S.D.I. English Edition: What is an HCM System

An HCM (Human Capital Management) system is a software solution designed to manage all activities related to the management of an organisation's human capital, i.e. its human resources (employees, collaborators, etc.). An HCM integrates different functionalities to cover both operational and strategic aspects of personnel management, helping companies to optimise workforce-related processes.

Part of the HCM principles are usually integrated in an ERP system (D365, Sap S/4, Infor), providing a basic management for the administrative management of personnel (referred to as Core HR)

-????????? Employee master data: Stores and manages the personal, contractual and legal data of employees

-????????? Payroll: Manages the calculation of wages, taxes, contributions and all aspects of payroll

-????????? Benefits management: Supports the configuration and management of company benefits such as health insurance, pension plans, etc.

-????????? Time and Attendance Management: Allows the recording and monitoring of staff working hours, absences and shifts.

But personnel management does not stop at the points listed above but requires many more functionalities, especially now that a new mental and generational change has made its way into the HR world; training, development, growth, talent, integration are issues that are increasingly present in the needs of companies' HR departments.

This is where arises the need to integrate the advanced HR management functionalities of HCM systems into Core Hr; let's look at some of them in detail:

HR process automation

Reduces administrative workload and improves efficiency by eliminating the need to manually handle tasks such as attendance calculation or payroll processing.

Strategic analysis

Provides useful data to make informed workforce management decisions and support company success.

An HCM system is a key platform for organisations that want to effectively and strategically manage their human capital, integrating all the necessary functionalities to cover the employee lifecycle, from recruitment to retirement.

Recruiting and Onboarding

The turnover, more evident in digital talent, of personnel in companies requires tools for the automation of 'Personnel Selection' that simplify the recruitment process, job posting, application management and interview organisation. Additional functionalities are expected from the implementation of AI systems that make these processes faster.

Facilitate the process of onboarding and integration of new hires, ensuring that they have access to the information, resources and processes needed to start work. Process not always agile and facilitated in companies.

Performance Management

Allows the management of periodic employee performance appraisals, goal setting and feedback processes.

It defines and monitors individual development plans to improve employees' skills and performance.

Training and Development

Training management in companies is an issue that is often underestimated or neglected. An HCM system helps to organise internal or external training courses, manages enrolments, and monitors training progress and skills improvement.

Development in HCM not only improves the training of resources, maximising their training, but at the same time proposes plans for succession planning, identifying potential internal candidates for key roles, promoting the development of career and succession plans or, alternatively, preparing job posts to search externally.

It monitors performance, plans career paths and trains employees to retain top talent. Talent management is an increasingly sought-after concept in HCM, helping to identify, develop and retain talent within the organisation, with tools for career planning and succession plan management. It monitors employee engagement, collecting feedback and managing initiatives to improve satisfaction and motivation.

Workforce planning and analytics

Analyses personnel data to support strategic workforce decisions, such as recruitment planning, cost management and resource optimisation. At the same time it provides advanced reporting and analysis on various aspects of human resources, such as turnover, labour costs, productivity and employee engagement. KPIs from the HR world are part of the company's system to identify focus points.? Together with employee feedback they give insight into the risk of potential problems.??

Compliance and security

Compliance and security; we know how much these issues are increasingly being considered, an HCM helps to manage compliance with local and international labour regulations, ensuring that the organisation complies with all applicable laws and regulations by protecting sensitive employee data through advanced security systems and compliance with privacy regulations such as GDPR. The HCM is a substantial help for the company to remain compliant with labour laws, avoiding mistakes and possible penalties.

Who are the major players in the market

In the market for Human Capital Management (HCM) systems, there are several leading companies offering human resources management solutions. These vendors range from traditional on-premise platforms to modern cloud-based solutions, and their offerings vary according to the needs of organisations of different sizes and industries.

The HCM market offers a wide range of solutions, from platforms geared towards large companies and multinationals (such as SAP SuccessFactors, Workday and Oracle HCM Cloud) to those more suited to small and medium-sized enterprises (such as BambooHR). The choice of HCM system depends on the company's specific needs in terms of functionality, scalability, budget and integration with other business systems.

We can list among the main players in the HCM market:

SAP SuccessFactors

One of the most popular solutions, SAP SuccessFactors is a cloud-based HCM suite designed to cover the entire employee lifecycle, from personnel management to talent management, from performance to payroll. It provides strong integration with SAP's ERP system, talent and performance management, a strong presence in the enterprise market; but not only with ERP, ensuring interaction with the entire SAP ecosystem.

Workday

Workday is the unicorn of recent years, a cloud-based HCM solution focusing on HR, payroll, recruitment, talent management and financial planning functions.

Famous for its ease of use, frequent updates and modern user interface. Widely used in large and multinational organisations.

Oracle HCM Cloud

Part of Oracle's cloud suite, this solution integrates HR, recruitment, payroll and performance management functions.

Strong data analysis capabilities, HR process automation and, of course, integration with other Oracle Cloud modules (such as ERP and CRM).

ADP Workforce Now

?Automatic Data Processing is a leading provider of payroll and human resources management solutions. ADP Workforce Now is a complete cloud-based solution covering HR, payroll, benefits, time management and compliance.

Proven payroll solution, strong focus on regulatory compliance and broad scalability for organisations of different sizes.

Microsoft Dynamics 365 Human Resources

Part of Microsoft's Dynamics 365 suite, this solution offers HR functionality such as personnel management, performance monitoring, recruitment and benefits management.

With strong integration with other Microsoft solutions such as Office 365 and Teams, it is easy to use for companies already in the Microsoft ecosystem.

Infor HCM

Infor offers a complete cloud HCM solution specialising in HR management for specific industries such as manufacturing, healthcare, and hospitality.

Focused on vertical industries, in-depth workforce management for industries with special operational needs.

BambooHR

BambooHR is a cloud solution designed for small and medium-sized enterprises. It offers basic HR functionalities such as personnel data management, recruitment, onboarding and performance monitoring.

Being dedicated to SMEs the ease of use, affordable price and specific orientation towards SMEs cannot be missed, with a focus on simplifying HR activities.

Sage People

Sage People is a cloud-based HCM platform, part of the Sage product suite, focused on HR management for medium-sized companies.

Integration with other Sage solutions (such as accounting), strong focus on global HR management.

Integration of an HCM system into a business ecosystem

The integrability of an HCM system into a business ecosystem is a crucial aspect of ensuring smooth and efficient business processes. An HCM system must interface with other business systems to manage shared data, automate workflows and enable comprehensive analysis of human resources and their interactions with other departments. Let's take a look at the main aspects and challenges of integrating an HCM system into an enterprise ecosystem:

Integration with ERP (Enterprise Resource Planning)

Integration between an HCM system and an ERP (such as SAP, Oracle or Microsoft Dynamics) is essential to link HR processes with other business functions such as finance, logistics and accounting.

The integration allows payroll data to be synchronised with the financial modules of the ERP, ensuring that personnel costs are accurately reflected in the budget and financial reports.

Employee attendance and shift data can be integrated to better plan operational costs and resource management.

Employee-related expenses, such as travel or project expenses, can be tracked and charged in real time through integration with the ERP; again, HCM systems are not 100 per cent prepared but can integrate additional functionality with add-ons such as Sap Concour.

Integration with CRM (Customer Relationship Management)

Integration with a CRM (such as Salesforce, SAP C/4 or Microsoft Dynamics CRM) makes it possible to link human resources data to sales, customer service and marketing processes.

Linking the performance and workload of the sales team with the CRM enables better resource planning.

In cases where employees work on specific projects, integration with CRM makes it possible to monitor working hours and project profitability.

Integration with payroll management systems

Integrating the HCM system with payroll software ensures that attendance, holiday, leave and overtime data are automatically transferred to the payroll system.

It enables the automation of payroll, avoids errors and reduces the time needed to process payroll by automating the transfer of data from HCM to payroll, while ensuring compliance with local and international regulations regarding wages, taxes and contributions.

Integration with Document Management Systems (DMS)

Integrating the HCM system with a document system allows you to manage sensitive employee-related documents such as contracts, certificates and tax forms.

It facilitates archiving and access to HR documents, improving file management efficiency.

It allows you to automate processes such as contract generation, electronic signature and document archiving.

Integration with BI (Business Intelligence) and analytics platforms

Connecting the HCM system to business intelligence tools (such as Power BI, Tableau, QlikView) enables the creation of advanced reports and dashboards for HR data analysis; creating sets of KPIs dedicated to HR management (see article KPI).

Allows you to monitor and measure employee performance, turnover, personnel costs and HR management effectiveness.

By using HR data in combination with other corporate data (financial, operational, etc.), managers can make more informed decisions on recruitment, personnel management and talent development.

Integration with collaboration and productivity tools (Web Apps)

Integration with productivity and collaboration tools (such as Microsoft Teams, Slack, Google Workspace) allows employees to easily access HR data and participate in HR processes.

Notifications regarding HR processes (such as holiday approvals or leave requests) can be sent directly via collaboration tools.

Employees can access their personal data or company policies directly through these platforms, reducing the need to access multiple separate systems.

Integration with e-learning platforms and training management

Connecting an HCM system to an e-learning platform (such as Cornerstone, Moodle or SAP Litmos) enables effective management of training and skills development and monitoring of programme progress.

The integration allows training courses to be assigned based on the performance and development needs of employees, facilitating the management of certification and compliance programmes and ensuring that employees complete the required training.

Integration with Work Force Management solutions

Integration with workforce management tools (such as Kronos, UKG or ADP) optimises shift planning and attendance monitoring.

It optimises planning for better shift assignment based on staff availability and skills, while automating attendance monitoring, reducing the risk of errors and improving productivity.

Challenges in integrating an HCM system

Integrating an HCM system into a business ecosystem offers numerous benefits, such as automating processes, reducing errors and making data-driven decisions. However, it requires careful planning and a strong focus on security and compatibility between systems, let us look at some of the key aspects:

-????????? Data compatibility: Different platforms use different data formats and standards, so the proper mapping of data between systems is critical.

-????????? Security and privacy: HR data is highly sensitive, so the integration must ensure that it is protected and that privacy regulations (such as GDPR) are respected.

-????????? Cost and resources: System integration requires time, resources and expertise, as well as the possible support of external vendors or an in-house IT team.

-????????? Maintenance and updates: Any system with which an HCM is integrated may require ongoing updates and compatibility with new software versions.

Orchestration and integration are a crucial point in the adoption strategy of an HCM system; natively integrated systems if part of the same suite (e.g. Sap SF with SAP S/4), with greater complexity between systems of different backgrounds, in which case the use of an orchestrator is strongly recommended (see article Orchestration).

A step further into the HCM world: Expense Note Management

An expense management solution is the basis for automating the processes associated with the management of company expenses, while ensuring that employee expenses are managed and recorded correctly and efficiently. This type of integration improves data accuracy, reduces approval times and increases visibility into company expenses.

The integration automates the entire expense report management cycle, from employee input to manager review and approval, to sending data to the accounting department or payroll, improving integration but also reducing the risk of manual errors and simplifying the expense reimbursement process.

A strategic step to improve business efficiency and automate key processes. It allows organisations to have a clearer and more up-to-date view of expenses, reducing manual work, minimising errors and ensuring regulatory compliance. Choosing the right integration depends on the business needs, the type of HCM and expense management systems used, and the ability to support the integration in a secure and scalable manner.

Employee data in the HCM system, such as department, position, cost centre and contact information, is automatically synchronised with the expense report management system, this synchronisation ensures that expenses are correctly allocated to the appropriate business accounts and that the data is always up-to-date.

By integrating expense reports into HCM, managers can use the HCM system to approve employee expenses directly, following a predefined workflow. This simplifies the approval process and reduces the time required to complete each expense management cycle.

In addition, corporate expense policies can be integrated into the approval workflow, automatically blocking non-compliant expenses.

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Simplified integration with payroll, approved expenses are automatically sent to the payroll system integrated in the HCM for employee reimbursement. This eliminates the need for manual entries and ensures that reimbursements are made in a timely manner. Expenses can also be categorised and recorded according to specific criteria (travel, meals, etc.), which facilitates fiscal management and cost tracking.

Reporting and KPIs are also important information in the management of expense reports. Expense report data integrated in the HCM system can be used to extract advanced information on company expenses by employee, department or project. This allows more accurate monitoring of company costs and provides useful information for budget management, HR dashboards can analyse reports showing expense trends, helping to identify trends and opportunities for cost reduction.

The integration ensures that expenses are recorded in compliance with local and international tax and accounting regulations. The system can also provide alerts in case of discrepancies in employee-reported expenses, helping to prevent violations of company policies or regulations.

The integration of mobile functionality and accessibility in expense report management offers mobile functionality, allowing employees to enter expenses and upload receipts directly from their smartphones. Integration with HCM allows centralised and accessible expense report management from anywhere, mobile apps can also provide notifications to managers to approve expenses quickly and simplify interaction between employees and managers.

Examples of HCM integration with expense report management:

- SAP SuccessFactors with SAP Concur: SuccessFactors, SAP's HCM system, natively integrates with SAP Concur, one of the most popular platforms for expense and travel management. This integration allows employees to easily manage expenses and managers to track and approve expense reports in one platform.

- Workday with Expensify: Workday HCM, a cloud-based solution, can be integrated with Expensify, one of the most popular expense management platforms. The integration allows employee data in Workday to be automatically synchronised with Expensify for optimised business expense management.

- SAP SF with Microsoft D365 F&O: in this case the integration is not native, so we will have to resort to a data exchange between different systems, the solutions to do this are multiple, interface development, dedicated API implementations or via orchestrators such as Azure Logic Apps or Mulesoft

Whichever case and scenario is adopted, even the integrations between Hcm and expense reports are not without challenges; compatibility of systems, management platforms; may require customisations or specific connectors to ensure seamless integration.

Integrating data with different formats that can be transferred without loss of information or inconsistencies is essential. Data mapping and API configuration are critical activities.

Nonetheless, ensure maximum security in the handling of data, business expenses are sensitive information and may contain confidential financial information. Appropriate security measures must therefore be taken during the integration process.

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