When it comes to core human resource management software, no two companies have the same requirements. Because companies vary in size, location and industry, their requirements for HR tools also vary.
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For example, some larger companies are in highly regulated industries where compliance is a major HR issue. Other companies are engaged in fierce competition for talent and have backlogs of positions they can't fill. Still other companies are entrepreneurial startups faced with managing an employee payroll, but lack the internal knowledge or time to do it themselves.
Despite these differences, there's one common thread: You must understand your company's specific needs before you go shopping for human resource management software.
Which HR tools fit best?
Most HR and human capital management (HCM) software is delivered as a suite. These products provide core HR offerings and expand into talent management and social engagement. HR software is designed so it covers the full spectrum of needs. This allows you to pick and choose the HR tools from this suite that best align with your organization.
Let's take a look at various use cases and which types of HR tools best align with these cases.
Processing payroll for U.S-based employees, as well as employees in other countries
For companies that are U.S.-based and either have expatriates working overseas or have locations across the globe, payroll processing can be complex. Not only do these companies need to stay abreast of U.S. payroll and tax requirements, but they also must comply with the wage and labor laws of these foreign countries and compute currency exchange rates. If your company processes payroll in the U.S. for other countries, it needs HR software that supports U.S. payroll and that can also localize payroll currencies and even languages to those used in the countries where these employees are located.
Meeting ever-changing compliance requirements
Certain industries such as insurance, financial services, healthcare, and public-sector governments and agencies require extensive regulatory compliance, and HR systems and reporting must also meet these compliance requirements. The problem is that compliance requirements, such as the federal Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA), or employee background checks in finance, are constantly changing. This makes it difficult for HR to keep up with updates.
If your company needs to stay on top of regulatory reporting and compliance, you may want to consider compliance-ready software that automatically updates software when regulations change.
Attracting and developing talent
Worldwide shortages of many critical positions are affecting companies of all sizes. For this reason, many HR departments want software that enables them to more effectively compete for and recruit talent and also retain and develop their current talent.
Traditional core HR systems that focus on payroll, compensation and benefits don't provide much support for talent management, so it's almost always necessary to look for software from a vendor whose primary area of expertise is HR talent management.
Integration with existing systems
If your company needs a new HR software package, but it already has HR systems in place, you need to find software that will work with the existing systems. Many companies want to keep their existing HR systems because the systems are already working well, and the employees are used to these systems. In some cases, companies might also have invested years of customized code and interfaces into these systems they don't want to lose. One approach is to find HR software that can deliver the new functionality desired and also integrate with your existing HR systems base.
Software that comes with a set of standard APIs that enable data to easily pass between the new software and the existing HR systems often meets that need, although this doesn't necessarily mean the software integration is plug and play. If two different vendors are involved, it can be difficult to get them to cooperate if they don't already have an agreement for integration of their two platforms. In these cases, you may need to bring in a consultant to achieve the integration you need.
Another approach is to add the new software by connecting into a cloud-based version. This works if you have minimal integration requirements with your existing software. With cloud, users can simply access the new software through a secure Internet portal. Many cloud HR providers that offer software as a service, or SaaS, provide HR expertise and consulting on how to best use the new software.
Unlike larger companies, smaller companies don't always have the staffing or desire to handle core HR functions such as payroll, direct deposit and filing taxes. For these companies, outsourcing payroll to an HR software vendor makes sense, because the vendor can take care of payroll, direct deposit and taxes.
Many outsource vendors also offer HR consulting services on an as-needed basis. This can be helpful for small companies that also need help hiring and firing employees, as well as doing performance reviews. These jobs are often left to line managers who have no HR experience and don't know the legal aspects of HR. In these cases, the outsource company can provide on-demand consulting. Since most outsource vendors are cloud-based and offer payroll access 24/7, small companies also gain flexibility because many of them have employees who work nontraditional hours.
Using social media for collaboration
Many companies that already have core HR and talent management tools want to take HR to the next level by using social media tools to help employees exchange ideas and information with one another. Companies whose work is project-based or where its employees must collaborate on new, one-off projects, often look for workforce project collaboration tools. Healthcare also uses collaborative technology to bring doctors, pharmacists and medical practitioners together in patient management. In all of these cases, HR is looking for social media workforce productivity tools that enhance collaboration for internal employees.
In other cases, HR wants to build awareness of the company brand or what it's like to work for the company through popular social media channels -- or browse social media for potential candidates for job openings. Nearly all HR software vendors offer social media for these purposes. However, some vendors have really focused on the collaboration and personal engagement in social media and do it better than others.
As part of their talent management strategies, many companies want to help employees develop their own careers and increase their value to the company. They do this by offering online training that employees can take anywhere, anytime on either their desktop computers or mobile devices.
HR goals like these are especially prevalent in technology-driven companies where new breakthroughs (and the need for new skills) are constantly emerging. If your company fits in this category, you might want to consider looking at HR software that supports the development and administration of a corporate training program.
Paying employees for performance
More companies want the ability to reward top-performing employees with bonuses and larger salary increases based on the value they deliver to the company. The problem is that older HR systems are often merit-based (meaning they provide pay increases based on time on the job).
If all HR wants is a way to provide performance-based pay with no other changes to existing HR software, you can simply look for a compensation tool that will do this. However, if HR's move to pay for performance is a first step of a new strategy that could require additions or replacements to other HR tools, you must consider the long-term integration picture for any software you buy. The best way to position for either scenario is to find a vendor that can provide the initial pay-for-performance tool and also scale into other HR tools as they're needed.
Visibility through HR analytics
With talent management, workforce management and pay for performance becoming more important to companies, HR managers and key corporate executives want to know how well their human capital is working. They want to use HR analytics to analyze turnover trends, salary levels and recruitment activities, and generate predictive analyses to help them determine why employees leave and how they can improve retention, or what motivates employees to join the company, so they can compete for the best talent.
Managing the cost of benefits is important for public as well as private-sector organizations. For small and medium-sized companies where managers are overtasked, it's always a challenge to get performance reviews completed on time. Regardless of company size or industry, most companies have little experience with HR analytics. Consequently, if your HR department wants to add analytics, you might consider a vendor that has a strong track record in helping organizations adopt HR analytics, with easy-to-configure analytics reports that HR can immediately put into practice. IT infrastructure is also a major issue in selecting an analytics vendor, because the analytics reporting the vendor offers must be able to easily interact with the employee-related data that's already stored in your data center.
HR software custom-made for your industry
Retail grocery companies have paper-thin profit margins, where the volume of goods sold is great and most employees are on hourly wages at thousands of different retail locations. They want HR tools and analytics that can help them optimize employee schedules, streamline work processes, and do whatever it takes to reduce costs and waste from operations. Oil and gas drillers work on a per-project basis and use highly skilled employees and contractors who augment staff. These companies might need HR tools that can address the needs of a hybrid employee and contractor workforce.
Still other companies must run payroll for both union and non-union employees, and they need a payroll system that can handle different pay rates, deductions and reporting regulations. If your company would be best served by industry-vertical-specific HR tools, there are HR software vendors that have optimized their products to fit the HR needs of specific industries.
Before shopping for an HR product
Today's HR software suites are capable of so many functions that unless your organization's primary goals and uses are well-defined, you risk becoming overwhelmed with all of the choices in the market and even in how software is deployed.
A good practice is to check existing HR operational and system processes that are already working well for your company. In most cases, your company will want to keep these processes in place and just add products that easily integrate with the existing HR software base.
However, if your company has reached a point where it wants to totally replace its HR systems because the cost of maintenance, the operational and system pain points, and the software's limitations are just too great, a major system conversion might be the most feasible means of retooling your systems and improving your business processes.
With a clear understanding of your company's needs and objectives, your next step is to identify must-have features that will factor into your request for proposal.
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