ERP Software: Its Effect on Human Performance and Impact on Productivity
May 8, 2006 Jerome Peloquin
This is the first in a series of three articles that address the complex relationship between technology, in the form of ERP software, and enhanced human performance, as indicated by business performance. This article examines the history of technology-enhanced performance in the workplace and, specifically, explores the advance of technology in supporting management decision making. It also presents some fundamental behavioral principles that drive human performance and relates them to technology in general and ERP systems specifically.
The overall focus of all three articles is the critical relationship between the class of technology referred to as ERP software–particularly large-scale, integrated computer software applications–and human performance.
How well do today’s ERP applications serve the goal of improved human performance? What is the appropriate role of the CIO and technology in the “performance” equation? These and other questions will be explored within the theme of Peter Drucker’s statement that “the first maxim of management is productivity.” Performance Paradigm believes this theme should be the litmus test for engagement in any IT initiative.
In this series of articles, I will examine both the evolution of enterprise resource planning software and the resources, human and technological, needed to assure improved human and organizational performance.
The printing press, as the late futurist and scientific pundit Carl Sagan pointed out in his book Broka’s Brain, gave man a tool to collect and store his accumulated knowledge inexpensively and with relative ease. Furthermore, it served as the basis to communicate that knowledge through the replication and distribution of the printed page. The advent of the computer has permitted man to not only store his knowledge, but to organize, manipulate, and modify it easily, and then to communicate it virtually at the speed of light.
In what way has technology effected change? Many of the issues facing management have changed little over the centuries. The same problems vexing the Pharos and their Overseers are still with us; 21st century managers still worry about improving performance and communication, about responding quickly and effectively to changes in the market and workplace environment. Although technology has greatly improved both an individual’s and an organization’s ability to handle, access, respond to, and manage information, the fundamental issues of how information is communicated, and then acted upon to achieve a positive, desired result are still present.
Performance Paradigm believes that it is self-evident that the purpose of the computer in the business world should be to improve profit through the enhancement of individual and organizational performance.
A Performance-Based Bias
A new class of managers, trained in the science of human behavior called Human Performance Technology (HPT), are beginning to have an effect upon the application of technology in the workplace. The productive performance paradigm, developed by Thomas Gilbert, requires that any expenditure be measured in terms of the cost, or value, of human performance as well as traditional return on investment. A key attribute of this productive performance paradigm is the requirement that in order to improve performance and productivity, managers must receive accurate and timely information on business performance. Armed with accurate and timely information, managers can act with confidence as they make the decisions necessary to meet their sales volumes, production quality goals, profit margins, and key business ratios.
An Overview of HPT
Accuracy and timeliness of information are the key elements in making effective business decisions; accuracy and timeliness of information, or feedback, to the individual who is required to make a decision is a cornerstone of HPT. When managers have accurate business information, in a timely manner, they are then in the position to make the best possible business decisions: Making informed, effective decisions is the crux of a manager’s job. The computer, when combined with appropriate software, is the single most effective tool for collecting, organizing, and communicating business information for use by management, specifically, and the organization, generally. It is important to note that the “computer” includes software, hardware, and people (the latter being largely overlooked in many IT initiatives).
Given this appreciation of the value of a computer-based information system in business, it is worthwhile to present a brief overview of the fundamental pillars of HPT that underlie its use as a guide for management. HPT, initially conceived and defined by Thomas F. Gilbert in his book Human Competence: How to Engineer Worthy Performance, is a methodology that supports the effective analysis of performance in an organization. In addition to determining an appropriate intervention (e.g., technology, training, etc.) to correct a deficiency in performance, it is critical to note that HPT is actually the way to manage people by focusing on desired performance. It is this focus on measurable performance, and, more specifically, quantifiable human performance, that differentiates HPT from other technology-centric methodologies.
In the HPT framework, there are six principle elements. In order to provide a brief introduction of the HPT framework, a short summary of each is presented below.
Performance Analysis Within HPT
When Gilbert created HPT, he conceived of six conditions necessary for effective human performance, all of which could be analyzed for their effect upon an individual or organization. These six areas were segmented into two categories–those that were under the control of management and those that were under the control of the individual. The six dimensions of performance are:
For the scope of this article series, the application of the first three dimensions are most pertinent to the evaluation of the effect of an ERP system on an organization.
Early Attempts to Record Information
The first efforts to provide written documentation (as generally accepted) came about in the time of the Sumerians (circa 3500 B.C.E.). Their creation of a formal written language was one of mankind’s greatest advancements. The process of impressing symbols into clay tablets (the first I/O devices) spread to other cultures; the Egyptian’s adopted a similar form of recording information using the cuneiform language.
In Egypt, the scribes were a respected class of learned technicians who had mastered the use of language. This group of recording technicians made another technical jump when they transitioned from using clay tablets to papyrus scrolls. These scribes, working with a stylus on papyrus “paper” recorded and documented the thoughts and actions of ancient managers.
Later (circa 300 B.C.E.), the “counting board” appeared in Greece. In outdoor markets of those times, the simplest counting board involved drawing lines in the sand using one’s fingers or a stylus, and placing pebbles between those lines as place-holders representing numbers. With the need for portable devices, wooden boards, with grooves carved into the surface, were then created and wooden markers (small discs) were used as placeholders. These counting boards represented an early approach at a formal method for representing, and calculating, critical accounting data.
In China, the emergence of the abacus, with its numerical shorthand, was, in reality, the forerunner of the modern computer. The abacus, as we know it today, appeared circa 1200 A.D. in China. On each rod, the classic Chinese abacus has two beads on the upper deck and five on the lower deck; such an abacus is referred to as a “2/5 abacus.”
These seemingly unrelated facts are actually quite relevant to our topic, since the scribes’ clay tablets and papyrus scrolls, as well as the counting boards and abaci, were designed to improve the quality of information that was the basis of decision making by business managers in those times, and, hence, the organizations they served.
As mentioned earlier, managers from the ancient world wrestled with many of the same problems facing managers today. Problems such as: informing associates of developments in time to make critical changes (directional information), assuring that calculations and numbers represented the very latest results, reporting on progress (confirmational information), and estimating costs. Over time, the fundamental role and function of management has not changed very much. However, just as building techniques have changed since the days of the Pharos with the advent hydraulics, heavy construction equipment, and laser measuring devices, so have the tools managers use to communicate, organize, and plan. And, continuing this theme of revolutionary progression of technology, so did the numbering systems developed on the counting boards and abaci formed the basis for the development of the computer bits and bytes with which we are so familiar today.
The Implementation of Widespread Automation
With the advent of the Industrial Age came the machine. As machines entered every phase of business, the typewriter made its debut in 1873 courtesy of Christopher Latham Sholes. The typewriter, the forerunner of today’s laser printer, was first a mechanical device, with electric typewriters not increasing productivity until the invention of the Remington Electric in 1925. The IBM Selectric typewriter, with interchangeable printing balls, became the epitome of corporate typing pools with its introduction in 1961, thus heralding the widespread adoption of the electric typewriter as a status symbol of progressive businesses.
While the progression of the mechanically produced typewritten word–a progression driven by the transition from simple mechanical devices to advanced electro-mechanical devices–was adequate for the production of an organization’s correspondence, World War II heightened the requirement for faster computational equipment for calculating numerically-focused information, such as weapons trajectories, cryptography, etc. Other military needs during WWII, including the Manhattan Project, accelerated the development of computing technology. By the mid-1950s, computers were becoming apparent in large, number-intensive organizations such as banks, brokerage houses, insurance companies, and the biggest consumer of all–the U.S. government. Early computers were nothing more than “number crunchers”–essentially fast calculators. Accounting was the first, and still is the most, important business application for computers used as “number crunchers.”
In the early developmental days of computing, only very large businesses were able to justify the purchase of these computers. Back in the day, all programs were written by internal programmers. No “off-the-shelf” software existed. The first computers, as we might recognize them, with a CRT and keyboard, began to appear in the late 1960s and early 1970s. By this time, the first general use software had appeared–IBM’s COPICS and MAPICS applications (manufacturing requirements planning and control programs) were the first, with DMAS–another IBM program for distributors–being the conceptual father of the modern ERP.
The first IT departments to implement these new software applications were called “data processing,” reflecting the fact that most of the content of early commercial, governmental, and military computer systems was financial or scientific, and usually in numeric format. As the output of the computer began to become more management friendly, and reports were required to place the numbers in some relative context, output with more discursive content appeared. The combination of the two, alpha and numeric, in operational reports heralded the advent of “management information.”
Arguably, the computer had the biggest impact on management of any technologically-driven change through the centuries. While the printing press enabled the first low cost distribution of information, and the typewriter enabled relatively fast dissemination of information within the organization, it was the computer that rapidly accelerated the rate and amount of information available to management. Within the data processing departments, analysts reviewed the printed output to mine relevant data. The beginning of ERP was to add intelligence, through exception reporting, to the growing IT infrastructure.
From Data to Information
The job of the computer analyst was to avoid a profusion of redundant data within an organization. Without effective discrimination as to its value, management could not act with confidence on this data. With the new computing technology, any type of data could be collected, entered, tabulated, calculated, stored, and displayed. Today, the overwhelming amount of data generated by a modern economy could not be handled without the “modern” computer. Consumer and business credit, in particular credit cards, are wholly dependent upon the advent of computer technology and its ability to provide near-real-time transaction processing.
Enterprise Resource Planning (ERP) software, as implemented in the 1990s, was actually the next logical step in a long line of successor efforts to improve the efficiency and effectiveness of management.
Origin and Evolution of ERP Systems
The first generation of ERP software systems that emerged in the early 1990s were an outgrowth of previous MRP/MRP-II (materials requirements planning/manufacturing requirements planning) systems, such as the MAPICS offering from IBM. The new ERP systems have served management fairly well in their initial implementation. These software systems, comprised of multiple modules designed to handle the information management, processing and reporting needs of specific functions within a business (e.g., purchasing, inventory management, finance), were designed to provide a foundation for the collection, distribution, and exchange of information within an organization. Early ERP systems, using proprietary formats, provided a common window for information that was available across all of the functions and units of a business.
However, today the proprietary architectures, data formats, and legacy code that provide the basic structure of these aging systems makes them vulnerable on several levels. Business will need to closely examine the costs of maintaining these systems in the light of change–both functional and technological–within their organizations. These first-generation systems have been, typically, more expensive and time-consuming to implement than forecasted during the initial sales presentations. Given the increased cost to implement these systems, compared to the initially forecasted budgets, businesses will need to consider the financial and performance risks of maintaining these systems as they consider their strategic IT budgets going forward.
The next generation of ERP software, designed with object-oriented architecture and enhanced functionality unavailable in the largest and most capable of today’s ERP software, has recently begun to enter the marketplace. Fundamental issues concerning the obsolescence of contemporary ERP software, and the advanced design and features of the next generation software, will be reviewed in a follow-on article to this series.
The Goal: Improving Organizational Performance
“Behavior is easy to identify, but hard to manage. Performance is hard to identify, but easy to manage Conclusion: Manage Performance and not Behavior.” — Thomas Gilbert
The Management Information System: As discussed, management depends upon the capability of the computer to handle large volumes of data and to help discriminate, organize, and plan the operations of companies from a single employee to thousands located around the world. Some pundit once said, “If you can’t measure it, you can’t manage it.” One of the most valued attributes of the computer is that it permits managers to collect an adequate quantity and type of data to allow the measurement and evaluation of performance, and, therefore, to make better, more informed decisions. The computer is the ultimate tool of management. To restate the key point, as an adjunct to management, it is the purpose of the computer to enable managers to function more efficiently and effectively.
Recent advances in the field of behavioral management, coincidental with the evolution of software architecture, point the way to improved use, application, functionality, and measurable results. Through the dual advocacy of quantitative measures of human performance and application of information flow as a key incentive, Gilbert, with a single stroke, empowered the entire IT establishment.
The computer, as with every other management innovation since the days of the Pharaohs (and probably before then), was introduced into businesses to enhance performance. It is an enabling technology. Sometimes organizations forget that. The “shock and awe” of the technology, and management’s romantic involvement with the “technology” ego, can, and often does, blind us to this râison d’etre.
Many, if not most, organizations that acquired management information systems, or ERP applications, found out during the installation process, and at great expense, that their business processes and work procedures were at least partially antiquated, often redundant and largely inefficient. This is one reason why the practice of business process re-engineering (BPR) emerged. Indeed, the principal value of the character-based ERP applications (as implemented on the IBM iSeries and AS/400 systems) may well have been the forced introspection that caused this review and restructuring of operational processes (the Y2K panic also contributed this general reassessment). Applying technology can produce tremendous leverage, since it adds value with appreciable reductions in effort on the part of management. Traditionally called “working smarter,” this is the “leveraging” of work behavior into improved performance, behaviors which result in worthy, profitable accomplishments for the organization (recalling that worth has a “value” component to it).
While the acquisition of an ERP system is made with the advice and input of the IT department, it is always an executive committee-level decision. Picking an ERP vendor is critical for obvious reasons; in truth, the deployment of an ERP system requires the significant commitment of corporate resources, in both time and capital.
SAP, one of the leaders in the ERP field, provided one of the first horizontal ERP systems that employed a database management system (DBMS) foundation and a graphical user interface (GUI) front end. This addition of an external DBMS further complicated the installation process, and ASP consultants became fixtures in many companies. The true economic impact of such a decision is easily millions of dollars.
One large automotive manufacturer began the installation of a major software vendor’s ERP system and data conversion, with a projected timeframe of three years with the assistance of a national consulting firm. When this author became acquainted with the progress of this project, it was about to complete its first five years of effort, the organization was budgeting and prioritizing tasks for the next five years of activity, and there was an extended forecasting effort for a third five-year period of activity–there was no clear sense that even after 15 years, this organization’s activities to implement this system would be fully accomplished. This type of extended timeframe and cost overruns is not atypical at all for current, first generation ERP systems. This common occurrence of time and cost overruns puts current ERP technology out of the reach of all but the largest, and most profitable, organizations.
The drive to remain competitive and to stay profitable requires continued and ongoing reassessment and validation of technology investments and business processes. This is a fact of life for a globally competitive organization. The current incarnation of ERP software systems, although they once permitted great market and profit advantages, may well have become the critical Achilles’ heel of the organizations implementing them–they are aging systems that are rapidly moving to obsolescence. Given the need for rapid change required by today’s agile, fast-paced business environment, the current batch of ERP offerings are generally incapable of being quickly reconfigured or expanded (e.g., they are not considered scalable systems by current definitions) at a reasonable cost. These systems are not “fast reactors.” Their short-coming lies in the nature of the software architecture and its inability to adapt to change in the business and technology environment. Today’s ERP systems are tied to millions of lines of legacy code, requiring constant maintenance and arduous days and months for modification. Such economic burdens discourage change and impede corporate agility.
Finally, the most difficult of human issues to effect is a “belief” system. Changing the organizational perspective, and the realization that the software in which the organization has such a financial (and even an emotional) commitment, too, often requires outside assistance. This type of resistance is truly a case of the forest blocking the view of the trees. Management itself is typically the major force resisting change – often the sad fact is that the business management team considers itself fully qualified to asses the relevance and functionality of their previous ERP decision(s).
In truth, nothing could be less true. The relationship necessary to build a successful management/vendor team, the tremendous investment in time and resources, and the commitment to existing software creates an almost unbreakable barrier to objectivity. Only an outside resource, unbiased and with no ties to either the software or the process, can assist management in making a productive, unbiased decision.
The purpose of the corporation is to generate profit. To enable it to do so, it must stay competitive in all of its business operations. The skill and knowledge of its human capital permits the business to function profitably in a competitive market. The ERP system provides a “tool” to leverage corporate human assets. This is the principal reason organizations acquire ERP systems–to improve the competitive position and profit of a business. If, for whatever set of reasons, software cannot rapidly and cost-effectively react to the new realities of 21st century requirements, such as on-demand, remote access, the deployment of wireless technology, or provide a “fast response” to required changes in functionality, then it may be time for a fundamental change in the present ERP vendor relationship.
Stayed tuned for Part 2 and Part 3 of this series.
Jerome Peloquin is the owner of Performance Paradigm, and a whole lot more. We welcome him to the ranks of IT Jungle’s expert commentators. Peloquin is a former U.S. Marine and was a member of the President’s U.S. Marine Band in Washington, D.C., and upon discharge, joined the U.S. Capitol Police. After that, he moved to San Francisco where he helped found one of the most popular bands of the day, Jefferson Airplane. For a time, he had a career as a professional musician, playing with such talent as Nina Simone, Jose Feliciano, Paul Winter, and Chad Mitchel. In the mid-1970s, Peloquin left the music business and went back to school to get a master’s degree in Instructional Systems Design. He studied with the eminent behavioral psychologist, the late Thomas Gilbert, a colleague of B.F. Skinner, the former being the father of the Human Performance Engineering branch of behavioral management, the latter being the most famous behavioral psychologist in the world. Peloquin subsequently founded and managed his own electronic publishing and consulting company, and after 10 years, he sold the business to Sylvan Learning Systems in 1996, and took a position as the director of consulting services at the company. In that capacity, he consulted with numerous Fortune 500 companies, including Ford, Frito-Lay, Gillette, Merck & Co., and Honda America Manufacturing. Peloquin left Sylvan in 1999 when the consulting division was sold, and formed his own practice.