Keeping up with HR jargon: HCM

August 11, 2020 Mark Debono

HR plays a critical role in the success of digital transformation projects, which – as a result of COVID-19 – are being prioritised by companies in every sector. Part of that is the digitisation of some of the HR functions too. To help HR professionals stay up to date with the different software available to support them, we have created a series of blog posts to help you know your ATS from your HCM. In this, the second in our series of four posts, we’ll take a look at HCM Software – what it is, and what it can do to help HR teams.

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 focuses 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 transactional – which includes processes such as payroll, absence management, time management, benefits management and onboarding – and transformational, which includes talent management (recruiting, learning, performance) and business intelligence (big data, employee data management, HR analytics and workforce planning).

Transactional HR focuses 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 improves 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 focuses 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, data visualisation, business intelligence, predictive and prescriptive analytics and big data, you can answer questions such as, “How can I ensure my recruiting process attracts the best candidates?”, “Does onboarding contribute to higher retention?”, “Am I planning for the long term to avoid skills gaps?”, and “Is my training strategy engaging enough to improve employee motivation and efficiency?”.

The core benefits of HCM software are as follows: improved visibility of the workforce; consolidated HR systems; advanced analytics; improved reporting; attracting and retaining top talent; lower HR costs; automated manual processes and increased employee satisfaction.

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 aging 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:

Employees: 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.

Managers: 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 gives 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.

The HR department: 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.

The C-suite: HCM software allows employees across the organisation to access data, information and other HR functions easily. Senior management want 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, ensuring that HR aligns with the business goals and understands any HR trends that are affecting the industry and business.

External partners/resellers/clients: 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.

If you enjoyed this post and found it useful, why not read our other posts in this series, on ATS (Applicant Tracking Systems), TMS (Talent Management Systems) and LMS (Learning Management System). And if you would like to find out more about how you can help progress on your own digital transformation journey, take a look at our resources here.

About the Author

Mark Debono

Area Vice President at Cornerstone OnDemand

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