Employees form the core of a company. This makes Human Capital Management (HCM) so important. But which HCM concept is the best fit for your organization? While the number of modern HCM software for large companies is still relatively manageable, it becomes much more difficult to keep track of what is on offer for small and medium-sized companies. Here’s what you should know before you decide on a provider.
Human Capital Management: HCM Definition
Human Capital Management (HCM) measures, controls and optimizes the process of hiring the right people, managing the workforce effectively and optimizing their productivity. The goal is to fill the right position with the right person at the right time in the company.
In doing so, HCM goes far beyond the administrative tasks of classic Human Resources Management (HRM). It focuses primarily on the competencies and qualifications of each individual employee. The goal is always to get the best out of employees and to develop them accordingly. The key components of an HCM concept therefore include not only administrative applications but also strategic tools. As a result, HR management today has evolved from being primarily an administrative task to being a decisive factor in business value.
HCM: Factor of success
Human capital management views personnel not primarily as a cost factor, but as an intangible asset. This value can be increased by investing in human capital. For this, it is important to evaluate the workforce both quantitatively and qualitatively, to measure performance and corporate goals, to involve employees and managers, and to make processes transparent. According to the basic principle of the “Continuous improvement process” (CIP), step-by-step improvements in the product, process and service quality of a company can be achieved.
However, HCM offers other benefits as well. It can improve employee productivity and help HR managers hire, motivate and retain people who fit the company. It also helps business leaders to anticipate tomorrow’s needs today. For example, the talent strategy maps the entire development cycle of an employee over the entire length of service, unlocks their potential, and aligns their performance with business goals.
The right HCM strategy can play a decisive role in the success of your company. Tight labor markets and a high demand for expertise make qualified professionals a sought-after commodity today. Changing demographics or poor location conditions in more remote areas also suggest that companies should invest more in careful, long-term employee development and retention. In addition, new work structures, due to team-based working and the increased involvement of freelancers, require new methods in HR management.
HCM-Software: What’s that?
HCM software offers companies the opportunity to digitally optimize their strategic HR management. It combines all the HR applications that companies need to manage their employees, in recruiting and onboarding, in training and development, and in performance management. The software typically includes core HR functions such as payroll, attendance, performance management and reporting. Unlike traditional HR software, HCM software offers strategic software features. For example, these can measure employee effectiveness or find and hire new employees. In addition, they offer many other functions. They provide information, for example, on whether an employee is meeting his or her goals and benchmarks, what his or her salary development looks like, and much more.
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HCM-Software: What are the benefits?
HCM software offers many benefits, including improved accuracy, transparency and measurability of HR management. It also automates administrative tasks, resulting in improved process and service quality.
HCM software can help you
- make data-driven decisions.
Data analytics and forecasting can lead to better decisions about compensation packages, work schedules and more.
- drive business growth.
Customizable and extensible cloud-based solutions allow you to manage more employees, transactions and data.
- increase profitability.
Automated workflows that replace manual tasks can reduce direct labor costs and administrative expenses.
- optimize talent strategies.
Chatbot-assisted applicant screenings, multimedia training, and mobile self-service options are just a few of the ways you can improve talent acquisition and talent retention.
- secure data.
Multi-layered protection and publicly available security alerts can help prevent data breaches and fraud.
- improve regulatory compliance.
Global and local monitoring capabilities ensure you stay current with changing regulations.
Range of Funcitons: What are a HCM systems capabilities?
An HCM system is an integrated personnel management system: It maps the entire structures of a company and manages and develops employees. It supports HR managers in all administrative and strategic tasks.
The list of administrative tasks performed by the HR department is long. Thanks to digital solutions, the creation and arrangement of employment contracts, the processing of vacation requests and sickness notifications, and the payment of salaries, for example, can now be handled in a time- and resource-saving manner.
Digital personnel file
Manages electronic documents from the personnel file. It allows documents and data to be managed easily, efficiently, and quickly.
Handles all employee compensation processes, including payroll calculation, check printing or direct deposit, and payroll tax management.
Streamlines the employee benefits enrollment process. Helps reconcile benefit standard costs and determines eligibility based on selected criteria. Includes reporting on employee elections and how they relate to the company budget.
Configures absence schedules and enables a company to track absences, issue leave approvals, and provide an administrative framework for tracking paid time off (PTO).
Allows employees to report time worked (either in real time or retrospectively) for payroll or billing purposes.
Helps companies optimize staff scheduling to meet demand by effectively aligning employee availability, skills, and workload requirements, ensuring efficient resource allocation.
Analyzes and visualizes company data and provides key performance indicators and insights in dynamic dashboards and automated reports.
Automatically captures travel requests, data and costs and supports travel expense reporting in accordance with applicable laws.
An HCM system also has a variety of strategic options. These include salary development, data analytics, succession planning or even location control, as well as many other functions.
One of the most sought-after modules of an HCM software is the Employee Experience Platform (EXP). It allows employees to perform all personnel-related tasks themselves. They can view their work schedule, check pay checks, and change their contact information. A major advantage of employee portals is that employees update their data themselves. This reduces the workload of the HR department immensely. It saves time and minimizes possible sources of error. Another advantage of EXP is that company employees have direct access to performance management. Employees can track their participation, eligibility and declarations for benefits and retirement at any time.
Performance Management System and Feedback
With a performance management system, managers can easily measure and improve employee performance. To ensure that employees are successful in their jobs, it is important that they know exactly what their employer expects of them. The software makes it possible to set benchmarks and schedule performance reviews at regular intervals. This information can in turn be used in feedback discussions and form the basis for salary increases and bonuses. However, not only do employees steadily improve their performance, but the company as a whole also achieves a return on investment from the improvements made by its employees.
One feature that can be found in any human capital management software is applicant tracking. Applicant tracking tools offer many benefits and can help fill a position in the best possible way. For example, they reduce the time spent on administrative tasks such as posting to job boards and sending follow-up emails. Another benefit is the automatic review of resumes. If you receive a large number of applications for a job, an applicant tracking system can use certain algorithms to scan resumes and pick out job requirements that you are looking for. This helps improve the quality of hiring, speed up the recruiting cycle, and improve the candidate experience.
The onboarding feature of HCM software is helpful in being able to map important processes and tasks within the company. Not only does it allow for technical onboarding, but it also offers various options to help a new employee integrate socially. Workshop and mentoring functions make it possible to network and support each other via the software tool. Internal onboarding events or workshops can also be planned, organized and held on the basis of the software.
With the right HCM software tool, talent management can also be aligned with the overall goals of the business. Talent management is primarily about retaining highly qualified employees, developing their skills and continuously motivating them to improve their performance. It includes measures that promote the growth of talent within the company. With the help of an employee development plan, the skills and knowledge of each individual can be expanded in a targeted manner and potential futer roles can be identified into which certain employees could move in the future. Through a tailored training program, employees are given the opportunity to advance their careers without having to leave the company.
HCM Software: Trends and Developments in Human Capital Management
Human capital management and the use of HCM software are becoming increasingly important in companies. One important trend is cloud computing by means of Internet-based software applications. Thanks to their individually adaptable scalability, cloud computing solutions are becoming increasingly popular. This makes professional HR software affordable for small and medium-sized companies in particular.
Another trend is the spread of user-friendly front-end systems such as employee experience platforms (EXP). They allow employees direct access to various HR tools such as time recording systems or their benefits administration. EXPs have two major advantages: they strengthen employees’ sense of personal responsibility. They also reduce the workload of the HR department, saving time and costs. The aim is to provide all managers and employees with all the data they need for their tasks immediately and in a uncomplicated manner.
In view of the increasing mobility of employees and the changes in working conditions, connections to mobile devices are also becoming more and more important. Many HR providers have recognized the trend and offer to connect with an employee’s smartphone or tablet computer. This means, for example, that employees in the home office can record their time themselves, or field employees can settle their travel expenses while on the road.
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HCM software comparison: How do you choose the right software?
Contemporary HR work is hardly possible without digital systems. HCM software uses mobile and cloud-based technologies to process data, run reports, and create a smooth end-user experience. Here are some aspects to consider when selecting HCM software:
Best-of-breed approach versus all-in-one software.
There are basically two types of HCM software approaches: the best-of-breed approach or the all-in-one solution. With a best-of-breed approach, you buy the best possible solution for each area of use. Then, the modules from the different vendors are combined into a comprehensive end-to-end solution. The advantage: a greater depth of functionality is created. However, because you are dealing with multiple vendors, contracts and user experiences, this solution is very complex. All-in-one software, on the other hand, means working with just one vendor for all your HCM needs. While this model may be easier to maintain, the features are often not as robust as the individual modules of the best-of-breed strategy.
Consistent user experience
Many employees use certain HCM software tools on a regular basis, while other features are sporadic. Make sure the HCM software is easy to use. All important functions should be available, easy to find and clearly named. It helps if the various elements remain consistent in arrangement, color and functionality throughout the application.
Make sure that your HCM software can interface with different applications. Therefore, your solution module should have appropriate interfaces – i.e. be capable of integration.
Personnel data is confidential data. Data protection is a key issue for HR departments. This makes it all the more important to choose a provider compliant with your countries data securtiy laws and guidlines when selecting an HCM system.
The provider’s experience
Currently, software startups are springing up all across the HR landscape. They often offer innovative solutions with a lot of potential. But young technologies in particular often have to contend with early stage problems. Therefore, you should rely on a team of experienced software developers. And don’t just look at what the technology can do, but also at what it can do for you.
Training and support from the provider
In order for HR staff and employees to use the HCM software once it has been introduced, they must be trained in using the various tools. Therefore, do not save on training and education. Only if the users have a positive user experience with the new software will this also benefit the company. Equally important is a comprehensive IT support for your software. This will help you avoid long-lasting disruptions and system failures and keep your IT equipment up to date at all times.
The individual providers of HCM software differ not only in their application, but above all in terms of the costs they incur through purchase, implementation and use (ongoing license fees). Market experience shows that HR-IT costs vary between 10 € – 180 € per employee per month, depending on maturity and customer size, internationalization, industry and employee structure. The average value is around €29 per employee per month.
HCM software comparison: finding the right provider
If you want to implement an HCM system in your company, you are faced with the challenge of selecting the right provider and the appropriate HCM solution from the abundance of offerings. Which system is right for you depends on various details. While large companies mainly opt for full suite solutions from ERP manufacturers, a large number of innovative start-ups serve the HCM market for small and medium-sized companies.
The most important ERP providers of HCM software
The complex HCM suites are predominantly used by globally active large companies with approximately 2,000 or more employees.
The SAP ERP HCM (SAP Human Capital Management) solution is an on-premise solution for automating core HR processes. The solution is based on SAP S/4HANA and is increasingly being replaced by cloud-based solutions such as SAP SuccessFactors. SAP Human Capital Management (HCM) is an integrated HR management system that helps map a company’s hierarchy structures and the relationships they contain, as well as manage and develop employees. It brings together all aspects relevant to HR management, such as payroll, master data and applicant management, as well as employee development.
Workday Inc. provides a complete cloud-based HCM solution for managing employees from the hiring process through employment termination. In 2007, Workday launched Workday Human Capital Management, its first HCM software solution. Since then, the module has undergone continuous development and is now characterized in particular by its agile development. This enables customers to react quickly to changing influencing factors. Workday HCM is a comprehensive solution that enables organizational and business process management, employee and manager self-service, and reporting and analytics. In 2020, it was named a “Leader” in the Gartner Magic Quadrant for Cloud HCM Suites.
Oracle Fusion Cloud Human Capital Management is a cloud-based full suite solution that connects every HR process from hiring to retirement. Oracle HCM Cloud provides human capital management applications that enable organizations to develop and execute their HR and talent strategy in the cloud. Companies can manage payroll, benefits, performance, and talent with this mobile HR platform.
A direct comparison of the ERP providers
|SAP S/4HANA Software||Workday HCM||Oracle HCM Cloud|
Cloud based solution: SAP SuccessFactors
|Range of Funcitons||Full Suite||Full Suite||Full Suite|
|User experience||Intuitive||Good design||Convenient and clear|
|Mobile Connectivity||Mobile solution:
|Free Test Trial||✓||No||✓|
|Price||Non-transparent||Good price performance ratio||Simple Pricing Model|
The most important providers of HCM software for SMEs
More and more software providers are developing digital HR solutions specifically for small and medium-sized enterprises. Once the digital processes have been introduced and established in the company, you will achieve significant savings in time and costs by optimizing the processes.
Personio is the name of the human capital management software from Personio GmbH based in Germany. The software has a comprehensive range of services and can cover the entire HR area. Personio is a cloud solution. The functional scope of the software can be defined individually.
Founded in 2017, Kenjo offers HR departments a cloud-based all-in-one HR management solution for managers and employees in small and medium-sized businesses. It allows users to manage documents, leaves and absences, perform performance management, analyze KPIs and select new talent.
jacando is an all-in-one cloud software for human resources management. The goal of Swiss software provider jacando is to offer a holistic approach to HR management for companies of all sizes. All products are scalable, can be adapted to individual customer needs and meet the highest security standards. To differentiate the various needs of individual companies, all main products are offered in modules. All modules are coordinated and work best together.
Direct comparison of HCM software providers for SMEs:
|Range of Functions||flexible||Two service packages plus additional options such as recruiting||Different modules can be selected|
|User Experience||Well structured,
easy to understand, appealing design
|Easy to use,
modern and clear design
|Good and intuitive menu navigation|
App (no recruiting option), multiple mobile interfaces
|Customer Service||Excellent||Excellent||Very good|
|Price||Transparent pricing, Cheapest rental option: 99€||Flexible premium and professional package prices, additional options can be booked||Good price-performance ratio|
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