What is human capital management (HCM) software?

HCM (Human Capital Management) is a set of practices designed to help organisations manage, develop and acquire employees. HCM software - often cloud-based - helps streamline the administrative side of Human Resources (HR) and allows organisations to focus on the strategic side of the business.

HCM (Human Capital Management) is a set of practices designed to help organisations manage, develop and acquire employees. HCM software - often cloud-based - helps streamline the administrative side of Human Resources (HR) and allows organisations to focus on the strategic side of the business.





What is HCM software?

HCM (Human Capital Management) is a set of practices designed to help organisations manage, develop and acquire employees, and which regards employees as a business asset. HCM software focusses on both the administrative side of Human Resources (HR) and the strategic side of the business, helping organisations to maximise business value through its people. HCM software uses a series of applications to help automate and streamline HR processes. It is typically considered an enterprise software that is able to scale up or down depending on the size and the needs of the organisation. It offers features such as time management and payroll as well as more advanced solutions such as performance management and employee engagement monitoring. 

The two main sides of HCM are:

  1. Transactional: Including processes such as payroll, absence management, time management, benefits management and onboarding
  2. Transformational: Including processes such as talent management (recruiting, learning, performance) and business intelligence (big data, employee data management, HR analytics and workforce planning)

Transactional HR focusses on processes and administrative tasks undertaken by the Human Resources department. HR tasks such as maintaining employee records or managing the payroll are considered transactional tasks – i.e. tasks that focus on processes rather than contributing to business strategy. Having a centralised system that consolidates employee data and automates administrative tasks reduces administration time in the HR department and improved visibility of employee data. Transactional processes only negatively affect the business if they do not work.  

Transformational HR covers both the business and its people. It focusses on the organisation and the employee individually and ensures a holistic vision of both. A transformational HR strategy is when the HR department focuses on aligning with the overall business strategy, using the right tools and technology and making use of the data available to them. The value HR can bring to the business is far greater than just handling administrative processes, as transformational HR can truly impact the success of an organisation. 

By implementing an HCM strategy and measuring its success with advanced analytics such as reporting, business intelligence, predictive and prescriptive analytics and big data, the following questions can be addressed: 

The core benefits of HCM software are as follows:

HCM software is a cost-effective way of centralising employee data, engaging employees and empowering HR. As new technologies evolve and change, so do business strategies. Technology is disrupting the workforce and businesses are continually adopting new technologies to help support the business. Organisations can no longer rely on ageing HR systems, they need modern solutions for a modern workforce – this is where HCM software can help. 

Who uses HCM Software?

Every company with a forward-looking HR strategy uses HCM software. Since companies invest in people (starting with their salaries), it makes sense for any organisation to invest in Human Capital Management software. 
In practical terms, there are five different categories of users:

Your organisation’s employees are your most valuable asset, and they can benefit from HCM software just as much as the business can. The employees themselves need HCM software to help manage their own data, access required learning, share knowledge, apply to internal job roles, and provide feedback. HCM software gives your employees the ability to manage their own career development and encourages them to learn and collaborate with their colleagues. This often increases employee engagement and boosts productivity.

Your employees’ managers need to have a comprehensive view of their team. The ability to evaluate performance, give feedback, plan for succession, assign training and report using HR analytics allows managers to see where the gaps are in their team and give them the capability to communicate with their colleagues effectively. They can set job satisfaction surveys and encourage an environment of continuous feedback. Similarly, being able to assign specific training modules and monitor performance using insights from analytical reports allows managers to provide detailed and useful feedback. 

HR needs an efficient system to have a clear view of the workforce. They need to plan global activities such as training and performance reviews, anticipate any skills gaps in the organisation, recruit new talent and plan for the future workforce. With an array of applications included in HCM software, HR has the ability to manage and develop the entire workforce, as well as carry out core functions while contributing to the overall business strategy. The department can automate systems such as payroll and time management and focus on learning, recruiting and performance management. 

HCM software allows employees across the organisation to access data, information and other HR functions easily. Senior management wants to have a consolidated view of all their employees and an HCM system allows for this visibility. They have the ability to perform advanced searches (for example, identifying who has the best competencies to manage a new project), as well as plan for global talent strategy, ensure that HR aligns with the business goals, and understand any HR trends that are affecting the industry and business. 

These users can use HCM software to access targeted information and communicate with the organisation from anywhere, at any time. As HCM systems are predominantly in the cloud, external users can access the information from across the globe. This allows for a more collaborative environment and gives users the ability to be trained on new products or provide feedback quickly and easily. 

HCM software is not just for the HR department, this technology can be used by everyone in the organisation. The technology is customisable, which allows organisations to specify their own needs as well as breaking any language or cultural barriers. Regardless of size, it allows for global collaboration and encourages consistency throughout the organisation. 

How to implement HCM software

Once you’ve decided to embark on an HCM project, you need to ensure that your chosen supplier can support during implementation, as well as recommend an appropriate partner to help manage the entire project. 
It sounds obvious but choosing a vendor that can complement your organisation's culture and support the business is critical when starting an HCM project. Read reviews from industry analysts and conduct thorough online research to determine the right vendor for your organisation. Ensure that you’re looking at the vendors that are leaders in the industry and pick the services that align with addressing the challenges your company faces. Similarly, look at the vendors your competitors use and research their experience with them; this insight can be extremely valuable when it comes to making your decision.

It is extremely important to note that there is no vendor that can truly cover all transactional and transformational processes. Some vendors may claim that they cover most of it, but this is usually through systems and technology that they’ve acquired. This means that their system is a patchwork of various technologies which will make any implementation complicated. When selecting a vendor, you need to ensure that your business needs are addressed, as this will have the highest positive impact on your bottom line, with the strongest risk control.

Once you have your shortlist, begin a benchmarking exercise. Start a comparison between your chosen vendors and rank them in terms of price, technology, security, data protection and any other features you consider important. You can also ask for whitepapers or case studies to understand their experience in the areas that are critical to your organisation. 

When choosing your HCM software provider, you need to ensure that you consider all of the elements that will help you get a return on investment. An HCM project is not just about licensing and implementing, you have to think about the management and operations of the software, as well as the regularity of innovation that occurs – particularly on a cloud-based platform. 

Organisations should be prepared to invest not only their money but their time on an HCM project. Testing and planning can take upwards of a year to conduct, which is by no means a quick turnaround. However, the time and money investment bring huge benefits to an organisation in the long-term.  

To summarise, when considering an HCM software vendor, you must:

HCM software is suitable for organisations of all sizes. It offers flexibility and scalability and allows businesses to meet both their current and future HR needs. HCM software allows organisations to effectively harness the heart of the business - their people - to drive overall business success.


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