The influence of dimensions of national culture on CSFs of ERP implementation: A case study K. Mohammad Cyrus Ph.D.
Ali Vaezi Nejad M.Sc
Industrial Engineering Department Amirkabir University of Technology Tehran, Iran
[email protected]
Industrial Engineering Department Amirkabir University of Technology Tehran, Iran
[email protected]
Abstract — Culture has a substantial and definite influence on organizations, organizational behavior, and the management of organizations. Taking the cultural differences into consideration is critical for a successful Enterprise Resource Planning (ERP) implementation. The literature indicates that the cultural differences cause difficulties in the implementation of Western ERP software programs in developing countries. In this research, by means of a questionnaire survey, we identified the most influential Critical Success Factors (CSFs) from each dimension of Hofstede cultural dimensions. Considering Iran's scores of Hofstede cultural dimensions, we can support ERP managers and consultants with guidelines on influential CSFs in areas of weak or undesirable cultural dimensions. The findings of our study reveal that Iran's highest ranked dimension, Uncertainty Avoidance, has the most influence on "clear and defined goals and objectives", "organizational support" and "minimal customization". Also Iran's second highest Hofstede ranking dimension, Power Distance, mostly affects "organizational culture", "top management support" and "organizational support". The other results and recommendation have brought in the end of this paper. Keywords-component; ERP implementation, Critical Success Factors, Hofstede cultural dimensions
I.
INTRODUCTION
Today Organizations not only compete just with quality and cost of their products, but also on new parameters like, time to market and meeting individual customers’ needs through customized products [1]. Hong and Kim [2] believe that these demands have prompted more firms to shift their IS1 strategies from developing in-house information systems to purchasing application software, such as ERP systems. Unfortunately the failure rate of ERP is relatively high [3]. Some reasons of these failures are mentioned in literature, such as: management issues, lack of infrastructure, cultural issues, lack of experience, training. Some researchers argued that ERP failure in developing countries is more related to cultural problems because people and organizations usually can't accept western software easily. 1
-Information System
In this paper, we intend to understand how cultural features of country people can affect on ERP implementation's success in an organization. For reaching this goal, we used Hofstede cultural dimensions which are the most cited reference about culture within IS literature [4]. We show that how much cultural dimensions affect on every CSF, through a questionnaire survey which proposed a relationship between CSFs in ERP implementation and Hofstede cultural dimensions. This paper is organized in five sections. In the next section a review on ERP, CSF and cultural dimensions is performed. In third and forth sections, research methodology and analytical results are explained, respectively. Finally, a conclusion and further research is proposed in the last section. II.
LITRATURE REVIEW
A. ERP Nowadays, companies must compete in the world markets in order to survive. To competing, it's necessary to decrease costs, improve quality, deliver products faster to customers and modify business process. ERP systems can help companies to reach their goals by creating synergy through integrating all operations in organization and making process more efficient. ERP is a multi-module application software system that allows a company to manage its business with potential benefits of improved process flow, reduced inventories, better data analysis, better customer service, and improved profit margins [5]. In 2010, implementation cost average of a ERP system was $5.48 million, implementation duration average was 14.3 months, average payback period was 2.5 years. About 61% of companies, their implementation took longer than expected duration, 74% of companies cost exceed budget and 48% of companies received 50-percent or less of anticipated benefits[6]. Consequently, this great investment need to careful planning and implementation. As the result, if the project fails, Implementer Company will face with irreparable damages.
B. Critical Success Factors There are many definitions of CSF in literature. Rockhar [7] has defined CSFs as “those few critical areas where things must go right for the business to flourish” and Bullen and Rockart [8] have proposed another definition for CSF as “the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department, or organization.” Identification of critical factors permits managers to obtain a better understanding of issues surrounding ERP implementation [9]. Shanks et al. [10] suggested that CSFs can help practitioners by providing clear guidance on where to focus attention and resources in planning an ERP implementation project. If we can identify CSFs that have influence on ERP implementation, we can prevent bad events and failure during implementation and also we can identify our weak CSFs and reinforce them. Al-mashari et al. [11], have classified CSFs to 5 categories. These categories are: setting-up, implementation, evaluation ERP success and ERP benefits. Bradley [12] has divided CSFs to 5 management functions. These are planning, organizing, staffing, leading and controlling. Cantu [13], created an ERP implementation framework including five CSF that are Management/Organization, Process, Technology, Data and People. According to the Cantu's study, Sun et al. [14] showed that People CSFs is the most important class. Ngai et al. [15] studied 10 countries and then categorized 80 sub-factors to 18 main CSFs. Top management support, education and training are introduced as most important CSFs. C. Culture Culture is a set of ideas shared by members of a group [16].Culture is learned and not inherited [17]. There's lots of research showing that culture has fundamental and definite impact on organization and organizational behavior and some specific research has focused on the effects of cultural issues on the success of ERP implementation. Yusuf et al. [1] argued that an awareness of cultural differences is critical to ERP success. Huang and Palvia [18] suggested that different cultures in different countries create some issues and challenges for ERP implementation. Sheu et al. [19] pointed out that different cultures affect on ERP implementation operations. In this paper, Hofstede cultural dimensions have been used, to determine the effects of culture on ERP implementation. Hofstede [20] proposed five cultural dimensions that we can distinguish differences between countries with them. Description for proposed dimensions listed below [20]: Power Distance Index (PDI) suggests that a society's level of inequality is endorsed by the followers as much as by the leaders. The high Iranian Power Distance characteristic is indicative of a high level of inequality of power and wealth within the society. The society accepted high power distance as their cultural heritage.
Individualism (IDV) on the one side versus its opposite, collectivism, that is the degree to which individuals are integrated into groups. The low ranking on this Dimension for Iran indicates the society is Collectivist as compared to Individualist. Masculinity (MAS) versus its opposite, femininity. It suggests that how much men values like courage, spleen, boldly and objectivism are preferred to women values like cooperation, quality of life and make friendly relations. Iran's score in this Index show that Iranian people not only are hardworking, but also they like live comfortable. Uncertainty Avoidance Index (UAI) deals with a society's tolerance for uncertainty and ambiguity. It indicates that what extent a culture programs its members to feel whether uncomfortable or comfortable in unstructured situations. Iran's society does not readily accept change and has risk aversion personality. Long-Term Orientation (LTO) versus short-term orientation. It's a new dimension that Hofstede had added it to 4 dimensions. It shows to what extent society members are diligent and patient to reaching long term gains. This index didn't take into account for Iran. III.
METHODOLOGY
To determine CSFs for our study, we studied 81 journal and conference paper then due to comprehensively, we chose 9 papers in field of CSFs. Based on the identified papers, a list of 26 CSFs was selected for this study. We categorized them to groups that Cantu had offered. Since we want to know the relation between CSFs and Cultural dimensions, we chose only those CSFs that were related to human, therefore we used only 3 categories of Cantu's paper that were related to human. Reference [21] shows the chosen CSFs and their references. As mentioned earlier, we want to identify the influence of each cultural dimension on CSFs. We selected Hofstede cultural dimensions because we know Iran's status in different cultural dimensions. So if we can make a relation between CSFs in ERP implementation and Cultural dimensions, we can advice managers and consultants to pay more attention to those CSFs that affect weak or undesirable Iranian cultural dimension. Identifying how much each CSF affects from each cultural dimension, we designed a questionnaire survey that only Likert-scale questions were used in it. We asked respondents to choose a number, which indicates amount of influence of each cultural dimension on each CSF. The validity of questionnaire was examined by interview with some of ERP managers and specialists. We selected an industrial company in Iran that has implemented ERP successfully. So we asked all of the ERP managers, consultants and specialists who were involved in implementation to answer to our questionnaire. 18 questionnaires were sent to them. Two cases were dropped due to incomplete data entry.
TABLE I.
INTERNAL CONSISTENCY ANALYSIS RESULTS
Long-Term Uncertainty Power Masculinity Individualism Orientation Avoidance Distance Standard division Cronbach’s alpha split half Reliability
1.33
1.49
1.62
1.56
1.81
0.966
0.942
0.939
0.939
0.883
0.874
0.744
0.992
0.896
0.896
We used Cronbach's alpha and Split Halves methods for assessing the reliability of identified factors. The most common internal consistency measure is Cronbach's alpha [22]. Theoretically, alpha varies from zero to 1, since it is the ratio of two variances. Many researchers consider an alpha coefficient at least 0.070 or more to be adequate for the scale [23]. Table I shows the maximized reliability coefficient ranged from 0.74 to 0.96, indicating that our data are reliable. IV.
REASEARCH FINDINGS
The important results of data analysis from the survey questionnaire are presented in Table II. We explain these finding for each cultural dimension separately. A. Power Distance "Organizational culture", "Top management support", "company-wide support", and "Frequent communication with the users" are most important factors that Power Distance Dimension affects them. In developed countries, power distance between manager and employee is low, but in Iran this organizational gap determines the power. Whatever power distance between organizational roles be high, it means that team work isn't done well. In this situation, managers make decision alone and employees in lower levels aren't allowed to be active in decision makings. Since there are lots of problems in lower levels that management isn't aware, this kind of decision makings might lead to failure. Though power distance is relatively very high in Iran and this factor can affect in success of projects, involved managers and users in implementation should pay more attention to which CSFs that are inherently more impressible from this cultural dimension. For example, "Organizational culture" and "Top management support" are affected from power distance dimension more than other CSFs. Therefore it's preferred to reform organizational culture and style of top management support before implementing ERP. Reforming structures and delegating decision-making authority to the lower levels can decrease negative effects of this Iranian cultural dimension. B. Individualism As a result, being individualism or collectivist of society members has directly impact on "Interdepartmental cooperation", "Company-wide support", "Interdepartmental communication" and " Project team competence". As Iranian people are relatively collectivist, before doing any transformation in organization, it's necessary to improve weaknesses related to this cultural dimension like not being
responsible for shortages and attributing failures to other factors. For increasing the probability of success of CSFs that are affected this cultural dimension, we should increase implementation team member's incentives for responsibility and competitiveness. C. Masculinity With respect to average scores of respondents, this cultural dimension has less effect on CSFs and so we can say it hasn't very significant effect of success or non-success of ERP implementation. "Project team competence", " balanced and knowledgeable implementation team" and " Interdepartmental communication" are most influential CSFs from this dimension in Iran. According to Iran's score in this dimension, "project team competence" should invigorate more. Solutions like definitive awards and clear promotion system can invigorate this cultural dimension of staffs. D. Uncertainty Avoidance The results show that "Clear goal and objectives" is the most important CSF that is affected by Uncertainty Avoidance dimension. Regarding to this result, we can say that if the ultimate goal of ERP implementation and steps to reach it be specified and obvious for Users and employees, they try to undergo difficulties, failures and problems until their organization reach its ultimate goal. "Company-wide support " and " Minimal customization" are the other effective CSFs from this cultural dimension. Iranian people usually try to avoid uncertainty, so they resist to activities that change present situation such as customization and BPR. They want to control everything in order to eliminate or avoid the unexpected. This dimension is one of the most important cultural dimensions that can be very effective in different steps of implementation. To omit or reduce uncertainty, we need strict laws, rules and regulations that enforce in the organization. Telling the objectives and benefits of ERP implementation in organization, encouraging employees to be creative, and rapid and transparent notification can reduce employees' uncertainty avoidance morale and thus increase the probability of success in implementation. E. Long-Term Orientation "Clear goal and objective", "Company-wide support", "software testing and troubleshooting", "monitoring and evaluation of performance" and "management of expectation" are the most affected CSFs from Long-Term orientation index. Success of these CSFs directly is related to employees' patient and foresight. So it's obvious that in a society like as Iran that is short-term oriented, not pay attention to these CSFs result to failure of projects. Drawing implementation goals and objectives for all of the staffs, is sign of long-term orientation of organization that try to draw the future of organization for its staffs. When a system designed, some of people like to run it immediately but with spending little time for software testing and troubleshooting,
TABLE II. Long-Term Orientation First factor Second factor Third factor Fourth factor Fifth factor Sixth factor Seventh factor
Clear goal and objectives
HIGH AFFECTED CSFS FROM DIFFERENT CULTURAL DIMENSIONS
Uncertainty Avoidance Clear goal and objectives
Masculinity
Individualism
Power Distance
Project team competence
Interdepartmental cooperation
Organizational culture
balanced and Knowledgeable Company-wide support Top management support implementation team Software testing, and Interdepartmental Interdepartmental Minimal customization Company-wide support troubleshooting communication communication monitoring and evaluation Frequent communication Frequent communication Organizational culture Project team competence of performance with the users with the users Management of Open and honest Interdepartmental User involvement Change management expectations communication communication Software testing, and Frequent communication Open and honest Top management support Project Management troubleshooting with the users communication Change management Use of consultants Top management support User involvement Project team competence Company-wide support
Company-wide support
can rescue organization from future serious problems. Great management of expectations can solve problems that shortterm peoples might make.
[8]
[9]
V.
CONCLUTION
This paper provides a valuable relationship between CSFs of ERP implementation and Cultural dimensions. Since the main reasons of ERP failure are related to human factors, finding the relation between human internal factors and influential factors on ERP implementation is very important. In This research, amount of Iranian cultural dimensions' affect on different CSFs is obtained. According to results and Iran's scores of Hofstede cultural dimensions, some recommendations were suggested for amplifying CSFs which are more affected from weak Iranian cultural dimensions. Future researches can examine affect of cultural dimensions on CSFs in other countries and find solutions to decrease undesirable affect of weak cultural dimensions on CSFs.
[10]
[11]
[12]
[13]
[14]
[15]
REFERENCES [1] [2]
[3]
[4]
[5]
[6]
[7]
Y. Yusuf, A. Gunasekaran, and C. Wu, “Implementation of enterprise resource planning in China,” Technovation 26, 2006, pp.1324–1336. K.K. Hong, and Y.G. Kim, “The critical success factors for ERP implementation: an organizational fit perspective,” Information & Management 40, 2002, pp. 25–40. K. Hong and Y. Kim, “The critical success factors for ERP implementation: an organizational fit perspective,” Information & Management 40, 2002, pp. 25-40. S. McCoy, “Integrating National Cultural Into Individual IS Adoption Research: The Need for Individual Level Measures,” AMCIS, Tampa, Florida, USA, 2003. M. Fan, J.Stalert, and A.Whinston, “The adoption and design methodologies of component-based enterprise systems,” European Journal of Information Systems 1, 2000, pp. 25–35. Panorama consulting group, “2011 ERP Report, 2011,” 2011, Available at: http://panorama-consulting.com/resource-center/2011erp-report/ J. F. Rockhart, “Critical Success Factors,” Harvard Business Review, pp.81-91, March-April 1979.
[16] [17] [18]
[19]
[20] [21]
[22] [23]
C. Bullen, and J. Rockart, “A Primer on critical success factors,” in: C. Bullen, and J.Rockart, The Rise of Managerial Computing: The Best of the Center for Information System Research, Dow JonesIrwin, Homewood, Illinois, 1986, pp. 383–423. I.C. Ehie, and M. Madsen, “Identifying critical issues in enterprise resource planning (ERP) implementation,” Computers in Industry 56, 2005, pp. 545–557. G. Shanks et al., “Differences in Critical Success Factors in ERP Systems Implementation in Australia and China: A Cultural Analysis,” Proceedings of the European Conference on Information Systems, available at: http://is2.Ise.ac.uk/asp/aspecis/20000073.pdf. M. Al-Mashari, A. Al-Mudimigh, and M. Zairi, “Enterprise resource planning: a taxonomy of critical factors,” European Journal of Operational Resarch 146, 2003, pp. 352–364. J. Bradley, “Management based critical success factors in the implementation of Enterprise Resource Planning systems,” International Journal of Accounting Information Systems 9, 2008, pp. 175–200. R. Cantu, “A framework for implementing enterprise resource planning systems in small manufacturing companies,” Master’s Thesis, St. Mary’s University, San Antonio, 1999. A.Y.T. Sun, A.Yazdani, and J.D. Overend, “Achievement assessment for enterprise resource planning (ERP) system implementations based on critical success factors (CSFs),” Int. J. Production Economics 98, 2005, pp. 189–203. E.W.T. Ngai, C.C.H. Law, and F.K.T. Wat, “Examining the critical success factors in the adoption of enterprise resource planning,” Computers in Industry 59, 2008, pp. 548–564. Y. Allaire, and M.E. Firsirotu, Theories of organizational culture, Organization Studies, 1984, pp. 193-226. G.H. Hofstede, Cultures Consequences, Newbury Park, CA: Sage, 1984. Z. Huang, and P. Palvia, “ERP implementation issues in advanced and developing countries,” Business Process Management 7, 2001, pp. 276–284. C. Sheu, B. Chae, and C. Yang, “National differences and ERP implementation: issues and Challenges,” Omega 32, 2004, pp. 361– 371. G.H. Hofstede, available at: http://www.geert-hofstede.com A. Vaezi Nejad, “Localization methodology for ERP Implementation in Iranian organization – Case study,” Master's Thesis, Amirkabir University of technology, Tehran, 2010. J.M. Cortina, “What Is Coefficient Alpha? An Examination of Theory and Applications,” Journal of Applied Psychology, 1993, pp.98-104 J.C. Nunnally, Psychometric theory, 2nd ed, McGraw-Hill:New York, 1978
