The Role of A Decentralized Organizational Structure on KM Infrastructure Capability during the Implementation of ERP Systems in Kenya

Abstract

It is a well-established fact that most Enterprise Resource Planning Systems (ERP) fail due to a myriad of implementation problems. This study was motivated by the high failure rate of ERP systems around the world during the implementation stage. Most studies report failure rates of between 65% and 75%. Many developed countries have adapted flexible organizational structures as a technique of minimizing ERP implementation problems. This paper investigated the influence of organizational structure on KM infrastructure capabilities during the implementation of ERP systems in organizations listed in the Nairobi Securities Exchange (NSE) in Kenya, with the aim of establishing whether these organizations have embraced organizational structures which enhance knowledge sharing. Three hundred and six (306) questionnaires were distributed to senior managers and users of ERP systems in the companies listed in the NSE. One hundred and eighty four (184) responses were received representing a 60% response rate. The study employed factor analysis, correlation analysis, univariate analysis, multivariate regression analysis and Structural Equation Modeling (SEM) to investigate the relationship among variables and measure the strength and direction of the relationships between constructs. Data was cleaned and analyzed using SPSS version 20 and AMOS version 21. The research found out that organizational structure is not considered a significant component of KM infrastructure in the companies listed in the NSE. The findings imply that most companies listed in the NSE in Kenya still practice silo behavior where individual divisions, units, or functional areas operate as silos or independent agents within the organization. This study leads to the conclusion that the organizational structures in Kenya are not flexible enough to enhance ERP implementation success and recommends that organizations should embrace decentralized structures, which provide the flexibility required for knowledge sharing in ERP implementation projects.

Keywords: ERP implementation, organizational structure, KM infrastructure capability, Social Capital Theory, Dynamic Capability View, Resource based theory