Historically, when companies talked about assets, they were generally referring to their capital -- resources they owned and expected to bring in income. Now, however, they could very well be talking about their employees -- their human capital. More and more, companies include their people on their lists of assets, and view recruiting, cultivating and retaining the right people as an important investment. And as with any major investment, companies need the right tools to manage their assets.
Human capital management software is a set of applications that can help develop and leverage employees' skills in an organization. In this guide, learn some of the functions HCM software provides to ensure a positive ROI on companies' employee investments, the growing importance of HCM among software vendors and get a preview of upcoming trends.
Table of contents:
HCM software -- what it is (and isn't)
Human capital management systems and human resources management systems (HRMS) are often seen as interchangeable. While this is true to a certain extent -- their processes are very similar -- they differ in strategy. The primary focus of the HCM function is to attract, hire and hone individual employees, thereby building an optimal workforce for an organization's needs. HCM software provides human resource managers with the means to clearly communicate and define performance expectations and goals, and support continuous improvement for each employee. In this sense, HCM differs from human resources management, focusing on the professional growth of an individual as a lasting investment, rather than dealing primarily with the day-to-day, transactional functions typically handled by HRM.
Inevitably, HCM and HRM use some of the same technologies, such as workforce management (WFM) software. Workforce management is considered to be under the umbrella of human resources in the broadest sense, and both HCM and HRM use it for different reasons. For instance, in HCM, it is used for time and attendance tracking, talent management and training. In HRM, it is used for payroll, benefits and vacation leave.
To add to the confusion, WFM software is also used in customer relationship management (CRM), mostly for staff hiring and scheduling. In CRM, it is critical for organizations such as call centers to have sufficient staff to fulfill customer needs. But like HRM, CRM employs WFM and other HR software more for the day-to-day requirements of the company and doesn't take the long-term view of HCM.
Maximize human capital development with talent management
Managing human capital first requires attracting human capital. Talent management system software is key to successful human capital development because it provides HR with a variety of applications for expanding and fostering the organization's available expertise and services. It doesn't just attract candidates -- it attracts those with the right skills. With recruitment pressures so high, a talent management system can help companies save money by hiring correctly the first time.
In fact, many companies are also reducing their total cost of ownership (TCO) by consolidating HCM and talent management systems. Despite some integration issues, talent management system software is in high demand, and many companies are interested in consolidating their HCM applications on one platform.
Time and attendance software benefits
Another cost-saving feature of many HCM systems is time and attendance software, which can eliminate manual processes, thus preventing human error and costly payroll errors. Tracking time and attendance can prevent overpayment of employees and even help calculate accurate tax payments. It can also reduce the risk of compliance violations and labor disputes.
New time and attendance technology has added self-service functions, such as shift scheduling. Employees can use web applications and mobile devices to check their schedules, trade shifts or see when they have vacation time available. The self-service capabilities make the system more accessible to everyone, improving communication and ensuring full staffing at all times. Time and attendance is a complex task but has a high ROI when optimized and automated through the use of technology.
Leading HCM software vendors
A good indicator of the value and growth of HCM software is how aggressive vendors have become in trying to corner the market, and the amount of money they are willing to spend to do so. In February of this year, Oracle purchased Taleo, an HCM Software as a Service (SaaS) vendor, for $1.5 billion. The acquisition was in response to SAP's December 2011 purchase of SuccessFactors, another SaaS HCM vendor, for $3.4 billion. Last year, Salesforce.com acquired Rypple, which produces performance management software, another component of many HCM systems.
With giants SAP and Oracle already dominating the HCM arena, some experts say these major acquisitions have positioned them to play a major role in the upcoming trends in HCM technology. The companies' looming presence in the HCM market also underscores the prevailing view of employees as company assets to be managed and nurtured.
Analytics, cloud computing lead HCM technology trends
Fast-emerging analytics technology is seen as giving companies an edge over competitors when it comes to managing human capital. Experts say talent analytics can enhance employees' development, in part by more closely linking them to the company's success and retaining them as long-term employees. Workforce analytics focuses more on strategy, such as determining what kinds of job skills and positions a company requires to meet its short- and long-term goals. Advocates claim HCM analytics enables organizations to make informed and effective human capital management decisions based on comprehensive data.
Meanwhile, the use of cloud computing technology in HCM is expected to increase, a trend SAP heralded with its purchase of SuccessFactors, a SaaS-based organization. Likewise, Oracle's purchase of Taleo, another SaaS vendor, was seen as proof of HCM's migration to the cloud. The technology's adherents say outsourcing to the cloud can be cost effective, and cloud HCM systems tend to be more flexible and able to handle rapid data growth than on-premises HCM applications. However, some experts say security and privacy concerns over HCM data could slow cloud HCM adoption.