What Is HCM? A Definition and Introduction

Introduction to HCM Software

HCM stands for human capital management, a type of enterprise software that’s increasingly sought after. This post will provide a definition of HCM software and an overview of its main features and benefits, as well as a brief guide on choosing an HCM system.

 

So just what is the human capital that needs to be managed? That refers to employees. HCM software was developed to serve all the functions related to human resources (HR) in organizations of every sort. This particular type of HR software can support recruitment, the interview and hiring process, onboarding and training, workforce management, and much more—making HCM software an important tool for organizations of all sizes.

Incidentally, HCM software is also sometimes classed as human resources information systems (HRIS) or human resource management systems (HRMS). The basic meaning of these terms is the same. In this post, we will simply refer to this type of business software as HCM.

 

What HCM Software Includes

The features and functions of HCM software fall under the following categories: talent acquisition, core HR (which includes personnel management, payroll, and benefits), talent management, workforce management, employee self-service, and product technology.

Benefit tracking is another important function of HCM software. With elements such insurance plans, retirement savings, childcare support, wellness incentives, and so on, the ability of sophisticated software to simplify the task of defining and maintaining such data can be a great boon to a busy HR department.

 

HCM software may also offer employee self-service portals, which are increasingly in demand. Consider how time-consuming it can be for an HR staff member to have to update employee profiles every time there is some sort of change such as a change of address, the addition or deletion of a dependent for insurance purposes, and the like. Self-service portals offered by HCM software allow employees to update such information themselves. Employees can also use these portals to consult company policy information, such as leave and overtime policies, keep up with company news, complete timesheets, and submit travel requests and expenses.

 

Performance appraisals are another important element included in many HCM tools. This is closely related to career planning and employee goal-setting—having the right tool will not only make the task easier for managers and supervisors, but can also lead to a greater degree of employee engagement.

 

Somewhat related to performance appraisals are features related to compensation management. Businesses with employees who earn sales commissions or participate in various incentive or bonus programs, stock options, and the like can require advanced tools to calculate and track compensation. If your organization works with complex compensation packages, an HCM system that includes features related to that can save considerable time and effort.

 

Another important area of HCM systems is employee engagement. This includes communication tools that facilitate real-time collaboration among employees, as well as tools aimed at optimizing work-life balance, managing access to employee assistance programs (EAPs), etc.

 

These are just some examples of what HCM software can do. If you’re interested in exploring all of the possible functions within each HCM module, you can download an HCM request for proposal (RFP) template. These RFP templates list hundreds of features that you can find in the software. Of course, the extent to which each of these aspects is supported by a particular HCM system will depend on the vendor and the configuration of the software product. An RFP template can help you identify exactly what you need from a software system and prioritize your requirements, and can then be sent to HCM software vendors so they can confirm whether or not their solution offers the functionality you need.

Benefits of HCM Software

The benefits of adopting HCM software can be numerous. For those who manage and staff your human resources department, the benefits of HCM can include:

• Increased efficiency and productivity through automation: it has been estimated that up to 40% of the average workday of an HR staffer is monopolized by benefits administration. Streamlining such tedious “clerical work” frees up time that can be spent on higher-value tasks.
• Reducing errors: no one likes it when errors are made, especially on things such as payroll, benefits, and tax-related matters. The compensation and benefits management functions of HCM systems can greatly reduce or even eliminate such errors.
• Tax and regulatory compliance: modern HCM software makes it easy to remain fully compliant with all applicable tax and regulatory schemes affecting personnel. For example, most of these systems will automatically file quarterly reports with all relevant tax authorities.
• Better and timelier metrics: with the cost of staffing a major expense for most organizations, HR departments are often asked to provide managers with data to use in quarterly and year-end reports, as well as for forecasting/budgeting and strategic planning. Most HCM systems make it easy to configure and run reports for these purposes.

These benefits directly apply to those working in HR, but there are other benefits that affect the organization as a whole. Chief among these is improved employee engagement. Employee engagement is all about creating an environment in which employees are encouraged to fully participate in the organization. Giving your team members a sense of empowerment and making sure their voices are heard increases their productivity, prompts them to better serve customers (both external and internal), and inspires in them a desire to build their careers within your organization as opposed to taking their skills and experience elsewhere. Hiring the best candidates and then retaining them is vitally important.

Finally, while it is sometimes hard to put a monetary value on it, there is a benefit to finding and hiring employees who are a good fit for your organization—something that robust talent acquisition functions within an HCM system can help accomplish.

 

At a time when good candidates are at a premium and there is a fair amount of competition to hire the best and most qualified applicants, ironing out the kinks that often exist between your organizational culture and the compatibility of job candidates can be hugely beneficial. Any HCM software than can aid this process can result in a big advantage.

Selecting the Best HCM Software

As with virtually all types of enterprise software, finding the right HCM application for your organization is not a matter of finding the best overall system or the best value in terms of price vs. features, or choosing the HCM system from the most prestigious vendor or the one that a respected colleague has recommended. Instead, it comes down to knowing exactly what your organization requires from an HCM system, identifying your current and future priorities, and matching those requirements to the functions and features offered by available HCM solutions.

 

Remember that HCM, like other enterprise software, has a life cycle of several years and is expected to directly support a number of critical business functions. It doesn’t make sense to cut corners in an attempt to save time and money only to end up with a solution that is not a great fit for your requirements.

 

If the process of evaluating and selecting HCM software seems challenging, and the idea of taking the risk of ending up with a poorly-matched product seems daunting, the good news is that help is readily available. An impartial software consulting firm like TEC can play a major role in making sure your HCM software selection project is ultimately successful.

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