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.
ADMINISTRATIVE 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.
Payroll
Handles all employee compensation processes, including payroll calculation, check printing or direct deposit, and payroll tax management.
Benefits Administration
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.
Absence Management
Configures absence schedules and enables a company to track absences, issue leave approvals, and provide an administrative framework for tracking paid time off (PTO).
Time Tracking
Allows employees to report time worked (either in real time or retrospectively) for payroll or billing purposes.
Workforce Planning
Helps companies optimize staff scheduling to meet demand by effectively aligning employee availability, skills, and workload requirements, ensuring efficient resource allocation.
Reporting
Analyzes and visualizes company data and provides key performance indicators and insights in dynamic dashboards and automated reports.
Travel Management
Automatically captures travel requests, data and costs and supports travel expense reporting in accordance with applicable laws.
STRATEGIC TASKS
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.
Employee portal
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.
Applicant management
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.
Onboarding
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.
Talent Management
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.