What is HCM software? Human capital management (HCM) software is a powerful tool for any company pursuing digital transformation. The main component that sets human capital management software apart from other HR software is the emphasis on appreciating workforce value by means of training, tools, compensation, rewards and other methods.
The value of HCM solutions is significantly increased when integrated to an enterprise resource planning (ERP) system. This allows companies to seamlessly operate with integrated end-to-end processes.
For example, HCM integrated with ERP software can allow production controllers to assign qualified technicians to production orders or allow store managers to assign training to cashiers on the point-of-sale.
Many of the ERP vendors in our 2022 Top 10 ERP Vendors Report have HCM functionality within their solutions.
The 2023 Top 10 ERP Systems Report
This report is relevant to organizations across industries and outlines the best ERP vendors that we believe will help organizations prosper in 2023.
In the past decade there has been a shift in the way companies manage and value their workforce. Because of this, the popularity of HCM software, human resources management systems (HRMS) and human resources information systems (HRIS) has been on the rise.
Let’s talk about the key features that popular HCM systems typically have.
What is HCM Software? [5 Features to Look For]
1. Workforce Management
This may seem like a simple feature, but there are several benefits to centralizing all your human resource information in a single system. Workforce information like employee information, positions, titles and reporting structures can live in the same system as performance and payroll information. This consolidation of data (especially within enterprise software) can allow for advanced analytics that help you make better hiring decisions based on business need.
Here’s an example of how significant value can be added when HCM software is integrated with an ERP system: Your ERP system provides several metrics relating to your build to order time (i.e., your total turnaround time from order placement to shipment is five days).
To remain competitive in the marketplace, you want to trim this down to three days. You suspect that picking the raw materials for the production order is the slowdown in the process due to the limited number of hand trucks in your warehouse.
However, workforce analytics show that warehouse workers’ pick times are quite fast. The data instead reveals the bottleneck is in completing the production of the finished goods. Upon further investigation, you realize that you only have two technicians with the skills to complete these production orders.
Without the combined production data from your ERP system and the personnel data from your HCM system, you might have ordered additional hand trucks instead of hiring additional skilled workers.
Workday is a good example of an ERP vendor with strong HCM functionality. You can learn more about Workday in our 2020 Top 10 ERP Report and the related webinar:
2. Learning and Professional Development
Continuing from the previous example, there is an alternative solution to the problem. Instead of hiring more skilled workers, how about training other employees via online or on-the-job training?
A key feature of HCM software is the ability to grow your current workforce’s skillset by providing training. Imagine your HCM software had a mentorship tracking program. You could pair one of the seasoned technicians (in a mentor role) with another employee who wants to learn while on the job. Although the end user training is happening outside of the system, tracking their meetings and progress can keep the momentum and help determine when the goal has been met.
Some HCM software vendors also offer out-of-the-box integration to popular e-learning programs to help track employee progress and suggest additional courses based on their learning interests. These courses can be aligned with business needs for specific skills training, or even used for companywide compliance training. These tools can also be leveraged to onboard new employees in an accelerated fashion.
HCM software helps provide continuous learning opportunities to a modern workforce that has come to expect it. As companies compete to attract top talent, on-the-job career development is becoming a key differentiator. Many companies highlight this offering during recruiting campaigns, and HCM software is the backbone of it all.
3. Performance Management
The ability to support employees in improving their performance is another key feature of HCM software. Human resources can define and publish role responsibilities and promotion criteria in a centralized system that employees can also access to ensure promotion progress is fair and easy to track. Using this defined list of responsibilities, managers can leverage HCM to create and facilitate performance reviews with their direct reports.
Rewards management is a sub-category within performance management that HCM software typically handles, as well. Setting up compensation and benefit plans that are competitive in the industry help retain the top talent.
How do you know what salary range and benefits are considered competitive? Business intelligence within HCM software can help you determine this based on several factors.
Another component to rewards management is goal attainment setting and tracking. For employees in sales, the ability to see their progress towards meeting quotas can light a fire when they are behind or give them piece of mind when they are on track.
HCM software can also help proactively plan for workforce adjustments when changes in leadership and promotions occur. For example, imagine that you have a high performing store manager who recently applied for a regional manager position. It’s likely that he/she will get the role. When this happens, a gap will be left in that store’s management structure. HCM software can preemptively notify you so you can take steps to prepare another employee to fill the role.
4. Expenses and Time Management
If there’s one thing that can bring business to a grinding halt, it’s not paying your workforce. A complicated expense tool is a huge burden for both the employee who incurred the expenses and the accounting clerk tasked with reconciling them.
What do employees typically do with burdens? They avoid them. Adding impediments between the time it takes employees to incur an expense and get reimbursed will not improve employee morale.
Submitting, tracking and approving or rejecting expenses are common HR business processes that are traditionally met using PC-based tools. In fact, with modern HCM software, processes like submitting expenses or entering a timesheet can done via self-service time and attendance tools.
Employees now have the ease and convenience of performing their daily job functions on their mobile devices, away from the office and their computers. Giving employees this flexibility of self-service expense and time management usually results in more on-time expense reports and timesheets.
Some aspects of expense management can even be automated. For example, some HCM software offers a mobile app that allows users to take photos of expense receipts. The picture can then be scanned to extract the information a user would normally have to type into an expense report. Then, an expense report can automatically be generated, and a new line is added for the expense – all triggered from a simple photo.
5. Recruiting and Talent Management
Companies pursuing business transformation are also looking to update the way they attract and recruit new talent. Modern HCM software can help with this. Popular HCM systems offer a variety of features relating to recruiting, such as applicant tracking and artificial intelligence (AI).
Here is a use case for how HCM software can help find the right candidate for your open position: Your most senior product manager has recently been promoted, and you need to fill his/her position immediately for a new product launch. You need the same level of experience for the task and none of your other employees have that level of experience, so you turn to external recruiting.
With your HCM software keeping records of past candidate information, you won’t have to start from scratch with a new recruiting campaign. Instead, you can leverage AI to narrow the candidate pool down to those who have the needed skillset for a product launch, as well as the level of experience your previous product manager had.
Even if you did not find a valid candidate in your existing recruitment database, HCM software makes creating and tracking a recruiting campaign simple. Modern HCM tools allow candidates to interact with hiring managers via video chat or internal email. This helps to reach a broader talent pool instead of being limited to local candidates.
Investing in Your People
HCM software is much more than a tool to operate your HR department; it’s an instrument for helping your company invest in one of its most valuable assets – people!
Need help navigating the different HCM software options? Panorama’s ERP consultants can help. Request a free consultation below.