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This paper provides a holistic view of the ERP implementation process, by reviewing the hard and soft factors that cause success and failure for ERP implementation, as well as examine the effectiveness of the critical success factors (CSFs) of ERP on both primary (operational) and secondary (organisational) measures of business performance in Nigerian service firms. The aim was achieved through an experience survey using a questionnaire within 22 Nigerian service firms, with 590 randomly selected senior and management staff, which have implemented the ERP programme in the past decade. Using the framework from Markus and Tanis (2000) process-oriented ERP life cycle model, several hypotheses were tested, via structural equation modelling (SEM). With the exception of the influence of chartering phase CSFs on operational performance, findings suggests the positive effects of the CSFs of ERP on both operational and organisational performances of Nigerian service firms. In addition, this study also suggests the positive effects of the operational performance on organisational performance of Nigerian service firms.
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Int. J. Management and Network Economics, Vol. 3, No. 2, 2014 123
Copyright © 2014 Inderscience Enterprises Ltd.
Enterprise resource planning in Nigerian service
firms: a structural equation modelling approach
Olawumi Dele Awolusi* and
Tolutope Olubamiji Fakokunde
Department of Business Administration,
Faculty of Management Sciences,
Ekiti State University,
P.M.B 5363, Ado Ekiti, Ekiti State, Nigeria
E-mail: awosco44@yahoo.com
E-mail: viptopefaks@yahoo.com
*Corresponding author
Abstract: This paper provides a holistic view of the ERP implementation
process, by reviewing the hard and soft factors that cause success and failure
for ERP implementation, as well as, examine the effectiveness of the critical
success factors (CSFs) of ERP on both primary (operational) and secondary
(organisational) measures of business performance in Nigerian service firms.
The aim was achieved through an experience survey using a questionnaire
within 22 Nigerian service firms, with 590 randomly selected senior and
management staff, which have implemented the ERP programme in the past
decade. Using the framework from Markus and Tanis (2000) process-oriented
ERP life cycle model, several hypotheses were tested, via structural equation
modelling (SEM). With the exception of the influence of chartering phase CSFs
on operational performance, findings suggests the positive effects of the CSFs
of ERP on both operational and organisational performances of Nigerian
service firms. In addition, this study also suggests the positive effects of the
operational performance on organisational performance of Nigerian service
firms.
Keywords: enterprise resource planning; ERP; organisational performance;
operational performance; factor analysis; multivariate analysis; service firms;
Nigeria.
Reference to this paper should be made as follows: Awolusi, O.D. and
Fakokunde, T.O. (2014) ‘Enterprise resource planning in Nigerian service
firms: a structural equation modelling approach’, Int. J. Management and
Network Economics, Vol. 3, No. 2, pp.123–143.
Biographical notes: Olawumi Dele Awolusi is a Lecturer in the Department of
Business Administration, Faculty of Management Sciences, Ekiti State
University, Ado Ekiti, Ekiti State, Nigeria. His main research interests are
internationalisation and foreign market entry, management technique adoption
strategies, international business and MNE diversification strategies. Some of
his recent publications can be found in the International Journal of
Management and Network Economics, International Journal of Business
Performance Management and the International Journal of Services and
Operations Management.
124 O.D. Awolusi and T.O. Fakokunde
Tolutope Olubamiji Fakokunde is a Lecturer in the Department of Business
Administration, Faculty of Management Sciences, Ekiti State University, Ado
Ekiti, Ekiti State, Nigeria. His main research interests are entrepreneurship,
quality and marketing management, and management technique adoption
strategies.
1 Introduction
The importance of improved enterprise management for company’s performance is
widely recognised in business literature and is beginning to be the backbone of
organisations (Al-Mashari et al., 2008; Adeyemi and Aremu, 2008; Hammer, 1990;
Hammer and Champy, 1993; Singh and Kant, 2008). Numerous approaches to operations
management practices and techniques were suggested, in order to help companies
improve efficiency and competitiveness (Annamalai and Ramayah, 2011a, 2011b). One
of the most popular and most often recommended approaches is the philosophy of
enterprise resource planning (ERP) system, simply known as ERP. ERP systems are
information systems (IS) used by multifunctional companies working in different
locations in the world. ERP is mainly used to extract and process data from different
functional areas across the enterprise (Gore, 2008; Dezdar and Sulaiman, 2011). ERP is a
high technical cross-functional information system which is designed to improve
organisational performance and competitiveness by streamlining business processes and
eliminating duplication of work and data (Avgerou, 2008). While ERP market is expected
to recover from the sharp downturn in 2000 and 2001, specifically, the ARC Advisory
Group estimates that the total ERP market in 2006 was $18.4 billion (Ignatiadis and
Nandhakumar, 2007).
ERP systems are ‘cross-functional’ system as it integrates the different business
processes from across different functional areas of an organisation which facilitate
the decision making (Gore, 2008). The difficulties of ERP implementations have
been widely cited in the literature but research on the critical factors for initial and
ongoing ERP implementation success is rare and fragmented. Many businesses have
adopted ERP as a tool to achieve strategic competitive advantages that impact both
operational and organisational performances (Ifinedo et al., 2010). In addition, ERP
improves quality by reducing the fragmentation of work and establishing clear ownership
of processes, hence, workers gain responsibility for their output and can measure their
performance based on prompt feedback (Koh et al., 2006). ERP provides three major
advantages including: automation and integration of business processes; availability of
common data and business practices throughout the organisation, and the generation of
information in real time (Kwahk and Ahn, 2010; Malhotra and Temponi, 2010; Buckhout
et al., 1999; Roberts and Barrar, 1992; Scheer and Habermann, 2000; Holland et al.,
1999).
Despite the extensive advantages of ERP systems, its implementation is not
straightforward and involves significant risks (Annamalai and Ramayah, 2011b).
Consequently, the successful implementation rate is low and many firms did not achieve
intended goals (Garg, 2010; Ganesh and Mehta, 2010). Heeks (2007) and Huang and
Palvia (2001) estimates that as many as 30–50% do not achieve the improved results they
Enterprise resource planning in Nigerian service firms 125
seek. The majority of failures result from the various critical success factors (CSFs)
(Al-Mashari et al., 2008; Annamalai and Ramayah, 2011a). Such contradictory outcomes
raise concerns among companies evaluating ERP as a crucial strategic initiative
(Avgerou, 2008). Dezdar and Sulaiman (2011) sustained these contradictory findings
offer a unique opportunity for conducting studies oriented to identify critical factors that
can influence the success of ERP implementations. Thus, based on the analysis of past
research, the purpose of this paper are:
1 to examine the effectiveness of the CSFs of ERP on both primary (operational) and
secondary (organisational) measures of business performance in Nigerian service
firms.
2 to examine the effects of the operational performance (primary measures) on the
organisational performance (secondary measures).
The difficulties and high failure rate in implementing ERP systems have been widely
cited in the literature (Garg, 2010), but research on CSFs in ERP implementation is rare
and fragmented. To date, little has been done to empirically validate some of the
theorised models, especially, the important predictors for initial and ongoing ERP
implementation success in developing economies (Garg, 2010; Ganesh and Mehta, 2010).
This research is an effort to achieve that. It identifies the CSFs in ERP implementation,
categorises them into the respective phases in the ERP life cycle model proposed by
Markus and Tanis (2000), and validated the model, using data from the Nigerian service
sector.
2 Review of relevant literature
2.1 Theoretical framework
An ERP system is a packaged business software system that enables a company to
manage the efficient and effective use of resources by providing a total, integrated
solution for the organisation’s information-processing needs; consequently, it supports a
process-oriented view of the business as well as business processes standardised across
the enterprise (Nah et al., 2001; Markus and Tanis, 2000). The primary fundamental
model for this study is the stage model (SM) theory.
Many researchers (Avgerou, 2008; Dezdar and Sulaiman, 2011; Dezdar and
Sulaiman, 2009; Garg, 2010) proposed a SM for management information technique
adoption strategies, such as ERP. Specifically, Chen et al. (2009, p.159) suggested, “a
four-stage model for ERP implementation: the initiation stage where the project team
kicked off a project; the contagion stage where issues come out to slow the project’s
development; the control stage where the management begins to establish controls, and
planning becomes utmost important; and finally, at the integration stage where controls
are deep-rooted with proper planning”. In a similar study, Lien and Chan (2007, p.70)
proposed a five-SM, namely, project preparation, business process reengineering (BPR),
systems developing and tuning, final testing, and system go-live, for a suitable ERP
system to implement successfully.
126 O.D. Awolusi and T.O. Fakokunde
2.2 Empirical and conceptual frameworks
The ERP implementation literature suggests diverse critical factors affecting the success
of an ERP system. This is on the premise that for ERP implementation to be successful,
these CSF issues must be addressed and managed well with the implementation stage in
the life cycle of the ERP projects. In specific terms, many studies have dealt with the
CSFs of ERP, including Al-Mashari et al. (2008), Annamalai and Ramayah (2011a),
Ignatiadis and Nandhakumar (2007), Koh et al. (2006), Kwahk and Ahn (2010), and
Malhotra and Temponi (2010), and its influence on organisational growth and sustainable
competitive advantage. However, this study was anchored on process theory, as proposed
by Markus and Tanis (2000), and was used to classify the CSFs of ERP identified. The
process theory focuses on the sequence of events leading up to implementation
completion.
Table 1 The measure of CSFs of ERP
Variable Description of factors
A1 Our organisation prepares staff, teams and other stakeholders to respond positively to
ERP changes
A2 ERP teams and champions are experienced, innovative and well empowered to handle
all aspect of the organisational needs
A3 The teams are made up of consultants and internal staff so the internal staff can
develop the necessary technical skills for design and implementation
A4 There is commitment and support from the top management during the ERP
implementation process
A5 Senior management are committed with its own involvement and willingness to
allocate valuable resources to the ERP implementation effort
A6 Leadership is effective and creative in taking decisions thus providing a clear vision
for the future
A7 Expectations at every level of the ERP implementation are adequately communicated
A8 There are formal promotion of project teams and the advertisement of project progress
to the rest of the organisation
A9 Employees are told in advance the scope, objectives, activities and updates, and admit
change will occur
A10 An individual or group of people are often given responsibility to drive success in
project management
A11 Timeliness of project and the forcing of timely decisions are adequately managed
A12 Project management are usually disciplined with coordinated training and active
human resource department involvement in my organisation
A13 There are project champions, leaders and project managers who continually push and
coordinate ERP efforts throughout our organisation
A14 Project sponsor are given power to set goals and legitimise change
A15 The leader continually strive to resolve conflicts and manage resistance
A16 Appropriate business and IT legacy systems are important in the initial chartering
phase of the project
A17 There is adoption of information systems that uses the latest technologies/ techniques
Source: Adapted from Al-Mashari et al. (2008), Kwahk and Ahn (2010),
Annamalai and Ramayah (2011a, 2011b), Avgerou (2008) and
Dezdar and Sulaiman (2011), Maldonado (2009) and Markus and
Tanis (2000)
Enterprise resource planning in Nigerian service firms 127
Table 1 The measure of CSFs of ERP (continued)
Variable Description of factors
A18 There is an effective use of software tools and information capabilities to enhance
organisation performance (productivity, growth, profitability etc.)
B1 users are involved in design and implementation of business processes and the ERP
system in my organisation
B2 There is effective communication during the ERP Process to ensure understanding of
the various cultural and organisational changes
B3 Users are trained, and concerns are usually addressed through regular communication,
working with change agents, leveraging corporate culture and identifying job aids for
different users
B4 Business processes are moulded to fit the new system with minimal customisation
B5 In conjunction with configuration, a large amount of reengineering takes place
iteratively to take advantage of improvements from the new system.
B6 Quality of business process review and redesign are given adequate attention
B7 The overall ERP architecture are established before deployment, taking into account
the most important requirements of the ERP implementation
B8 To prevent troubleshooting errors, my organisation work well with vendors and
consultants to resolve software problems
B9 There are vigorous and sophisticated software testing programme in my organisation
C1 Performance goals and controls are set to indicate levels of ERP achievements
C2 Monitoring and feedback often include the exchange of information between the
project team members and analysis of user feedback
C3 Reporting are often emphasised with custom report development, report generator use
and user training in reporting applications
D1 ERP mission and vision that direct both long-term and day-to-day operations are
clearly stated to all employees
D2 ERP business vision outlines proposed strategic and tangible benefits, resources, costs,
risks and timeline
D3 There are clear business model of how our organisation would operate after the ERP
implementation effort
Source: Adapted from Al-Mashari et al. (2008), Kwahk and Ahn (2010),
Annamalai and Ramayah (2011a, 2011b), Avgerou (2008) and
Dezdar and Sulaiman (2011), Maldonado (2009) and Markus and
Tanis (2000)
2.2.1 CSFs of ERP implementation
The CSFs are the factors that ensure the success and survival of any ERP organisation
and help to identify the information needs of the stakeholders (Al-Mashari et al., 2008).
However, since many research studies indicated that there were implementation failures
in ERP projects; consequently, CSFs on implementation success (IS) is very important to
consider in any project life cycle implementation in the organisation (Koh et al., 2006;
Kwahk and Ahn, 2010). In focusing this study, the operationalisations of the CSFs of
128 O.D. Awolusi and T.O. Fakokunde
ERP (Table 1) were distilled from various articles and empirical research on ERP
implementation. They were then categorised into a number of subgroups, similar to
Markus and Tanis’ (2000) process-oriented ERP life cycle model, representing various
phases of change related to ERP implementation. These phases are as follows:
1 chartering phase CSFs
2 project phase CSFs
3 shakedown phase CSFs
4 onward and upward phase CSFs.
This paper demonstrates how the various phases of ERP initiation, implementation, and
maintenance played an important role towards the ERP implementation success. It is also
vital to examine the implementation stages to successfully implement the ERP systems,
in terms of value additions to business performance of Nigerian service firms.
2.2.1.1 Chartering phase CSFs
The chartering phase represents the decisions defining the business case and solution
constraints. While the key players in this phase include vendors, consultants, company
executives, and IT specialists; the chartering phase comprises decisions leading to
funding of the ERP system project, and its activities include initiation of idea to adopt
ERP, developing business case, decision on whether to proceed with ERP or not,
initiation of search for project champion, selection of software and implementation
partner, and project planning and scheduling (Nah et al., 2001). Consequently, the
chartering phase CSFs consist of ERP teamwork and composition, top management
support, effective communication, project management, project champion, appropriate
business and IT legacy systems (Nah et al., 2001; Markus and Tanis, 2000).
To successfully implement ERP, teamwork and composition is important throughout
the ERP life cycle. Specifically, using the best people in the organisation, building a
cross-functional team is also critical (Buckhout et al., 1999). The team should have a mix
of consultants and internal staff, so as to avail the internal staff the opportunity to develop
the necessary technical skills for design and implementation. It is also important to give
the teams’ adequate compensation and incentives for successfully implementing the
system on time and within the assigned budget (Roberts and Barrar, 1992). In addition,
top management support is also needed throughout the ERP implementation. The project
must receive approval from top management and must align with strategic business goals
(Scheer and Habermann, 2000).
Also important at the chartering phase of ERP implementation is effective
communication (Ignatiadis and Nandhakumar, 2007). Expectations at every level need to
be communicated. Consequently, management of communication, education and
expectations are critical throughout the organisation (Koh et al., 2006; Kwahk and Ahn,
2010). In addition to improved communications, good project management is also
essential for successful ERP implementation. Consequently, an individual or group of
people should be given responsibility to drive success in project management (Malhotra
and Temponi, 2010). This can be achieved by establishing and controlling the scope of
Enterprise resource planning in Nigerian service firms 129
the ERP project (Kwahk and Ahn, 2010). Furthermore, project sponsor commitment is
critical to drive consensus and to oversee the entire life cycle of the ERP implementation
(Buckhout et al., 1999). Someone should be placed in charge and the project leader
should ‘champion’ the project throughout the organisation (Buckhout et al., 1999;
Roberts and Barrar, 1992). The high level executive sponsor must also have the power to
set goals and legitimise change (Roberts and Barrar, 1992; Scheer and Habermann,
2000). Lastly, appropriate business and legacy systems are important in the initial
chartering phase of the ERP project. Specifically, Roberts and Barrar (1992) observes
that business and IT systems involving existing business processes, organisation
structure, culture, and information technology affects the successful ERP adoption
and deployment (Buckhout et al., 1999; Roberts and Barrar, 1992; Scheer and
Habermann, 2000).
2.2.1.2 Project phase CSFs
The project phase involves getting the system and end users up and running. The key
players at this stage include the project manager, project team members, internal IT
specialists, vendors, and consultants. The phase comprises system configuration and
rollout, while their key activities include software configuration, system integration,
testing, data conversion, training, and rollout (Nah et al., 2001). Thus, the project phase
CSFs consists of three factors: change management programme and culture, BPR and
minimum customisation, and software development, testing and troubleshooting (Nah
et al., 2001; Markus and Tanis, 2000).
For ERP effort to be successful, change management is important, starting at the
project phase and continuing throughout the entire life cycle. Consequently, enterprise
wide culture and structure change should be managed (Holland et al., 1999; Avgerou,
2008; Dezdar and Sulaiman, 2011). Another important factor that begins at the project
phase is BPR and minimum customisation. This is on the premise that the business
processes must be align to the software (Dezdar and Sulaiman, 2009; Garg, 2010). In
addition, software development, testing and troubleshooting are also essential, beginning
in the project phase. The overall ERP architecture should be established before
deployment, taking into account the most important requirements of the implementation
(Holland et al., 1999; Avgerou, 2008; Dezdar and Sulaiman, 2011).
2.2.1.3 Shakedown phase CSFs
The shakedown phase is a stage for stabilising, eliminating ‘bugs’, and getting to normal
operations. This phase refers to the period of time from ‘going live’ until ‘normal
operation’ or ‘routine use’ has been achieved. The key activities include bug fixing and
rework, system performance tuning, retraining, and staffing up to handle temporary
inefficiencies (Nah et al., 2001). According to Markus and Tanis (2000), this phase is
sensitive due to the fact that the errors of prior causes can be felt, typically in the form of
reduced productivity or business disruption. Hence, it is important to monitor and
constantly make adjustments to the system until the ‘bugs’ are eliminated and the system
is stabilised (Markus and Tanis, 2000). Specifically, the shakedown phase CSFs consist
of monitoring and evaluation of performance (Nah et al., 2001; Markus and Tanis, 2000).
It is important to record milestones and targets so as to keep track of progress.
130 O.D. Awolusi and T.O. Fakokunde
Achievements should also be measured against project goals. In addition, management
also need information on the effect of ERP on business performance (Malhotra and
Temponi, 2010; Buckhout et al., 1999; Roberts and Barrar, 1992; Scheer and Habermann,
2000; Holland et al., 1999; Avgerou, 2008).
2.2.1.4 Onward and upward phase CSFs
The last phase, onward and upward, according to Nah et al. (2001) involves maintaining
systems, supporting users, getting results, upgrading, and system extensions. In addition,
this phase refers to ongoing maintenance and enhancement of the ERP system and
relevant business processes to fit the evolving business needs of the organisation. Nah
et al. (2001) maintained that this phase continues from normal operation until the system
is replaced with an upgrade or a different system. While the key players include
operational managers, end users, and IT support personnel; its key activities include
continuous business improvement, additional user skill building, upgrading to new
software releases, and post-implementation benefit assessment (Nah et al., 2001; Markus
and Tanis, 2000). Consequently, the onward and upward phase CSFs consists of business
vision (Nah et al., 2001; Markus and Tanis, 2000). This is on the premise that a clear
business vision to steer the direction of the project is required throughout the ERP life
cycle (Malhotra and Temponi, 2010; Buckhout et al., 1999).
Lastly, there should be a clear business model of how the organisation would operate
after the ERP implementation effort (Malhotra and Temponi, 2010; Buckhout et al.,
1999; Roberts and Barrar, 1992; Scheer and Habermann, 2000; Holland et al., 1999;
Avgerou, 2008). In summary, operationalisation of the CSFs of ERP model in this study
is tabulated in Table 1. The relationship between the various constructs and operational
and organisational performances are depicted in the conceptual model, shown in Figure 1.
Figure 1 Proposed model for the effects of ERP efforts on performance
Chartering phase CSFs
*ERP teamwork and composition
*Top management support
*Effective communication
*Project management
*Project champion
*Appropriate business and IT legacy
systems
Project phase CSFs
*Change management program and culture
*BPR and minimum customization
*Software development, testing and
troubleshooting
Shakedown phase CSFs
*Monitoring and evaluation of performance
Onward and upward phase CSFs
*Business visio
n
Operational
performance
Organisational
performance:
Profitability, growth,
sustainable competitive
advantage, customer
services
Enterprise resource planning in Nigerian service firms 131
Table 2 The measure of performance
Variable Key factors manifesting business performance
OPERATIONAL:
E1 Our organisation’s operating cost reduces relative to competition
E2 Management is satisfied with the level of waste reduction in our organisation
E3 There is a general improvement in the quality of products relative to competition
E4 Management is satisfied with Improving flexibility in production and work processes
E5 Management is satisfied with improved employee participation and morale
E6 Management is satisfied with improved products and services quality, process and
productivity, and reduced errors/defects
ORGANISATIONAL: profitability dimension
F1 Our organisation’s net profit position improves relative to competition
F2 Management is satisfied with return on corporate investment
F3 Management is satisfied with return on sales
F4 Our returns on investment (ROI) position improves relative to competition
F5 Our organisation’s return on assets (ROA) position improves relative to competition
F6 Our organisation’s financial liquidity (cash) position improves relative to competition
Growth dimension
F7 Our deposits growth position improves relative to competition
F8 Management is satisfied with our deposits growth rate
F9 Our market share gains relative to competition
Sustainable competitive advantage dimension
F10 Our competitive advantage in ERP implementation is difficult for competitors to copy
because it uses resources that we only have access to.
F11 It took our organisation time to build the competitive advantage and competitors
would find it time-consuming to follow a similar route.
F12 Possession of unique proprietary technology, tacit know-how, and firm
reputation/image induces our companies propensity to transfer new management
techniques
Customer services dimension
F13 Market research is conducted to discover customers expectation and changes in
customer satisfaction
F14 There is a record of customers’ requests, complaints and transactions for future
reference
F15 Customers’ complaints, lost customer analysis and feedback are used to improve the
products/ services
F16 Customers are satisfied with the customer service and customers relationship
management of my organisation
Source: Adapted from Al-Mashari et al. (2008), Annamalai and Ramayah,
(2011a), Dezdar and Sulaiman (2011), Bontis (1998), Bontis et al.
(2000), Bhote (1996), Guenzi and Troilo (2007), Asikhia (2010) and
Maldonado (2009)
132 O.D. Awolusi and T.O. Fakokunde
2.2.2 Business performance measures
In this study, performance is defined as the degree to which ERP implementation efforts
fulfils the operational objectives (primary measures) in order to improve organisational
(secondary measures) objectives (Al-Mashari et al., 2008; Annamalai and Ramayah,
2011a; Dezdar and Sulaiman, 2011; Bontis, 1998; Bontis et al., 2000; Bhote, 1996;
Guenzi and Troilo, 2007; Asikhia, 2010). Various authors have argued and empirically
tested the positive impact of ERP on company’s performance in terms of operating and
financial results, quality, customer satisfaction or employee satisfaction (Al-Mashari
et al., 2008; Annamalai and Ramayah, 2011a; Avgerou, 2008; Dezdar and Sulaiman,
2011; Garg, 2010). However, most of these studies focus on identifying the ERP
practices that are most effective and crucial from the performance improvement point of
view (Annamalai and Ramayah, 2011b; Dezdar and Sulaiman, 2009). Some of those
studies focus only on particular type of performance: quality performance, financial
performance or operating performance. They do not provide much evidence on how
exactly ERP affects performance (Kwahk and Ahn, 2010).
As adapted in this study, Al-Mashari et al. (2008), Annamalai and Ramayah (2011a),
and Dezdar and Sulaiman (2011) measured performance in two dimensions: operational
performance and organisational performance. Operational performance reflects the
performance of internal operation of the company in terms of cost and waste reduction,
improving the quality of products, improving flexibility, improving employee relations,
operating procedures; and productivity improvement (Mabert et al., 2003). They are
considered as primary measures because they follow directly from the actions taken
during the implementation of ERP, while organisational performance measured by
financial measures such as growth and profitability, and non-financial measures such as
sustainable competitive advantage and customer services. They are called secondary
measures because they are a consequence of ERP implementations (Al-Mashari et al.,
2008; Annamalai and Ramayah, 2011a; Dezdar and Sulaiman, 2011; Bontis, 1998; Bontis
et al., 2000; Bhote, 1996; Guenzi and Troilo, 2007; Asikhia, 2010). The measures of
performance are depicted in Table 2.
There is a common assumption in the literature that the CSFs of ERP have a positive
impact on the operational performance (Al-Mashari et al., 2008; Annamalai and
Ramayah, 2011a, 2011b; Avgerou, 2008; Dezdar and Sulaiman, 2011). They indicated
that ERP firms outperform non-ERP firms in operational performance such as reduction
in production costs, increasing productivity, improving flexibility, improving employee
relations, operating procedures and improving the quality of products. However, to
investigate the previous mentioned relationship, the following hypotheses are therefore
proposed:
H1A Chartering phase CSFs has positive relationship with operational performance.
H2A Project phase CSFs has positive relationship with operational performance.
H3A Shakedown phase CSFs has positive relationship with operational performance.
H4A Onward and upward phase CSFs has positive relationship with operational
performance.
In addition, the relationships between ERP practices and organisational performance have
also been addressed in several studies (Mabert et al., 2003; Molla and Arjun, 2006;
Moohebat et al., 2010; Nah et al., 2001; Reimann et al., 2010). They indicated a positive
Enterprise resource planning in Nigerian service firms 133
association between ERP practices and improved organisational performance. In other
words, the results of those studies demonstrated the crucial role of ERP practices in
enhancing the organisational performance, i.e., financial performance and non-financial
performance (Reimann et al., 2010). Therefore, it is hypothesised that:
H1B Chartering phase CSFs has positive relationship with organisational performance.
H2B Project phase CSFs has positive relationship with organisational performance.
H3B Shakedown phase CSFs has positive relationship with organisational performance.
H4B Onward and upward phase CSFs has positive relationship with organisational
performance.
Lastly, this study attempts to investigate the effects of the primary measures
(as expressed by the operational performance measures) on the secondary measures
(as expressed by the organisational performance). As emphasised by Garg (2010),
Ganesh and Mehta (2010), Heeks (2007), and Huang and Palvia (2001), the operational
performance has a positive correlation with overall organisational performance. One
possible explanation could be due to the success of ERP implementation as measured by
operational measures such as producing high quality products, speed of delivery, high
flexibility, switching costs, safety, waste reduction, resource conservation and high
productivity would lead to success in the secondary measures, i.e., financial and
non-financial measures (Garg, 2010; Ganesh and Mehta, 2010; Heeks, 2007; Huang and
Palvia, 2001). Therefore, it is hypothesised that:
H5 Operational performance has positive relationship with organisational performance.
Research survey and methods follows.
3 Research methodology
Surveys, via the use of questionnaire, were the primary source of data collection for this
research. According to Avgerou (2008), survey research is an appropriate method to
generalise from a sample to a population, allowing in this sense, to establish inferences
over the entire population. The populations consist of all senior and Management staff of
Nigerian services firms quoted on the Nigerian stock exchange (Table 3). These levels of
staff have been used in previous research (Mabert et al., 2003; Molla and Arjun, 2006;
Moohebat et al., 2010; Nah et al., 2001; Reimann et al., 2010; Khong and Richardson,
2003), based on the premise that they were among the most knowledgeable informants on
ERP projects and the derived success in their respective organisations. The unit of
analysis is the firm, while from a time dimension, this research adopts a one-time cross-
sectional perspective.
3.1 The construction of the questionnaire and its appropriateness to the study
A personally-administered questionnaire was primarily adopted from earlier studies
(Al-Mashari et al., 2008; Annamalai and Ramayah, 2011a; Dezdar and Sulaiman, 2011;
Bontis, 1998; Bontis et al., 2000; Bhote, 1996; Guenzi and Troilo, 2007; Asikhia, 2010)
and it was modified where necessary. All the items in the questionnaire were measured
134 O.D. Awolusi and T.O. Fakokunde
with a five-point Likert scale ranging from 1 to 5, where “1 = strongly disagree,
2 = disagree, 3 = neither disagree nor agree, 4 = agree, 5 = strongly agree and n/a is ‘not
applicable’ or ‘no comments”. This was done to ensure consistency and the ease of data
computation (Bontis et al., 2000; Bhote, 1996). In the questionnaire, participants were
asked to answer three important sections; section A with regards to the demographic data,
section B, CSFs of ERP and section C contains items measuring the business
performance (operational and organisational performances). In items measuring the CSFs
of ERP implementation, respondents were asked to rate the degree of usefulness of 33
variables (Table 1) in association with their company’s ERP strategies. In business
performance measures, they were asked to rate 6 and 16 variables (Table 2) in relation to
their companies’ operational and organisational performances respectively.
Table 3 Participating service firms in the survey
Name of industry Number of company Total questionnaire
Airline services 3 91
Banking 4 146
Hotel and tourism 3 92
Insurance 4 116
Healthcare 4 75
Media 4 70
This scale was pre-tested several times by five professors in Management studies and six
experts in ERP implementation, specifically in the context of Nigerian service firms and
it was found to be valid on the basis of this study. In addition, the pre-test also included a
pilot study, which was conducted to get insights into the essential CSFs of ERP
implementation and its effects on both operational and organisational performances in the
Nigerian context. Using convenience sampling method, the pilot study was conducted on
120 senior and management staff of two Nigerian service firms, not included in the
sampling frame, to test the validity and reliability of the study instrument (Al-Mashari
et al., 2008; Annamalai and Ramayah, 2011a). The results of the pilot test was processed
and analysed.
3.2 Reliability of the questionnaire
Reliability analysis is conducted in order to measure the internal consistency of variables,
measured by interval scale items, in a summated scale (Hair et al., 1998). In this paper,
the summated scales are CSFs of ERP and business performance (operational and
organisational).
Based on the data collected during the pilot stage, Cronbach’s alpha, composite
reliability, and average variance extracted scores were computed for each construct to
measure the internal consistency and to indicate how different items can reliably measure
the construct. Hair et al. (1998) pointed out that reliability coefficients of 0.7, 0.7, and 0.5
and above can be considered ‘adequate’ for the three measures respectively. In this
research, all scales have reliability coefficients greater than 0.7 (see Table 4). Thus, the
scales used in this research could be considered as reliable.
Enterprise resource planning in Nigerian service firms 135
Table 4 Summary of test result – reliability analysis
Constructs
Number of
questionnaire
items
Cronbach’s
alpha
(mean)
Composite
reliability
(CR)
Average
variance
extracted (AVE)
Chartering phase CSFs 18 0.767 0.701 0.722
Project phase CSFs 9 0.717 0.766 0.789
Shakedown phase CSFs 3 0.781 0.781 0.710
Onward and upward phase CSFs 3 0.809 0.806 0.744
Operational performance 6 0.853 0.805 0.663
Organisational performance 16 0.805 0.705 0.779
During the main study and based on the sample frame of 55,675 permanent senior and
management staff, the sample size for this study was determined using the modified
Yamane (1967, p.886) formula. At a 95% confidence level and (variability) P of 0.5
assumed for this formula (Khong and Richardson, 2005), the total Sample size was
settled at 590 respondents. Consequently, a total of 590 questionnaires were administered
to the respondents based on the allotted questionnaires for each participating service
firms. A total of 480 questionnaires were returned to the researcher within two weeks.
Out of the 480 questionnaires, 28 questionnaires were discarded due to incorrect fillings
by the respondents. In all 452 usable questionnaires (76.6% response rate) were analysed.
Using SPSS 18.0 (Statistical Package for Social Sciences), the data from the
questionnaire was analysed using the following methodologies in sequential order: factor
analysis, and structural equation modelling (SEM).
4 Results and discussion of findings
4.1 Factor analysis
The purpose of factor analysis, in this study, was to reduce the 55 variables, of which 33
were manifesting CSFs of ERP and 22 manifesting business performance (both
operational and organisational performances), to a more manageable set of factors
(Hair et al., 1998). The results of this factor analysis, via confirmatory factor analysis,
with the assumption of extracting via principal components method and rotating via
varimax, are shown in Table 5. However, variables with high factor loadings were
assigned to describe the respective factors, while variables that have low loadings on
respective factors were constrained to zero (Hair et al., 1998). The component matrix
for successful ERP (CSFs of ERP) and business performance (operational and
organisational) revealed only six significant factors, that is, Factor 1, 2, 3, 4, 5, and 6
(Table 6), representing each of the constructs. The six factors were extracted.
Consequently, factors 2, 3, 5 and 6 manifest chartering phase CSFs, shakedown phase
CSFs, Project Phase CSFs and onward and upward phase CSFs respectively (CSFs of
ERP); while factors 1 and 4 manifest organisational performance and operational
performance respectively.
136 O.D. Awolusi and T.O. Fakokunde
Table 5 The hypotheses of each construct associations of the model
Construct
association
α
level
Parameter
estimates
(PE)
ρ-value
t-value of
structural
effect
Significant
(yes/no) Hypothesis Valid
ation
Chartering phase
CSFs with
operational
performance
0.05 0.367 0.111 1.099 No Reject
H1A
No
Project phase CSFs
with operational
performance
0.05 0.735 0.049 2.555 Yes Accept
H2A
Yes
Shakedown phase
CSFs with
operational
performance
0.50 0.718 0.029 3.071 Yes Accept
H3A
Yes
Onward and
upward phase
CSFs with
operational
performance
0.05 0.611 0.042 3.199 Yes Accept
H4A
Yes
Chartering phase
CSFs with
organisational
performance
0.05 0.619 0.047 2.786 Yes Accept
H1B
Yes
Project phase CSFs
with organisational
performance
0.05 0.715 0.049 2.376 Yes Accept
H2A
Yes
Shakedown phase
CSFs with
organisational
performance
0.05 0.627 0.046 3.456 Yes Accept
H3B
Yes
Onward and
upward phase
CSFs with
organisational
performance
0.05 0.582 0.035 2.711 Yes Accept
H4B
Yes
Operational
performance with
organisational
performance
0.05 0.695 0.001 4.788 Yes Accept H5 Yes
Note: α level denotes significant level
In addition, the model fit was assessed after performing the factor analysis. Various, fit
indices indicate a reasonable fit with X2 = 886.21 and 336 degrees of freedom, p < 0.01;
normed fit index (NFI) = 0.96; non-normed fit index (NNFI) = 0.97; comparative fit
index (CFI) = 0.96; root mean square error of approximation (RSMEA) (90% confidence
interval = 0.078) and standardised root mean square residual (SRMR) = 0.096
(Baumgartner and Homburg, 1996; Hair et al., 1998; Kwahk and Ahn, 2010; Adeyemi
and Aremu, 2008; Asteriou and Hall, 2007; Bandara et al., 2005; Baron and Kenny,
1986; Berrington and Oblich, 1995; Bhatt, 2000). We can thus safely conclude that the
Enterprise resource planning in Nigerian service firms 137
model is accepted to fit the data and we can continue to analyse the outcome of the
hypothesised effects. However, since variables with factor loadings above 0.70 were
deemed to represent the various constructs, these variables with higher factor loadings
were used to test the underline hypotheses, via SEM (Asteriou and Hall, 2007; Hair
et al., 1998).
4.2 Structural equation modelling
SEM is used to estimate “multiple and interrelated dependence relationship and the
ability to represent unobserved concepts in these relationships and account for
measurement error in the estimation process” [Hair et al., (1998), p.584]. SEM was used
in this paper because it can estimate “a series of separate, but interdependent, multiple
regression equations simultaneously” in a specified structural model (Khong and
Richardson, 2003). Hence, SEM is the most suitable analysis to estimate the strength of
causal relationship between both operational and organisational performance and the
CSFs of ERP. Table 6 shows the constructs derived from confirmatory factor analysis.
4.3 Hypothesis testing
In order to examine the relationships between CSFs of ERP (exogenous constructs) and
business performance (as represented by operational and organisational performances) of
Nigerian service firms (endogenous constructs), the hypothesised relationships were
tested, using SEPATH (statistical software package). SEPATH is a module for estimating
SEM in a statistical software package called STATISTICA. The results are shown in
Table 5.
4.4 Discussion of findings
Findings based on the survey revealed that successful ERP can positively affect
organisational performance. Except for chartering phase CSFs (PE = 0.367, p = 0.111),
the results suggests the positive effects of the CSFs of ERP (project phase
CSFs – PE = 0.735, p = 0.049; shakedown phase CSFs – PE = 0.718, p = 0.029; onward
and upward phase CSFs – PE = 0.611, p = 0.042) on improved operational performance
in Nigerian service firms, and were corroborated empirically in this study. The only
surprising result of this study was the inability to corroborate the influence of the
chartering phase CSFs on the improved operational performance. Meaning that,
chartering phase CSFs has no significant positive relationship with operational
performance, based on the data set of this study. This unique finding was contrary to
many empirical findings (Avgerou, 2008; Dezdar and Sulaiman, 2011, 2009; Garg,
2010). This findings might be due to the fact that this stage usually precede the
implementation stage, hence of little influence on the success of the ERP implementation
(Moohebat et al., 2010; Nah et al., 2001; Adeyemi and Aremu, 2008).
In addition, the results also suggests the positive effects of the CSFs of ERP
(chartering phase CSFs – PE = 0.619, p = 0.047; project phase CSFs – PE = 0.715,
p = 0.049; shakedown phase CSFs – PE = 0.627, p = 0.046; onward and upward phase
CSFs – PE = 0.582, p = 0.035) on organisational performance (Table 5) in Nigerian
service firms, and were also corroborated empirically. Lastly, Hypothesis 6 (H6) was also
validated at 0.05% level of significant (PE = 0.695, p = 001). Meaning that, operational
138 O.D. Awolusi and T.O. Fakokunde
performance has significant positive relationship with organisational performance, based
on the data set of this study. Thus, this finding confirmed a previous study that
investigated the relationship (Molla and Arjun, 2006; Moohebat et al., 2010; Nah et al.,
2001). All results are significant at p< 0.05. These results indicate that all the hypotheses,
except the relationship between chartering phase CSFs and operational performance,
were supported and validated by this study. This implied that positive and significant
relationships exist between CSFs of ERP and business performance (operational and
organisational performances) measures of the Nigerian service firms. In relation to other
studies, a positive and significant relationship obtained in this study agrees with the
findings of Al-Mashari et al. (2008), Annamalai and Ramayah (2011a), Avgerou (2008),
Dezdar and Sulaiman (2009) and Garg (2010).
Table 6 Results of factor analysis for CSFs and business performance
Factor
1 2 3 4 5 6
F5 .866
F12 .838
F8 .767
F15 .760
F1 .755
F14 .733
F6
F9
F7
F16
F3
F4
E2
F10
F13
F11
A2 .784
A3 .778
A1 .754
A7 .710
A4
A8
A6
A5
Notes: Extraction method: principal component analysis. rotation method: varimax with
Kaiser normalisation.
Rotation converged in seven iterations.
Enterprise resource planning in Nigerian service firms 139
Table 6 Results of factor analysis for CSFs and business performance (continued)
Factor
1 2 3 4 5 6
C3
C1
C2
A9
A10 .799
A11 .783
B7 .780
B8
B9
A12
A13
A14
E1 .798
E5 .789
E3 .755
E6 .722
E4
F2
B5 .872
B1 .857
B2 .748
B4 .733
B3 .731
B6
D2 .804
D1 .798
D3 .720
A15
A16
A17
A18
Notes: Extraction method: principal component analysis. rotation method: varimax with
Kaiser normalisation.
Rotation converged in seven iterations.
140 O.D. Awolusi and T.O. Fakokunde
5 Conclusions and implications for practice
This paper provides a holistic view of the ERP implementation process, by reviewing the
hard and soft factors that cause success and failure for ERP implementation, as well as,
examine the effectiveness of the CSFs of ERP on both primary (operational) and
secondary (organisational) measures of business performance in Nigerian service firms.
The paper also examines the effects of the operational performance (primary measures)
on the organisational performance (secondary measures). Using the framework from
Markus and Tanis (2000) process-oriented ERP life cycle model, several hypotheses were
tested, via SEM. Findings based on the survey revealed that successful ERP can
positively affect business performance (both operational and organisational
performances) of Nigerian service firms.
Except for the influence of chartering phase CSFs on operational performance (ERP
teamwork and composition, Top management support, Effective communication, Project
management, project champion, appropriate business and IT legacy systems), the results
suggests the positive effects of the CSFs of ERP (project phase CSFs – change
management programme and culture, BPR and minimum customisation, software
development, testing and troubleshooting; shakedown phase CSFs – monitoring and
evaluation of performance; onward and upward phase CSFs – business vision) on both
operational and organisational performances of Nigerian service firms. In addition, this
study also suggests the positive effects of the operational performance on organisational
performance of Nigerian service firms, based on the data set of this study.
5.1 Theoretical implications
This study seems to be among the few examining the success of ERP, and the related
CSFs, in the perspective of how organisations fare after implementing ERP. This gap was
originally positioned as a critical area for future research by Kwahk and Ahn (2010).
Distinct from previous studies, the current study presents a roadmap for the successful
implementation of ERP in Nigerian service firms. A roadmap proposed by the current
study has been taken from a model proposed in the study. The model contained four (4)
phases (CSFs), with 33 items, which are expected to enhance the practices of ERP
implementation in Nigerian service firms. Furthermore, based on a gap identified by
Malhotra and Temponi (2010) and Khong and Richardson (2003), the measurement of
business performance in this study was not limited to or focused on financial metrics, but
encompasses diverse business indicators and perspectives, like profitability, growth,
customer services and sustainable competitive advantage.
In addition, this study seems to be one of the few that aims at investigating ERP’s
success in a developing economy, like Nigeria, by proposing a model and attempting to
validate it empirically. More importantly, this research contributes to the body of
knowledge by proposing and validation a conceptual model that considers operational
(primary measure) performance as an antecedent to organisational performance
(secondary measure). This was in response to Al-Mashari et al. (2008), which contends
the stringent necessity to provide a model that amalgamates ERP enablers with ERP
effectiveness and ERP success. Hence, this study integrates the CSFs of ERP practices,
with operational and organisational performances as related drivers of the effectiveness
and success of ERP practices in a developing economy, like Nigeria. Finally, this
research adds to the body of knowledge by providing new data and empirical insights into
Enterprise resource planning in Nigerian service firms 141
the relationship between the CSFs of ERP practices and operational and organisational
performances of Nigerian service firms.
5.2 Managerial implications
Nigerian service firms should consider ERP as an innovative tool for improving
operational and organisational performance in today’s dynamic business environment.
The measurement model provides predictive implications on improved operational
performance and organisational performance, given the activities of critical factors
manifesting successful ERP. Moreover, the corroborated findings provide valuable
implications for practice. This study is expected to provide specific direction to
companies contemplating an ERP programme. Hence, the study is expected to be
beneficial to Nigerian service firms and other Nigerian companies alike, policy makers in
private and public sectors of the Nigerian economy by, enabling better strategic and
tactical judgments with regards to ERP implementations. It will help Nigerian companies
understand ERP as a business philosophy, its key components and benefits. It will also
explore imperatives for successful implementation. Lastly, the study emphasises the need
to link operational performance to organisational performance to achieve the success of
ERP implementation.
However, this research is subject to the normal limitations of survey research. The
study is using perceptual data provided by senior and management staff which may not
provide clear measures of performance. However, this can be overcome using multiple
methods to collect data in future studies. In other word, there is still an important area of
research regarding quantitative impacts. A survey of key indicators on each domain of
performance should be undertaken over a suitably long time period, i.e., ten years, to
include before and after ERP adoption. Another useful avenue for future research is to
carry out a comparative study with companies in the manufacturing sector, or by
conducting cross-country studies, to provide good insights on the effectiveness of ERP
implementation. Finally, in this study, all the respondents were from Nigerian service
firms; therefore, conclusions are especially valid for service firms.
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