LEADERSHIP TYPE FOR A SUCCESSFUL ENTERPRISE

SOFTWARE IMPLEMENTATION
Wilbur A. Reid

Regent University

ABSTRACT
The growth of enterprise software packages from third party vendors has led to
enormous opportunities and challenges in the past 20 years. Excitement about the capabilities of
ERP systems such as SAP or Oracle has been tempered with stunning failure rates in
implementations. Even high ROI and quick project payback pricing optimization projects have
struggled in some recent implementations. This study shows that there is a strong correlation
between successful enterprise software implementations and leadership type, and that relationship
is mediated by readiness for organizational change. Lack of leadership leads to failure and simply
managing the details of the project is not statistically significant for success, but leading the
people involved with the project is critical.

INTRODUCTION

Since 1990, there has been a dramatic corporate shift from in-house developed enterprise
software development to off-the-shelf, configurable software (Holland & Light, 1999; Hong &
Kim, 2002). These software packages include broad enterprise resource planning (ERP) systems,
as well as specialized best-of-breed systems that perform functions such as pricing or inventory
optimization. Although a successful implementation of ERP or specialty software will have
quick and substantial payback, many implementations have failed (Aladwani, 2001; Finney &
Corbett, 2007), and the high failure rates of ERP implementations are “widely cited in literature”
(Nah, Lau, & Kuang, 2001, p. 285). While there is an abundance of research showing the
relationship between leadership and organizational change, there are no known studies that have
considered the relationship between leadership and the success of software implementations.
This study considers 60 large enterprise software implementation projects, with
participants providing insight into the level of success of the project, the leadership within the
project, and the readiness of the organization for change prior to the implementation. Finney and
Corbett (2007) sought to determine the critical success factors (CSFs) of ERP implementations
and determined that much of the existing literature on the topic is flawed because researchers
have only surveyed senior managers, and they determined that all of the stakeholders in the
implementation should be surveyed for a broader and more balanced response. Therefore,
participants in this study included a broad cross-section of project leaders: business leaders, IT
leaders, executive sponsors, and 3rd party project managers.

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 LITERATURE REVIEW AND THEORY
Although there is little research specifically targeting leadership type to the
implementation of enterprise software, there is ample research on the topic of leadership type
and organizational change that would be required for a successful implementation (Bennett,
2009). There is also ample research into the success and failure of enterprise software
implementations. The following analyses of these studies provide a foundation to build
hypotheses to project the outcome of the relationship between leadership type and successful
implementations.
Studies have shown that leadership type can influence employee performance (Bass,
1985; Burns, 1978; Bass & Avolio, 1993) and that leaders play a critical role in helping
organizations adapt and succeed in growing and changing environments (O'Reilly, Caldwell,
Chatman, Lapiz, & Self, 2010; Muller & Turner, 2007).

The Independent Variables: Leadership Type

Avolio and Bass (2007) developed what they call a full range leadership model that
addresses perceived short-comings of previous leadership models that do not account for all of
the leadership characteristics that should be accounted for. This model begins with identifying
three broad types of leadership: (a) transformational, (b) transactional, and (c) passive / avoidant
(laissez-faire). Passive individuals avoid engaging in leadership behaviors and are the least
effective leaders. Transactional leaders focus on errors and exceptions, exchanging rewards for
effort and results, and can be effective leaders. The most effective type of leadership is
transformational because followers are inspired, challenged, and stimulated to pursue a vision
(Avolio & Bass). Table 1 summarizes the difference between transactional and transformational
leadership.

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 These three broad types of leadership contain sub-types of leaderships that are called full
range leadership model factors and are summarized in table 2 (Avolio & Bass, 2004; Bass &
Avolio, 1995).

A transformational leader is proactive and seeks to optimize performance by leading

individuals to achieve higher results. The five factors within transformational leadership that
describe how that happens are all labeled with words beginning with the letter “I”, so they are
called the five I’s of transformational leadership. Questions related to Idealized Attributes (IA)
seek to determine if the leader is able to instill a certain way of thinking within the followers,
such as a sense of pride, respect, and interest in others. Idealized Behavior (IB) is more action
oriented, and searches for behaviors such as talking about the values of the group, considering
moral implications of decisions, and having a collective sense of mission. Inspirational
Motivation (IM) captures enthusiasm, optimism, and confidence that goals will be achieved.
Intellectual Stimulation (IS) is about seeking different perspectives to solve problems and
suggesting new ways of doing things. Individual Consideration (IC) is about spending time with
others in teaching and coaching, and valuing the input of others in the group (Avolio & Bass,
2007).
Transactional leaders utilize rewards and punishment to lead followers to a desired
outcome. Transactional leadership may take the form of Contingent Reward (CR) or
Management-by-Exception: Active (MBEA). Contingent Reward utilizes specific goals and
objectives and provides incentives to reward followers for obtaining those objectives.
Management-by-Exception: Active focuses on exceptions and mistakes and directs attention
toward failures so that standards can be met (Avolio & Bass, 2007). Passive – Avoidant
Behavior is reactive and ineffective, and can be divided into two types. Management-by-

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Exception: Passive (MBEP) waits until there is a problem and then responds to it. Laissez-Faire
(LF) represents a vacuum of leadership and is not responsive at all (Avolio & Bass).
Howell and Avolio (1993) noted that previous research showed transactional leadership
provided mixed results in predicting performance, but that “substantial evidence now exists” (p.
893) to show that transformational leadership will positively predict performance. A literature
review by Slvanathan and Fekken (2002) concluded that “transformational leadership has
consistently shown advantageous effects on a range of individual and organizational outcomes”
(p. 198). Bennett (2009) noted that transformational leadership motivates and inspires employees
more than other leadership type. Muller and Turner (2007) proved that leadership type was
significant to project success and that different types of leadership types may be appropriate for
different project types. The transactional leadership type appeals to subordinates personal
desires, with rewards based on performance (Burns, 1978).
To measure these different types of leadership, the Multifactor Leadership Questionnaire
(MLQ) was developed and has been enhanced over the past 25 years based on research in the
leadership fields (Avolio & Bass, 2004). Hinkin and Schriesheim (2008) note that “the vast
majority of published empirical research of the topic (transformational leadership) has utilized
the Multifactor Leadership Questionnaire (MLQ)” (p. 501). The current and most frequently
used version of the Multifactor Leadership Questionnaire is the MLQ-5X, which is also known
as the 45-item short survey (Muenjohn & Armstrong, 2008). The MLQ-5X may refer to
individual or team leadership. For example, one question on the team leadership assessment is:
We instilled pride in others for being associated with us. The answers choices are: (a) not at all,
(b) once in a while, (c) sometimes, (d) fairly often, (e) frequently, if not always.

The Dependent Variable: Project Success

Numerous studies have been conducted to determine the success factors in software
implementation, but the dependent variable of success has always been an elusive one to define
(DeLone & McLean, 1992). The problem is not a lack of definitions of success available, but
that there is a different definition in nearly every study. Using a database of 180 diverse articles
and 100 unique studies, DeLone and McLean organized a comprehensive taxonomy and found
six categories of software implementation success: (a) system quality, (b) information quality, (c)
use, (d) user satisfaction, (e) individual impact, and (f) organizational impact. Of the 100 studies
that were analyzed, only 28 of them attempted to measure multiple categories, with only one
study measuring results from as many as four categories. The focus of most of the studies
utilizing one category allows a coherent basis for measuring success, but does not take into
account the various levels of success of a project. Umble, Haft, and Umble (2003) summarize the
literature on determining implementation success by stating that there are generally two ways to
categorize success or failure: (a) the project achieves a substantial proportion of its benefits or
(b) the system achieves the level of Return on Investment (ROI) identified in the project
approval phase. Most projects are neither wildly successful nor an abysmal failure, but lie
somewhere in the middle (Kotter, 2007).

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The Mediator: Readiness for Organizational Change
With the staggering growth of information availability, the internet, communication
capabilities, and the globalization of the economy, leaders in organizations today face
unprecedented challenges in change management within their organizations and the rate of
change has never been greater (Kotter, Rathgeber, & Wyman, 2006). Schumpeter (1911, 1950)
began the discussion of change when he noted that economies have dynamic disequilibrium and
that change is required to maintain health. Haynes (2002) built upon Schumpeter’s idea and
contended that change is necessary for organizations to remain healthy. However, Beer and
Nohria (2000), Kee and Newcomer (2008), Oakland and Tanner (2007) and Bunker (2009) show
the failure rate of organizational change initiatives to be between 66% and 90%. Kee and
Newcomer identified a “resistant organizational culture as the chief culprit” in causing initiatives
to fail, and Kotter (1996) estimated that half of all large-scale organizational changes fail
because the leaders failed to establish sufficient readiness. Readiness is a “combination of ability
and motivation” (Grow, 1991, 1996), and the type of management and leadership preparing for
change should be appropriate for the readiness of the organization.

The Model
Summarizing the model of the variables, the dependent variable of software
implementation success is related to the independent variable of leadership type. Readiness for
organizational change mediates this relationship.

Table 3

Independent Variable Mediator Dependent Variable

Readiness for
Organizational Change

Software
Leadership Type
Implementation Success

Hypotheses
Since research to this point indicates that transformational leadership is the most effective
in organizations, it is reasonable to believe that it will also be the most effective in leading the
change that an organization must go through to implement an enterprise software system. A
commonly held opinion among business leaders, though undocumented or proven to this point in

5
time, seems to be that transactional leadership is also a key to successful software
implementation. In other words, a successful project contains both transactional leadership that
insures that the software is properly implemented, as well as transformational leadership that
leads the organization through the change management that is necessary to recoup the substantial
financial investment that the company has made in the project. Mediating this relationship
between leadership and successful results is the organization’s readiness for change. If the people
within the organization are not ready for a significant organizational change, then even the most
effective leader will have difficulty in leading the organization to a successful result (Kotter,
1996). Likewise, if the organization is ready to embrace change, even a mediocre or poor leader
may be able to have a successful outcome.
• H1: Successful project implementation is positively related to transformational
leadership.
• H2: Successful project implementation is positively related to transactional leadership.
• H3: Readiness for organizational change mediates the relationship between leadership
and successful project implementation; so that a higher degree of transformational
leadership leads to readiness for organizational change which leads to higher success in
implementation.

METHOD

To determine the relationship between leadership and software implementation,

participants from large enterprise software implementations were surveyed. A total of 85 people
participated from 60 different projects. Responses from the same projects were consolidated into
one response for the project so that N = 60 in the analysis. The participants served various roles
in the projects: (a) business or functional leader (47% of participants), (b) I.T. or technical leader
(15%), (c) vendor or 3rd party leader (18%), (d) consultant (13%), or executive (7%). There were
12 different types of projects represented, with pricing packages from PROS, Zilliant, and other
pricing vendors representing 48% of the projects. Other software packages included SAP (12%),
Oracle (7%), and Sage (7%). The companies that implemented these projects included
distributors (32%), manufacturers (32%), services (23%) and others (13%). Although there was a
wide range of project costs, 77% of the projects were less than $9 million. The survey consisted
of 5 sections: (a) project success, (b) leadership effectiveness, (c) leadership type, (d) readiness
for organizational change, and (e) general and demographic information.

Project Success
Five questions were used to determine the dependent variable of implementation success:
(a) project completed on time, (b) project completed within budget, (c) project achieved
budgeted return on investment, (d) users adopted the new software, and (e) executives satisfied
with the results of the project. Participants rated the project success for each of these criteria and

6
the numbers were then aggregated into one number that was used as a score of success for the
project. These five variables make a reliable scale, with a Cronbach’s alpha of .835.

Leadership Type
The 45 question MLQ-5X survey was used to identify the leadership type. Scores were
tabulated to identify transformational, transactional, and passive-avoidant leadership types.
Scores were also identified at the nine factor levels that make up the three leadership types. Each
question on the MLQ-5X was answered on a 5 point Likert scale, with an average score of the
appropriate questions attributed to each leadership type.

Readiness for Organizational Change

Readiness for organizational change is measured by the 25 question survey from Holt,
Armenakis, Field, and Harris (2007), with four factors: (a) appropriateness of change, (b)
management support, (c) change efficacy, and (d) personally beneficial. Each question on the
this survey was answered on a 5 point Likert scale, with an average score of the appropriate
questions attributed to each type of readiness for organizational change. This scale of
organizational change is reliable, with a Cronbach’s alpha of .803.

ANALYSES AND RESULTS

Relationship of Project Success to Leadership Type

The first step of analysis is to determine the relationship between the dependent variable
of success and the independent variable of leadership type. Table 4 shows that transformational
leadership is positively correlated to successful project implementation with a Pearson’s
correlation of .415 and significant to the 0.01 level. This supports hypothesis 1. Transactional
leadership is also positively correlated, though to a lesser degree at a Pearson’s correlation of
.260 and 0.05 level of significance. This supports hypothesis 2. Passive-avoidant leadership is
negatively correlated, at a Pearson’s correlation of -.295 and 0.05 level of significance.

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Table 4

Correlations of Dependent, Independent, and Mediating Variables

Readiness for
Transformational Transactional Passive-Avoidant
Success organizational
Leadership Leadership Leadership
change
Success Pearson Correlation .415** .260* -.295 * .543**
Sig. (2-tailed) .001 .044 .022 .000
N 60 60 60 60

Transformatio Pearson Correlation .628** -.583 ** .622**

nal Sig. (2-tailed) .000 .000 .000
Leadership
N 60 60 60

Transactional Pearson Correlation -.330 ** .351**

Leadership Sig. (2-tailed) .010 .006
N 60 60

**
Passive- Pearson Correlation -.582
Avoidant Sig. (2-tailed) .000
Leadership
N 60

Readiness Pearson Correlation

for Sig. (2-tailed)
organizational N
change
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).

When the leadership types are broken down into the 9 factors, the most interesting
finding is within the two factors of transactional leadership. Contingent rewards (CW) is
correlated significantly with success, but Management-by-Exception – Active (MBEA) has a
slight negative correlation with success, but is not statistically significant. Therefore, linking
rewards to goals leads to success, but focusing on exceptions and errors to meet standards does
not seem to have any correlation with success. All of the transformational factors are positively
correlated to project success. Not surprisingly, a lack of leadership (MBEP, LF) is negatively
correlated with success, indicating a higher probability of project failure.

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Table 5
Correlations of Leadership Type Factors to Success of Implementation

IA IB IM IS IC CR MBEA MBEP LF
Success Pearson Correlation .431 ** .362 ** .380** .450** .259* .461 ** -.050 -.300* -.270 *
Sig. (2-tailed) .001 .005 .003 .000 .046 .000 .703 .020 .037
N 60 60 60 60 60 60 60 60 60
IA Pearson Correlation .751 ** .825** .838** .777** .724 ** .156 -.501** -.550 **
Sig. (2-tailed) .000 .000 .000 .000 .000 .233 .000 .000
N 60 60 60 60 60 60 60 60
** ** ** ** ** **
IB Pearson Correlation .737 .761 .678 .683 .191 -.467 -.572
Sig. (2-tailed) .000 .000 .000 .000 .144 .000 .000
N 60 60 60 60 60 60 60
** ** ** ** **
IM Pearson Correlation .699 .627 .685 .108 -.463 -.516
Sig. (2-tailed) .000 .000 .000 .412 .000 .000
N 60 60 60 60 60 60
IS Pearson Correlation .705** .722 ** .161 -.578** -.601 **
Sig. (2-tailed) .000 .000 .219 .000 .000
N 60 60 60 60 60
IC Pearson Correlation .735 ** .147 -.333** -.420 **
Sig. (2-tailed) .000 .262 .009 .001
N 60 60 60 60
CR Pearson Correlation .168 -.472** -.521 **
Sig. (2-tailed) .198 .000 .000
N 60 60 60
MBEA Pearson Correlation .040 -.064
Sig. (2-tailed) .762 .630
N 60 60
MBEP Pearson Correlation .830 **
Sig. (2-tailed) .000
N 60
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).

Standard multiple regression shows that the variance in success that is predicted by
leadership type and readiness for organizational change is 30.5% (r squared = .305) and that this
is statistically significant. It is interesting to note that readiness for organizational change is the
only statistically significant variable in this regression.

Table 6

Model Summary
Adjusted R Std. Error of the
Model R R Square Square Estimate
1 .553a .305 .268 .35420
a. Predictors: (Constant), Readiness for organizational change, Transactional Leadership,
Transformational Leadership

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Table 7
b
ANOVA

Model Sum of Squares df Mean Square F Sig.

1 Regression 3.088 3 1.029 8.206 .000a
Residual 7.026 56 .125
Total 10.114 59
a. Predictors: (Constant), Readiness for organizational change, Transactional Leadership, Transformational Leadership

b. Dependent Variable: Success

Table 8

Coefficients a
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .645 .285 2.266 .027
Transformationa .054 .088 .105 .613 .543
l Leadership
Transactional .018 .086 .030 .211 .834
Leadership
Readiness for .199 .061 .467 3.277 .002
organizational
a. Dependent Variable: Success

Mediation of Readiness for Organizational Change

The correlation of the variables and the standard multiple regressions clearly show that
readiness for organizational change is a significant influence on the likelihood of project
implementation success. There are three steps to demonstrating that readiness is at least a partial
mediator between leadership and success: (a) leadership and success are correlated, (b)
leadership and readiness for change are correlated, and (c) readiness for change and success are
correlated (Baron & Kenny, 1986).
Hierarchical multiple regressions were used to assess readiness for change as the
dependent variable, transformational leadership is seen as having a statistically significant impact
on readiness. Transformational leadership does not add a statistically significant amount of
predictability to the model. As a result of the correlations between leadership type, readiness for
organizational change, and success, hypothesis 3 is supported.

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Table 9

Coefficients a
Standardized
Coefficients
Model Beta t Sig.
1 (Constant) 4.776 .000
Transformational .622 6.054 .000
Leadership
2 (Constant) 4.435 .000
Transformational .663 4.988 .000
Leadership
Transactional Leadership -.066 -.493 .624
a. Dependent Variable: Readiness for organizational change

Controls
The variables in this standard multiple regression were controlled by six other variables,
including project size, company size, and the type of software being implemented. These
variables added 4% to the predictive capability of the model, from r squared of .305 to .345, but
none of the individual control variables were statistically significant.

Table 10
Model Summary
Adjusted R Std. Error of the
Model R R Square Square Estimate
1 .588a .345 .212 .36760
a. Predictors: (Constant), What was the general size of the project, including internal and external costs?, Readiness for
organizational change, How did external economic variables impact the project?, Which software package was implemented?,
How would you describe the experience of the project team that led the implementation?, Which best describes the company that
implemented this project?, Transactional Leadership, What are the annual sales of the part of the organization that implemented
the software?, Passive-Avoidant Leadership, Transformational Leadership

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Table 11
Coefficients a

Standardized Coefficients
Model Beta t Sig.
1 (Constant) 1.255 .215
Transformational .204 1.002 .321
Leadership
Transactional Leadership -.033 -.201 .841
Readiness for .459 2.776 .008
organizational change
Passive-Avoidant .042 .261 .795
Leadership
Which software package .033 .243 .809
was implemented?
How would you describe the -.070 -.555 .582
experience of the project
team that led the
implementation?
How did external economic .034 .273 .786
variables impact the
project?
Which best describes the .025 .179 .858
company that implemented
this project?

What are the annual sales -.068 -.477 .635

of the part of the
organization that
implemented the software?

What was the general size -.156 -1.139 .260

of the project, including
internal and external costs?

a. Dependent Variable: Success

Conclusion of Analysis
Analysis of the data shows that transformational and transactional leadership leads to
readiness for organizational change, and that a lack of leadership is negatively correlated to
readiness for organizational change. Readiness for organizational change leads to successful
software implementations. Transformational leadership and transactional leadership are
positively correlated with success, while passive-avoidant leadership is negatively correlated.

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Table 12
Standardized Coefficients
Independent Variable Mediator Dependent Variable

Readiness for
Organizational Change
transformational: β= .622** β= .543**
transactional: β = .351**
passive avoidant: β = -.582**

Software
Leadership Type transformational: β= .415**
Implementation Success
transactional: β = .260*
passive avoidant: β = -.295*

** standardized coefficient Beta is significant at the .01 level.

* standardized coefficient Beta is significant at the .05 level.

DISCUSSION

This study demonstrates that readiness for organizational change is a critical factor in
predicting the success of a large enterprise software implementation, and people are more likely
to be ready for change if they are led by transformational leadership. The research also shows
that people are not just going to be ready for change if there is a void of leadership. Although
many corporate managers and executives focus on the type of software being implemented,
eliminating exceptions or errors during implementation (MBEP), or external economic
conditions, the results indicate that these types of variables are not statistically significant and
that they should be focusing on change management. In other words, it is not as much about the
processes and details as it is about the people.
The strength of this study is that it is the first to consider the role of leadership types on
software implementations utilizing a broad range of participants within the project. The results
are consistent with the theory derived from other leadership studies. Limitations include the fact
that the results are based on self-reported surveys that could suffer from common method
variance or simply pride of ownership. People that have given a year or two of their lives to
bring a project plan to reality do not want to admit that it was less than successful, so results
could be inflated. Future study in this topic should include independently gathered
determinations of project success and failure, as well as a more comprehensive analysis of each
individual project and the leadership from multiple points of view. Further analysis could also be
performed on the leadership factors, such as contingent rewards and MBEA. The importance of
leadership within software implementations is going to continue to grow in importance in the
business community, so research needs to continue to be developed.
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