Today, staff turnover is high in many organizations. Some variables are out of companies’ hands, such as political and economic changes influencing an employee’s decision to leave their employer.
However, by tracking the employee lifecycle, any business can analyze what they could do differently to maintain employee engagement and keep staff productive, motivated, and loyal. These are some of the human capital management software (HCM) goals.
So what is human capital management software? What are its standard features? And how can you choose the best HCM software systems for your organization? We will explore all of these questions, beginning with a definition.
How Are HCM And HRM Software Different?
On the surface, human capital and human resource management software (HRMS) appear to be the same. These two software solutions are similar, but one differentiating factor is features. HCM is more diverse in its feature profile than HRM, offering a comprehensive HCM solution to every HR solution.
On the other hand, HRM offers more limited functions. Companies also needed a feature to leverage employee records for succession planning as part of the workforce planning strategy.
Unlike HRM, HCM is a strategic approach to change, encompassing every HR processes tool, from employee engagement to helping HR teams create value for the company under one software solution. This diversity allows companies to use analytics solutions as part of many other tools to identify obstacles to the optimal employee experience, ensuring high productivity and employee wellbeing.
How HCM Software Elevates Digital Transformation
Digital transformation has been a top priority for businesses over the past few years, and for good reason. The ever-changing landscape of technology presents new opportunities for businesses to streamline processes, drive efficiencies and improve customer experiences. But to truly capitalize on these opportunities, companies need the right people in place – those with the right skillsets and mindsets to adapt to change and drive innovation.
This is where human capital management (HCM) comes in. HCM is a holistic approach to managing people, encompassing everything from recruiting and onboarding to performance management, learning, and development. When done well, HCM can help businesses attract, develop and retain the talent they need to succeed in the digital age.
HCM software solutions can automate and streamline many of the manual processes involved in managing people, freeing HR professionals to focus on more strategic initiatives. These solutions can also provide valuable insights into an organization’s workforce, helping leaders make more informed decisions about where to allocate resources.
But perhaps most importantly, HCM software can help businesses create a culture of continuous learning, which is essential for driving digital transformation. By providing employees with easy access to learning and development opportunities, HCM software can help businesses ensure that their people are always prepared for the future.
HRM: The Evolution Of HCM Software
Before HCM became common, HRM was used for all HR management processes, allowing staff to carry out all essential HR functions digitally. But about a decade ago, the tech business industry realized the need for a software solution that did more than core HR software functions.
HR departments needed a software solution that could automate recruitment advertisements and onboarding in line with DEI and fairness policies, offer more comprehensive self-service tools for staff and optimize HR functions as part of an overall strategy. HRM evolved as a solution to these needs. So what exactly is HCM software?
What Is Human Capital Management Software?
HR departments use human capital management software to process every aspect of an employee’s experience. Within their lifecycle, employees are recruited, onboarded, developed, and offboarded by their company.
HCM goes beyond core HR processes by offering the tools for workforce management strategy, such as change management plans, leadership development, organizational development, and, crucially, employee engagement.
HCM software can customize and automate your organization’s functions to maximize employee efficiency. HCM applications record, organize and store employee data to help you make data-driven decisions about each employee’s productivity.
Software managers can add and monitor specific goals and record the employee’s benchmarks to show their progress. Other functions include talent management, applicant tracking, onboarding, internal training, and attendance monitoring. But what other features do HCM software systems offer?
What Features Does Human Capital Management Software Include?
Human capital management (HCM) software vendors offer many features as part of their software. These features are constantly changing and being added to as industrial needs change. But core HR capabilities remain, such as attendance tracking, employee self-service portal, automated payroll management software, and onboarding.
Talent management systems contained within HCM software exist to support companies in managing leadership development, performance, and compensation management. Companies often utilize talent management automation to speed up operations. Succession planning is also part of many human capital management systems as it helps plan key leadership roles for the future and maintain internal hiring and promotion where possible.
Workforce management is needed so that companies can understand, record, and build a roadmap for workforce capacity. Organizations that utilize external agencies must invest in HCM systems that support contingent workforce management features, allowing them to track non-core employees such as consultants and freelancers. This feature can also include employee turnover data to ensure the right amount of staff is always available.
Talent acquisition software allows HR to efficiently record quantities and what type of staff they need to recruit to fulfill business goals. This feature works alongside the employee turnover data to ensure that HR recruits the right number of staff in the correct departments.
The best human capital management software allows HR staff to analyze and visualize compensation management data via digital payroll processing tools. The extracted data supports future compensation planning to ensure compensation levels are inclusive and fair across different departments.
Applicant tracking system
The applicant tracking system allows HR teams to record the number and type of applicants for a role for practical purposes and ensure they follow DEI (Diversity, Equality, and Inclusion) policies. Automating applicant tracking also reduces time spent on repetitive tasks, allowing HR staff to work on more complex duties.
Onboarding is a crucial stage for HR to support new staff as it informs their experience of the company long-term. HCM software allows HR teams to automate onboarding to ensure that they don’t overlook any part of the process and that the onboarding experience is consistent and positive.
Time tracking and attendance
HCM allows HR staff to track when employees come into work and set alerts for when to inform employees of poor attendance and consequences. Time and attendance software containing absence management functionality also allows HR to liaise with staff about attendance to offer support when needed. This HCM software is crucial today because there are many hybrid employees, and personnel tracking is highly valued.
Continuous professional development (CPD)
Many HCM software packages allow staff to select their training, giving them choice and autonomy. This feature also reduces the administrative time for HR departments.
Several HCM software solutions offer staff the option to configure their workflows for multiple HR processes. Teams can use workflows to automate tasks like data entry and maintain efficiency, consistency, and fairness. Many examples of workflow software also contain time tracking features so employees can track the amount of time spent on one task, allowing prioritization of the most significant tasks.
Reporting and analytics
HCM software is a valuable analytics source, using metrics to advise recruitment, employee performance, and staff turnover. The best HCM software makes metrics and analytics accessible to see and use. A predictive analytics tool can suggest changes to improve succession planning for the future. Business intelligence software supports reporting and analytics and is part of many HCM software solutions.
Having all the different HR policies in one place for staff at various levels to see and alter easily is a massive advantage that HCM software adoption offers.
Companies providing employee self-service are similar to how CRM software caters to customers, but self-service is for staff. Staff can access self-service via a mobile device and boost the employee experience. Online payroll services enable staff to access payroll information, freeing up payroll processing department staff to work on other tasks.
HCM systems featuring an employee self-service portal can streamline HR processes, reducing the time HR need to support the team and allowing them to focus on more challenging tasks.
Benefits management is a valuable aspect to track on HCM software as it allows HR staff to collect employee data using surveys to record their views on the value of benefits as an important area of benefits administration. Benefits management tools also allow companies to compare benefits easily with other organizations on a unified platform.
HCM software solutions are essential for tracking employee data on how they are performing. The need to automate performance management is ever-growing, with larger workforces in enterprise companies and more employees not working in the office.
It’s always best to establish what functions you need before investing in an HCM software solution. But what are the benefits that these features bring to your company?
What Are The Benefits Of HCM Software?
According to Fortune Business Insights, the market value of human capital management software was worth $10.73 billion in 2021, showing the significance of HCM to the business world. Human capital management deals with workforce management, talent acquisition, performance management, and other company-wide HR processes to increase human capital ROI.
1. Efficient recruitment and low turnover
HRIS software stores all employee data, including general personal data, role and salary history, insurance plans and benefits administration data, banking details, and performance management information. Centralizing this information to one area helps HR make efficient use of their time when supporting staff.
2. High staff productivity and engagement
HCM tools increase staff productivity by automating basic processes so staff can focus on more demanding, complex tasks that utilize their skills better to create value for the company. When HCM allows staff to engage in more stimulating tasks, employee engagement improves as they enjoy challenges and reward more than repetition.
3. HR automation increases efficiency.
Human error and the time it takes to input data are great reasons to adopt HRMS packages. There are also many other ways that HR management software packages improve efficiency and productivity, allowing staff to focus on more complex tasks not possible to achieve via technology alone.
4. Metrics and analysis improve decision-making.
HR departments collect as well as store information. Surveys are one means of asking staff their views on many aspects of their progress toward goals, benefits, whether the company cares about them, and other factors. HR staff can then use these data to improve HR processes, company image, or performance management processes, fusing efficiency and productivity with staff engagement.
5. Streamlined processes reduce costs.
In the past, HR staff spent much time on manual data entry. The future of widespread HRMS use reduces costs as it is costly for the team to spend much time on repetitive manual tasks efficiently completed by a machine. Automating data entry is one of the most efficient ways of reducing these costs. Utilizing an employee self-service portal is another feature of HRMS which allows staff to support themselves, reducing HR staff time.
6. Better returns on HR investments
Several features of HCM software, such as data analytics and workforce management, help organizations to ensure that experienced staff can collect valuable information on future investments. Many HCM solutions feature expense management tools that can help provide resources for future investments to keep the business sustainable.
So now that we have established the benefits of HCM solutions, how can your organization get started with HCM software tools?
How To Choose The Best HCM Software
Determining which workforce management features influence your business the most helps you select the best software without wasting resources.
Ask yourself the following questions:
- Will this software scale with the company?
- Can the software be customized to fit our local and regional needs?
- Does this HCM align with our budget and goals?
These questions should help direct you toward the best HCM software for your organization. There are also several factors to inform your decision when researching which HCM software is best for your business:
An SME may only need the basic, free version of BambooHR, whereas a large multi-national corporation will require the paid version on a multi-license agreement for several systems. Price does not always reflect quality, so look at as many user reviews as possible to ensure value for investment.
HCM vendors attempt to offer as much compatibility as possible with their software. While MS Teams, Slack, and Zoom may be compatible, double-check that your more specialized and less popular software, particularly any legacy software, can be integrated with your new HCM system.
Adaptability for all users
The staff, as individuals and within specific departments, have particular needs based on their role. The best HCM software offers customized options and versatility for several different uses. Look for high adaptability in HRM software to ensure all staff can get the most out of it, whatever their role. High adaptability means high agility for the future of the company.
Talent strategy support
One of the most significant elements of human resource management software is its ability to support the organization’s talent strategy. The most useful HCM software solutions incorporate many tools to plan an effective talent strategy. These include HRIS data management of the employee records of current talent and AI to predict what skills the company needs for future resilience.
Actionable data insights
An HCM system uses metrics and analytics to capture data and produce insights for several purposes, mostly related to recruitment, performance, talent management, and acquisition. HR leaders need to choose the right HCM for the level of experience and needs of IT teams and HR staff to get the most out of the metrics and analytics features of a new HCM system.
Employee data management comes with many risks that can harm the global reputation and employee trust in an organization if information about bank details and addresses ends up in the wrong hands. HR leaders must ensure that their HCM software provides security features to protect employee data as a matter of high priority.
Once you have chosen your HCM software, you must practice a structured approach to ensure your organization gets the most out of it.
Getting Started With HCM Software Tools
When HR leaders select and integrate HR software correctly, it frees HR departments from the burden of resource-draining responsibilities. Utilizing the HR software best suited for your business helps ensure that your company optimizes vital, required task completion for efficiency and quality.
Acquire the most talented individuals for job openings
Human capital management (HCM) tools make it easy for organizations to stay focused on the current climate with DEI and employee fairness to ensure that HR recruits a diverse, experienced team for every department.
HCM systems also make succession planning a streamlined process by keeping a record of employee attributes in the human resources information system (HRIS) and when employees are due to depart the company so HR can replace them internally or externally.
Involve your staff through employee self-service
Self-service portals effectively allow staff to give feedback on organizational changes and improvements they think should be made. Pulse surveys are regular feedback opportunities with many HCM software solutions that provide staff chances to have their voice heard on employee benefits to compensation.
Set benchmarks for employee performance
HCM supports HR staff in setting performance management benchmarks for the team to conduct performance reviews more fairly and efficiently. Many benchmarking tools calculate the cost, time, and resources to establish staff guidelines for processes within various roles.
Once you have started with how you will use your HCM, your company can begin to consider the advantages of integrating ERP software.
What Are The Advantages Of Integrating HCM and ERP Software?
HCM and ERP software (Enterprise Resource Planning) seem the says. But they differ in one crucial area. Although both HCM and ERP software deal with resources at the organizational level, HCM is only used by HR. ERP software manages all non-human resources, such as supply chain management, procurement, accounting, and risk management.
Combining HCM and ERP capabilities means leaders and departments can manage human and non-human resources using the same unified platform. There are other benefits to integrating ERP and HCM, the first being improved usability across departments.
When a company uses software that combines core HR functionalities and resource management into one software solution, it increases usability for all users. This combination allows all staff using the software to understand better the resources used within the company and how best to utilize them, diversifying skill sets and promoting cross-departmental innovation.
HCM and ERP allow companies to upskill and reskill more efficiently, using traditional learning tools such as digital employee training and employee onboarding. Job aids alongside non-traditional development tools like learning networks, peer training, and coaching solutions.
ERP shows HR departments what skills are needed to improve business outcomes. HCM makes the process easier by tracking employees’ experience, skills, and required learning. This data is easy to manipulate and visualize for HR staff to signpost employees to skills they need to support organizational resilience.
Larger companies have many compliance considerations to ensure policies align with local government laws, primarily focused on safe data management. Combining ERP and HCM allows HR to monitor compliance so organizations can avoid breaking the rules and remain within policies.
The more widespread companies distribute data across different software solutions, the more difficult it is to store and record safely. Organizations boost security by combining HCM and ERP functions in one software solution.
HR develops as a value-enhancing eco-system
McKinsey analysis shows that many executives are beginning to understand the benefit of external partnerships in helping companies deliver their uniqueness in the marketplace via HR value creation.
This perception contrasts with past perceptions, where HR departments have not created value for their company. Still, the combination of HCM and ERP can help achieve this to help stake out a place for the company as a unique provider of services or products.
To develop value as part of a value-enhancing eco-system, HR departments must leverage HRM-ERP tools to utilize elements of the employee lifecycle, such as performance reviews, engagement, development, and talent acquisition.
How Can Your SME Benefit From A SAP?
An SAP (Systems, Applications, and Products) is an excellent solution to the HR needs of SMEs that do not need and cannot invest in large-scale ERP and HCM software integration. SAP shares its name with the company that developed it and offers a modular approach to ERP and HR functions.
There are three main benefits to using an SAP:
- SAPs are customizable for any organization: Whatever the size of your enterprise, you will find SAP modules that meet your needs.
Most SAP clients are SMEs, showing smaller companies to be the majority of users, and SAP specializes in cloud-based ERP tools and solutions to fit the needs of any company size or type.
- SAPs are innovative: SAPs include the latest innovations to equip companies to deal with future digital disruption and upskilling, becoming resilient against change.
SAPs automate repetitive tasks to increase employee efficiency.
- An SAP offers security and flexibility: Cloud integration makes SAPs flexible as companies can choose which features they need and change these easily.
SAPs also include robust security features to secure employee data.
SAPs are ideal for small and medium enterprises. Ensure that your SAP meets your SME needs by researching SAP modules thoroughly before investing. Enquire about what free tools you can try before signing a monthly agreement.
Cloud HCM Suites For Enterprises In 2022
Cloud HCM suites are popular today as they offer scalability and flexibility, as well as automatic updates alongside external IT support if needed. Gartner user reviews rate Workday human capital management software as the most popular cloud HCM for large enterprises. But what other HCM cloud solutions are available?
The Oracle cloud HCM system is a comprehensive suite of HR tools within customizable modules that can be purchased individually or within a whole suite. Oracle HCM is best for medium to large organizations.
The ‘Global HR’ suite includes employee information management tools, union support, employee lifecycle, and self-service capabilities. The suite also includes tools to manage resources to plan organizational changes.
BambooHR offers HR Management as a Service and proudly states that Asana, SoundCloud, and Foursquare use it. BambooHR is aimed at SMEs and has an intuitive, accessible UI. Staff can use this software to manage time, attendance, reports, files, and personnel data.
Organizations can configure security so that login details correspond to the role and team members see less detailed information than managers. And this software is available for Android and iOS for easy self-service portal access.
Infor HCM aims to simplify HR management by unifying several services within one platform. The outcome is the ability for staff to move seamlessly between streamlined workflows. The software offers HR tools such as time and employee relations management and benefits management. Infor HCM also features a payroll management system for streamlined payroll processing.
Cloud HCM will likely become more prevalent in the future, particularly for SMEs who need similar features to large enterprises but at a lower price. Always read the elements of an HCM carefully and compare them to your company’s needs before investing.
Innovations In The Changing World Of HR
There is a functional gap between the current HCM capabilities and what is needed to get the most out of HR department resources. The main issue with HCM software today is that it is not adaptable or agile enough to allow HR to fulfill its purpose of creating value and pushing its resources to predict trends and build resilience.
This point fits with McKinsey research which shows that 95% of chief HR officers seek to elevate the role of HR within their organization through digitalization. HCM is the key to the success of any digital strategy.
Many organizations fill the functionality gap with third-party applications that are still limited, needing several updates each year to combat swiftly technological and trend disruption. So what needs to happen to improve HCM software to help bridge this gap?
The Future Of HCM Software
HCM software must create a solution for the functionality gap by implementing more adaptable functionality to accommodate constant innovations within a disruptive market. What features will HCM software have in the future?
- HCM systems will offer better integration performance in user experience (UX) and data consolidation.
- Integration platform as a service (iPaaS) software will become more prominent as it enables companies to create more efficient and cost-effective relationships with third-party software providers.
- HCM solutions will become more adaptable to industry and region business requirements.
- Pre-built connectors and third-party software integration will help HR departments to create value for companies.
Companies must research these new technologies and seek to invest in HCMs with these features in the future to ensure resilience and sustainability.
HCMs Will Transform The Role Of HR
HCMs are becoming more prominent as companies realize they can use them to improve a wide range of HR functions. HCM software uses HR process automation tools to unlock time for staff to spend on more challenging tasks, supporting a broad overview of operations to improve efficiency, and allowing HR to create value by integrating ERP and HCM solutions.
These HCM features allow HR to change how it evaluates its role and capabilities. Some of the most significant HR functions revolve around hiring, recruitment, and employee management operations, designed to improve productivity through increased employee satisfaction.
Adaptability, agility, and resilience are the natural strengths of an HCM that companies must acknowledge to optimize their use of HCM and ERP software. As it assists with these areas, employee management, recruitment, and talent management are the core of HCM software. However, the focus for the future of HCM operations must be on the agility to maintain resilience.
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