Everything #HR Needs to Know About HCM
It’s been a while since I’ve published one of these posts. As a quick reminder, I’ve been working on a series about HR technology: the common terms and concepts that HR pros need to know. It’s amazing the things I’ve learned. I hope you feel the same.
For example, one of the terms that keeps popping up is HCM. What exactly is it? To give us some insights and a bit of a history lesson, I had the privilege of chatting with Bill Kutik. If you do not know Bill, you should. He is considered one of the top four HR technology influencers in the US, and the industry’s leading producer of shows – live and online. He’s probably best known as founding co-chairman of the HR Technology® Conference & Exhibition. Bill is also writes an informative monthly column on technology for Human Resource Executive magazine.
Bill, let’s start with a couple of definitions. What is HCM? And what is end-to-end HCM?
[Kutik] The progression of acronyms in HR technology, which is what I most like to call it, is fascinating. At first, we had the HRIS or Human Resource Information Systems, referring to the basic traffic-cop and record-keeping software that recorded people being hired and fired, transferred, given raises and promotions and their benefits among 100 different items. Very compliance oriented.
Then some marketing-oriented people decided to rename it HRMS or Human Resource Management System. Many old-timers refused to adopt the name, pointing out quite rightly that it was more just an electronic filing cabinet than the manager of anything. But the name quickly caught on and is now called ‘Core HR.’
People started noticing that the applications that hung off the HRMS – recruiting was the first and performance management soon followed – actually did offer strategic value and first called them the Talent Management (TM) suite and finally HCM or Human Capital Management.
As the night follows the day, HCM eventually was taken up to mean the whole shebang – Core HR and TM – which together comprise an end-to-end HCM solution. The broadest possible definition of that is the software that can start with a candidate, who’s not yet applied for a job, extend through the entire employee lifecycle, and even include those who retire and come back to the same company to work as a contingent.
Of course, companies have lots of contingent workers who have never been employees, but that’s still a separate problem with HR often reluctant to take on tracking the entire workforce in a holistic way.
What are the advantages of an end-to-end HCM solution?
[Kutik] I don’t think any HR practitioners today are looking to buy anything else but an end-to-end HCM solution: If they are willing to give up some favorite software module they love (say recruiting) and start all over. That’s called ‘rip-and-replace,’ and companies of all sizes are doing it for new Cloud systems.
If they need to stay on a legacy on-premise system because of the millions of dollars spent to acquire, implement, customize and maintain it, they may buy the TM Cloud applications from their legacy vendor (with promises of easy integration), from a competitor or from an independent (all promising it’s so easy.)
The advantages of a unified system can be just like Microsoft Office, which is used in 90 percent of corporations for a good reason: all the applications look and act the same. They have a common look and feel – User Interface (UI) – and you can use common navigation techniques – User Experience (UX). You can even search, ask queries and run reports much the same way in every module.
This ease-of-use actually leads to employees using the software, which is the biggest problem companies face after implementing new end-to-end HCM systems: user adoption.
Are there any disadvantages? Is it possible that businesses can get stuck with a legacy system and not be willing to change because of the investment they’ve made?
[Kutik] I can’t think of any disadvantages, except the ones I’ll talk about shortly. I believe many large corporations will stick with their on-premise legacy systems because both of the enormous investment, but more importantly, they’ve been customized to work exactly as the company wants the software work. Even when the old processes it enables may now be witless.
IBM still runs payroll on a mainframe Tesseract system purchased in 1986 because it still works, which is not witless. Now they’ve written so much code over it, that not even company founder Gary Durbin would recognize it. But it is 30 years old, though some say IBM is finally planning to replace it.
Though Cloud software has become more and more flexible – and even extensible – to accommodate a company’s idiosyncratic processes, it may never reach the level of on-prem software where you could write new code to make it work differently. But there can be so many things companies can’t do with their on-prem software that Cloud may overcome that reason eventually. Cloud is the next generation of computing: just like mainframe, client/server and web-based applications before it.
On the flip side, there are many systems that don’t fall into the category of end-to-end HCM solution. Generally speaking, what are the advantages for non “end-to-end” solutions?
[Kutik] The software industry term for those are ‘point solutions,’ and their primary advantage is they may be ‘best-of-breed’ which means they are simply better at what they do than a comparable software module in an end-to-end system. There are always trade-offs buying an end-to-end HCM solution, and one of them may be losing a software module that works perfectly for you. There are no useful generalities on this point. Every HR department has to decide for itself.
A very tech savvy good friend of mine still uses WordPerfect and Eudora as an e-mail client despite for 15 years not getting the benefits of meeting invitations automatically entered into an integrated Word calendar.
Tech security is a priority for organizations. Are Cloud HCM solutions secure?
[Kutik] Most of the data breaches you read about occur on on-premise systems. The reason is simple. Very few individual corporations (save the 16 agencies comprising the U.S. Intelligence Community) can afford to invest in security the way Amazon Web Services does – serving hundreds of Cloud vendors – or even giant companies like Oracle and SAP maintaining their own datacenters around the world.
A recent guest on my video series, Firing Line with Bill Kutik®, faced security fears moving his company from a mainframe system to a Cloud system. He brought all the stakeholders into a room and asked, ‘What data elements are we already tossing over the wall to third-party insurance providers, 401(k) providers, Flexible Spending Account managers, COBRA administrators, etc.?’
As they ticked them off (including Social Security numbers, of course), they soon pretty much had everything needed for complete identity theft and realized that the Cloud did not increase their risk profile one little bit.
With technology changing so quickly, how can an organization stay on top of what’s happening in the HCM market?
[Kutik] Many people have full-time jobs keeping up with the HCM market, and they can barely cope. An HR executive or practitioner with a day job doesn’t really have a prayer. However, they can catch up on what’s happening in the HCM market by attending events such the HR Technology Conference, but you know I’m prejudiced having started it 19 years ago. There are other conferences to attend and at least 20 blogs to read. But despair of ‘staying on top!’
A huge thanks to Bill for sharing his expertise with us. If you want to tap into more of Bill’s knowledge, be sure to check out his radio show. While he’s not recording new episodes at the moment, the archives are full of conversations with industry leaders.
Technology decisions are more complex than ever. Yes, functionality, user experience, and cost are important considerations. But as Bill points out, organizations have to think about long-term solutions, system maintenance, and data security.
Image taken by Sharlyn Lauby on a lazy cloudy day off the coast of Mexico
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