study, I use the balanced scorecard approach to measure the change in the innovative productivity of the employees using the ERP systems undergoing external training from ERP consultants. I use one of the factors (Innovation productivity) of a Balanced Scorecard developed by Rosemann and Wiese (1999) to measure the benefits of an ERP system. This is a part of the innovation benefits of the BSC among the other benefits which were process benefits, customer benefits and finance benefits. The innovation benefits include the innovative productivity as an automate benefit or ERP implementation. This benefit states that the goal of the ERP system is to make the employees competent users of the system so that they can exceed the normal use of the system and become innovative with it.

According to the model by Bradford and Florin (2003), innovative capacity is one of the key factors leading to a success of ERP implementation. It mentions that a firm having an innovative environment would be able to take out the maximum from the ERP software and would be most beneficial. So, the innovative factor takes a key role in the success of the ERP system.

Thus, the quality and effectiveness of the training processes affects the employee ability to use the new/revised processes and the system. After the employees become experts in their domain of ERP, they should be able to innovate with the system as the scope defined by the ERP systems is immense. Training plays a big part in creating experts which can be leaders in innovation and can increase the innovation productivity of an organization. Is this relation between training and technological innovation a linear one? The literature explains the relation up to a certain time limit. Studies have shown that training in ERP is related to increased innovative productivity (Chang, 2004). Cheng (2004) mentions that the training by external consultants along with the organizational support can lead to increased productivity.

2.3 CREATIVE ABILITY

This article basically deals with necessity of monitoring the relationship between the number of hours of post implementation training by external consultants and the innovative productivity of the employees. However, said that it is not feasible for the external consultants to train the employees if they have little capacity to innovate. Employees have to be creative or learn creative skills within the company. Normally, all the big companies implementing an ERP have training programs which aim at improving the creative skills of these employees. The aim of the paper is not to study those training programs. So, the purpose of this paper is to study the relationship between post implementation ERP training by external consultants and moderated by the creative ability of the employees.

It is also important that training and knowledge-transfer strategies are established at the start of the project, and included in the calculation of project duration and cost. The ERP adoption process has been investigated thoroughly, and its impact on the operational performance of companies is discussed extensively in the operations management literature (Jacobs and Bendoly, 2003).

Unfortunately, the ERP project-management literature lacks adequate coverage of team performance issues related to learning and knowledge transfer. Analytical tools that make it possible to predict the impact of training on team performance and to accurately calculate resource costs is scarcely studied in the literature. Without the ability to arrive at more accurate estimates during the planning phases of their projects, companies try to compensate for inaccurate guesses by hiring more consultants.

The aim of this paper is to understand the relationship of post implementation ERP training with the increase of innovative productivity over time. Does the extended training by consultants always lead to an increase in the innovative productivity of the trainees or does it follow a curvilinear path or it increases and then becomes constant after a period of time?

3. METHODOLOGY

3.1. SAMPLE

The sample would be programmers and senior programmers of the ERP team at XYZ. The team comprises of 52 members and the team has the responsibility of implementing the ERP system and using it in their daily functions. They are both males and females with an average age of 31 years. The quality of training given is a controlled variable as the ERP training team of external consultants is one of the best teams of the IT industry. These professionals have implemented the ERP at various locations and have an expertise in this industry.

The study is a longitudinal study as I aim to measure how the relationship of post implementation ERP training from external consultants varies with the increase in innovative productivity over a period of two years. To ensure that the study provides meaningful results, I have used creative ability as a moderator so that the variance in the creative ability levels of different employees can be accounted for in the model. An organization named XYZ (not disclosed because of confidentiality) implemented their ERP system two months ago. There are some unidentified issues with the ERP system. They have a plan to spend a lot of money on external consultants for a period of next three years. One of the directors at the company said, "It’s worth it". This study would find out if it’s worth the resources both in terms of time and money to spend on the external consultants for a period of three years. This study wants to measure relationship between consultancy hours and innovative productivity of the employees who take some time understanding the system and the benefits that can come out of the system.

This study actually want to focus if the time frame of three years for continuous support is required or is there a room for saving some human and financial resources and at the same time make the staff more productive and rely on their own strengths? The data would be collected four times – one when the training by external consultants just started (t = 0), after one year (t = 1), after two years (t = 2) and after three years (t = 3). There is a relationship supported by research between post implementation training by ERP consultants and improvement in the technical innovative productivity of the employees as they gain expertise with the system which makes all the organizations follow the training schedules very rigorously for all the employees.

But, the research does not mention if the relationship changes over time or how the impact of the training on productivity is impacted over time and when do the support from external consultants stop having an impact on increasing the innovative productivity of the employees. This impact can take place due to employees becoming negligent in their work as they expect the solutions to all their queries from the consultants. They may not try to be innovative and find solutions to the problems themselves thereby hindering their capacity to think innovatively. Plaza and Rohlf (2008) studied the relationship of training and performance of ERP implementation and mentioned the performance threshold point where there is no further improvement in the performance of the employees with further external training by consultants. This study is not to present a mathematical formula to measure the time after which the external training through consultants has no further effect on the innovative productivity. This study measures if there is a pattern of decline of innovative productivity which becomes flat indicating no further innovative productivity within a period of 3 years. It has to be noted that this training is not related to the on-the-job training or training that is done inside the organization to better understand the ERP systems.

Plaza, M., & Rohlf, K. (2008). Learning and performance in ERP implementation projects: A learning-curve model for analyzing and managing consulting costs. International Journal of Production Economics, 115(1), 72-85.

3.2 MEASURES

Post implementation ERP training – The post implementation training is measured as the training time (in hours) when the ERP project is given a GO LIVE from the client team to the time the stage 2 ends. That is, the company is still taking the support from the external consultants on a regular basis and organizing official training sessions. Regular basis means once in two weeks. The details of the number of hours spent on the training for a particular ERP implementation project would be taken from the company’s training records. This would start with t=0 and finish at t = 3.

Innovative productivity – The innovative productivity would be measured per individual receiving the training. The team receiving external training from ERP consultants comprise of around 50-60 people those who are supposed to understand the system and come up with new reports and function modules. The innovative productivity would be measured as the number of new initiative taken by the employee such as developing a new functional module, user exit and creating new process or report which would enhance the understandings and boundaries of the ERP systems. This study, since it is being done in a field, a real organization, so I believe that just going by the number of modules developed or areas explored by the employee would not give the correct picture. So, the overall ideas generated in the team would be taken into account during these stages to assign a value to the innovation productivity score. There is another academic scale to measure innovation called OECD Olso Manual (1992) which has a section to measure technological innovation. But this scale cannot be used in this case as this is a very specific situation in a particular type of ERP system. So, the process of measuring innovative productivity would be specific to their task.

To get more clarification of data, the 360 degree feedback would be processed for these employees as there is a column in the performance appraisal that mentions "value creation" which is directly related to innovative productivity. Value creation column is monitored by the supervisor which mentions the degree of creativity showed by the employee during a certain period. It ranges from (Below peer group = 5) to (Top of the peer group = 1). This is measured against their innovative performance regarding their work in the organization.

Creative ability – Kilgour (2006) mentioned that creative ability is the process of merging thought categories, or mental images, either across or within domains, in ways that have not been done before, in order to develop an original and appropriate solution to a situation or problem. The creative ability is measured by the Torrance Test. This test was developed by Torrance in 1960 and is used to test a range of four factors that are considered to constitute the creative ability process:

i) Fluency - total number of relevant responses

ii) Flexibility - number of different categories of relevant responses

iii) Elaboration - amount of detail in the responses

iv) Originality - the statistical rarity of the responses

The first and third of these factors relate to idea appropriateness while the second and third relate to idea originality. The results of the Torrance test would be graded by a specialist who has a prior experience in this field. The graded results would be obtained and used in the analysis of the study.

The test is divided into two parts: creative ability by words and creative ability by pictures. These two results give the overall creative ability of an individual. (Please refer to the appendix 2 for an illustration). The results of the test would be aggregated to have the averaged result of the team. The total marks would be out of 100. The result would be put up on a scale of 1 to 5, 1 being the lowest (0-19) and 5 being the highest (81-99). This is a validated scale used to measure the creative ability of an individual.

4.1 RESULTS (EXPECTED)

The measures of all the three variables would be graded on a Likert scale from 1 to 5. Regression tests would be performed initially to support the relationship between these variables by looking at the significant values. The results are expected to show a positive relation for the first year, the strength of the positive relation would decrease during the second year and by the end of third year, it would be expected to have no relationship. With regards to moderators, those employees having a high creative ability would be able to make better use of the training provided by external consultants as they can go ahead and explore various other opportunities provided by the system as they have the capability to think outside the box. Since the company follows a risk mitigation strategy as they have a highly developed testing department which tests the code on a number of situations before it is sent to the production server, the employees are encouraged to explore new arenas and commit mistakes in an attempt to create a new process or a module. For employees with zero or very low score on the Torrance test, the relationship of training hours and innovative productivity can target trainings which can improve their creative ability so that they can take 100% out of the training that is given to them by expert external ERP consultants.

5.1 CONCLUSION

This study was done to understand the importance of training in helping employees gain expertise of the ERP systems which are very complex information technology systems. It served the main purpose of recognizing that it is important for a company to continuously monitor goals of the ERP training and check if it is aligned to the goals of the organization. If the company promotes an atmosphere of innovation through ERP systems, it should monitor after certain time periods the success of the ERP training in improving the innovative productivity of the employees. The study also shows how the company must provide creative thinking training to some of the employees who have less creative ability to enhance their thinking horizons. Since ERP systems are very expensive to implement for an organization, it becomes even more important to take out the maximum benefit from the system. The study is expected to provide the results that gaining expertise through ERP training by external consultants is imperative to innovative productivity of the employees and it loses the relationship with the external trainers with time. It is not always a straight line and once the employees are aware of the systems, they can pursue the innovation through the ERP system on their own. However, it is not convenient to define a certain time frame which is generalizable to all the projects since there are a lot of variables like size of the project, the number of employees, the culture of the company, the motivation of the employees, etc. This study establishes the importance of monitoring the gains from the training by ERP consultants and the relationship between innovative productivity and number of training hours. The results are expected to show a decrease in the productivity after a period of two years and that is the time when the company has to monitor if it is "worth it" spending large amount of financial resources on the external training consultants.

6.1 LIMITATIONS AND IMPLICATIONS FOR FUTURE RESEARCH There have been studies critiquing the Torrance test that results on the four constructs being measured do not show high levels of correlation between tests (Antastasi, 1988). A respondent may score highly on originality (and in fact all four constructs) in one test but poorly on this same construct in a different test. The creative thinking outcomes may be a result of a selection of cognitive processing strategy rather than inherent differences (Plucker, 1998). However, we have tried to control some variables but others were out of the scope of the study.

Another limitation can be the measure of variable innovative productivity of the employee and hence the team. The source of data is the "value creator" column of the performance appraisal. This is probably the most reliable means to measure the variable but this is also subjected to somewhat personal opinions. I could not use self questionnaires because the objectivity of the answers would be very low in that case. Further studies could use develop more standard company specific scales to measure the innovative productivity of the employees.

The future research could include the variables such as size of the company, the project size, the culture to come up with more standardized relationships and if possible, a mathematical formula which can be used by the organizations to train their employees during an ERP implementation to maximize the productivity benefits from the employees. This would go down a long way to save precious financial resources for the company as ERP systems cost a lot of money. So, if there is a possibility to save some financial resources without impacting the overall productivity of the employees, it has to be explored.

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