A Buyer’s Guide to HCM Systems

Introduction

Is this guide useful for me?

If you’re reading this, you’re probably somewhere in the process of making a change to your current way of working. No matter how far you’ve come on your own, we understand that it can be overwhelming, and that there is a lot of conflicting information out there. We’d like to help you navigate your way through the process with confidence.

Once you’ve made the decision to look into adopting a new HR system – or introducing a digital system for the first time – it can be difficult to know what to do next. You might have a lot of questions, or maybe you don’t even know which questions to ask yet.

This guide might be helpful if you:

are pretty sure an HCM system will benefit your business but you’re not sure how to get started;
are looking for a system that will support your business and HR needs, but you’re not yet clear on what those needs are or how to define them;
want a solution that will add value over the long term, but you’re unsure how to select a provider that both complements the organisation you have today and will be able to work with you as you grow and evolve.

What does this guide cover?

erp-screen

There are a number of things it helps to know before you start that will save time, effort and stress as you work your way towards your goal of digitalising some or all of your HR processes. This guide is intended to be a starting point that takes some of the mystery out of the process. We will cover:

What a digital HCM system is
Why you might need one
How to introduce an HCM system to your organisation
Making a business case
The next steps after you have approval to move ahead
Selecting a solution and vendor

What is an HR system?

From paper and spreadsheets to comprehensive software suites, every organisation has a way of managing their HR processes. But when we talk about HR systems in this guide, we’re talking about a digital solution that will:

support your overall way of managing people in your organisation;
reduce the time you spend on routine tasks; and
help you reach your business goals.

Why do we need a digital HR system?

Much like other business functions, HR has undergone dramatic changes in recent years. Focus is moving away from routine administrative tasks and there is increasing demand for more strategic work. The key to this transition lies in the kind of useful, reliable data insights that can only come from a digital HR system. When this type of system also automates many routine administrative tasks, this frees up time to focus on valuable, strategic work.

Organisations experiencing high growth will often struggle to cope with new staff volume without a digital system to manage it. These struggles will then impact the organisation’s ability to attract and retain talent. In addition, many employees and job seekers are beginning to expect that their workplace should be as self-service driven as their personal lives, particularly in regard to technological tools.

An organisation that offers digital, self-service solutions to its employees is likely to be seen as a modern, forward-thinking employer. Putting a system in place that can manage routine processes automatically, and that offers employees transparency and control, can have a positive impact both on employee engagement and your ability to attract and retain talent.

Further, there is an increasing demand for quality HR master data from IT and systems administrators in regards to access management. Erroneous software licences resulting from out-of-date employee records can cost thousands and waste valuable personnel resources in data maintenance.
When evaluating HR systems, keep in mind what these factors mean to your organisation and where they will be most valuable.

Terms you might encounter

In your research of HR software solutions, you will likely come across many different acronyms and terms and it can be hard to know what the difference is, or whether there is in fact a difference at all.

Here’s a quick guide to the most common terms you’ll come across, and what they mean.

Human Capital Management (HCM)

The term Human Capital Management (HCM) covers the full spectrum of routines and processes used to manage people in an organisation. An HR system should support your HCM practices, enabling you to meet your organisational goals unhindered.

While HR practitioners are responsible for maintaining the processes that underpin HCM, it’s managers at all levels who are usually responsible for establishing them and carrying them out. In this way, it’s easy to see how HCM affects an entire organisation and contributes to its success. An effective HR system should sit at the core of an organisation’s HCM practices.

Although there are many differing opinions about exactly which processes and functions belong within the scope of HCM, it’s generally accepted that the term refers to:

Other processes that may also be considered part of HCM include workforce planning, resource planning, time tracking, travel expenses, and payroll management.

HR system, HRMS or HRIS?

HR systems are sometimes referred to as Human Resource Management Systems (HRMS) or Human Resource Information Systems (HRIS), or HCM systems. These terms are used more or less interchangeably, even though some may argue that one term or another refers to specific types or parts of systems.

Given that many modern HR software solutions are module-based and can be customised or acquired bit by bit, even the same solution can be quite different from one organisation to another. For the sake of consistency, and to minimise confusion, we will use the term “HR system” throughout this guide.

We regard an HR system to be a digital solution that assists your organisation in reaching both its HCM and organisational goals by managing HR processes.

Talent Management (TM)

Talent Management is a subset of the organisational processes within HCM that focuses on individuals, namely, the ways in which an organisation attracts, develops, motivates and retains talented employees. The purpose of TM principles is to support the development of a dynamic, sustainable and performance-oriented organisation that is geared to achieving its goals.

Talent Management generally consists of:

Talent Management is about establishing processes and measures that help place the right person in the right job at the right time. This then enables their team and, on a larger scale, the entire organisation to succeed and grow.

An HR system that supports Talent Management helps to optimise your organisation by automating processes and storing data in a single system for ease of reporting and integration with other areas of HCM.

How to introduce an HR system to your organisation

Define your goals and purposes

The best way to get started is to be clear about what you need in a broad sense; e.g. what problems or challenges are you trying to solve?

The purpose of your new HR system might be to improve productivity and efficiency, to develop common routines and processes, or to cope with fast growth. It’s important to find a solution that will meet your unique needs. That brings us to the next step:

Identify your needs

Think about what the catalyst for your decision to make a change was. If you pinpoint the areas where your current system is falling short, or where you see possibilities for automation, you’ll be in a better position to decide where to start. Remember: you don’t need to change everything at once. Depending on the resources you have, it might be a good idea to prioritise the core functions of HR to begin with, like HR master data and onboarding.

An HR system that is customised to fit your organisation will not only provide value to HR, but also to management, IT, your finance department and, not least, your employees. This means finding out to what degree the systems you will evaluate can be customised or purchased in modules that you can add onto later.

Strategic and tactical thinking

In order to find the right solution for your organisation, it’s important to understand your own organisational strategies and goals. The following questions may help your thinking and planning:

Strategic questions	Tactical questions
What are your organisational goals?	How does the way we run HR processes today add value to the organisation? Which processes are causing issues?
What must HR do, now and in the future, to deliver on these goals?	How can our processes be further streamlined?
What role do you want management and employees to play in performing relevant HR processes?	Which steps in the process – possibly those done manually today – can be eliminated and what effect will this have?
Which stakeholders do you need to involve (and when) to make sure you understand the full scope of key priorities and interests?	What integrations and data flows exist today? Do we use an HRIS or ERP system that will need to interact with the HR system?
What are the critical success factors for both the software and the end result?	Where should HR master data be stored as a primary source of information?
	Who uses data and reports today, and where does the data come from?

Talk to vendors

You don’t need to have your full business case scoped out before approaching vendors. In fact, there are good reasons to contact providers while you’re still thinking and planning. Vendors have a lot of experience working with many different companies, and they can help identify challenges and suggest solutions. A good vendor will walk you through the different parts of their solution and help you see potential in areas you haven’t even thought of yet.

Another benefit to contacting vendors early is that it will give you a sense of how it might be to work with them in the future, and whether you’re a good cultural match. A vendor who shows genuine interest in helping you succeed and meet your goals, is flexible in their approach, and who gets back to you quickly when you have questions is more likely to be a good partner in the long term.

You may also decide to enlist the help of an independent consultant to help you through this process, such as HerbertNathan, Deloitte, KnowIt, PWC, Martin Jonassen AS, etc.

Get management on board

As an HR professional, you will likely see the need for, and benefits of, a modern HR system more clearly than others in your organisation. But this is a change that will affect everyone, and they need you to guide them through it. After all, the right solution has great potential to make day-to-day tasks easier at all levels, attract top talent, increase employee engagement, and improve the bottom line. If you involve leadership, middle management, IT, and employees early in the process, it will help manage expectations and create a positive sense of expectation about the changes to come.

IT is your new best friend

While adopting a digital HR solution should of course involve IT from a practical and procurement standpoint, systems administrators, data security experts and other IT folk can become your most vocal advocates. There is increasing interest from IT people in how good quality HR data can make their jobs easier. Helping them understand the benefits to their work in regards to access management and integrations with other solutions.

Most organisations use multiple cloud or SaaS solutions and services, and most charge a fee per user – often without distinguishing between active and inactive users. This means that former employees and erroneous or inactive users who haven’t had their access revoked across every service have the potential to cost businesses thousands.

There is also the issue of the individual security in each service. If a cloud or SaaS solution your company adopts doesn’t have adequate security measures in place, a single attack could leave you vulnerable to data loss, employee identity theft, and hefty fines for non-compliance with data safety regulations like GDPR.

The solution is an HR system that manages these issues automatically. When centralised, accurate and secure HR master data system controls data flow to and from SaaS and cloud licencing records, it becomes possible to automate tasks like revoking or changing access levels when, for example, staff leave or change roles.

IT people who understand these benefits will help advocate for your proposed plan to introduce a digital HR system to your organisation.

Making a business case for a new HR system

With all the above points in mind, your next task is to create a strong business case for this change by presenting compelling arguments centred on those factors that leadership will be most motivated by.

process-icons

When writing a business case, there are some key points you need to address when seeking support from decision-makers; regardless of what your proposal is about, most high-level managers will base their decision on these areas. Making a clear case for how your proposal will affect these areas will increase the likelihood that you’ll gain the support you need.

Direct value
Most managers are concerned with securing or increasing sales of the company’s products or services. Your business case should outline how process improvements within the HR system you’re proposing will result in top line growth, and also where there is potential to reduce costs.
Market share
If you’re part of a young company with ambitious growth plans, leadership is most likely to prioritise gains in market share over cutting costs. Show how the solution you propose will professionalise your organisation, make it easier to acquire new customers, and increase sales.
Risk reduction
Managers will want to know what the risks and benefits of digitalisation are. You will need to demonstrate how your solution will reduce risks your organisation is facing today, such as talent attraction and retention, GDPR compliance, or access management, for example.
Quality
Poor quality products and services represent a considerable cost in terms of replacements, overtime, non-conformance management, etc. In addition, you risk losing customers and receiving bad references. Demonstrate how your solution can address and reduce quality shortfalls.
Delivery capability
In many cases, unnecessary effort and energy is spent ensuring agreed deliveries are made on time. Clarify how your proposed solution can reduce problems and costs associated with firefighting, reprioritisation, crisis meetings with clients, etc.
Reputation
Management is concerned with the business’s reputation and how it may be affected by, for example, negative publicity or legal action. Demonstrate how the business will be better able to comply with laws and regulations and avoid incurring penalties.

After the green light

If your proposal was a success and you have management behind you, it’s time to move forward with the vendor selection process. This means you have some preparation to do. Before you finalise your list of candidates and start attending sales meetings with vendors, you should take time to ask yourself some important questions.

The successful selection of an HR system is the result of good planning. The business implications and consequences are at least as important as the choice of the technology itself.

Key points to remember

Know your goal, purpose and vision, what you want to achieve for your organisation, and which problems your chosen system should solve. The successful vendor needs to be able to support you in this vision.

It can take a long time from when you start the HR system selection process until a contract is signed. You should expect to take up to twelve months but, depending on your needs and the number of solutions you look at, it could be even longer. This may sound like an exaggeration, but it takes time to define your selection criteria and then map them to the various solutions and make your evaluation. Companies that have taken their time tell us that keeping their patience is difficult but that it’s worth it in the long run.

When you’re happy with your selection criteria, prepare a list of needs and a description of future HR processes that you can present to the suppliers you invite to your process. We recommend keeping your list of vendors fairly short (no more than five) and that you ask for references before you book your sales meetings and demonstrations. This will give you a good idea of what the suppliers are offering – and what they’re like to work with – before you are given their sales pitch.

Think long-term and holistically, making sure organisational strategy is at the core of the changes you want to make. Think about what you want your organisation to look like at the end of the process, rather than focusing on the way your practices are today.

If you think you’ll need to bring additional areas into your digital system later, make sure the solution you choose accommodates that. You might start with one key area – such as HR master data – and then aim to expand when the organisation is ready. If this is your approach, you should find out if the vendor’s interface is consistent across different modules. This will help your employees recognise new additions as part of a unified system and assist in streamlining onboarding to additional modules in the future.

GDPR and data security

Today, there is more focus on the collection, storage and use of HR data than ever before. It’s important to choose a system that both complies with data privacy regulations and also helps HR and management make decisions based on accurate, relevant data.

In May 2018, the EU’s General Data Protection Regulation (GDPR) entered into force. This meant more stringent data security requirements and privacy protection measures for all businesses that collect or work with the personal data of EU and EEA residents, including employee data. This regulation not only imposed stricter requirements on businesses’ IT and HR departments, but also on the suppliers of HR systems. Suppliers are now held to a number of stricter requirements as Data Processors. This increase in the security of solutions is, of course, relevant to you from a general data security perspective, but it also impacts your responsibility invest in a new HR system that is GDPR compliant by design.

Let’s take a closer look at one of the most important aspects you should keep in mind when dealing with GDPR and the selection of an HR system.

When you invest in an HR system, you will be considered a Data Processor for your employees’ information. This means that you should familiarise yourself with the relevant regulations so that you’re equipped to assess whether the system and suppliers’ practices comply with these rules. It might be a good idea to bring in an external expert for this part of the process or consult with your organisation’s designated Privacy Officer.
There will be differences in how the various HR system vendors have approached GDPR and what they do to guarantee the safety and security of your employees’ data. You should pay particular attention to their ability to explain and document their system’s compliance with the regulation.
Even when an HR system meets the stricter requirements of GDPR, there is no guarantee that the supplier has established good security routines and processes. Be sure to review their procedures, taking advice and guidance from your own legal counsel and technology experts where necessary.
If you choose a Software as a Service (SaaS) solution from a supplier located outside the EU/EEA, it’s possible that your employee data will also be located on servers outside this area. In this case, you should pay extra attention to the GDPR requirements for data located in other countries and how it must be handled, and make sure the solution is compliant.

There are specific requirements outlined in the GDPR for HR systems to provide complete control over HR data. This includes privacy-by-design, migration and export of data, deletion, and access to personal data. By choosing a solution that can support multiple processes, e.g. LMS, master data, absence, etc., you will also find it much simpler to meet GDPR requirements with your data stored in a single system.

Selecting a System

On-premise or SaaS

In the past, purchasing an IT system involved buying licences and installing a database on a server, either hosted by the supplier or self-hosted. Sometimes this required installing a program or application on each individual computer that needed to use it. These systems, sometimes called “on-premise software” could be adapted to business needs as long as you were willing to pay the price for customisation. Upgrades were issued every 2-3 years, could take several months to implement, and were extremely costly.

Today, it’s more likely that an IT system will be purchased under a Software as a Service (SaaS) agreement that is delivered and operated from the cloud, i.e. hosted in a specialised data centre and accessed via a browser from anywhere, on any device, via secure login. SaaS suppliers issue around 3-4 updates per year, which take minutes to implement, giving customers access to the latest version of the software at all times.

Though there are somewhat fewer on-premise solutions available today, it’s important to understand that choosing between this and a cloud solution will rule various providers in or out of your selection process.

Questions to ask suppliers – and yourself!

General questions

Is the system available as SaaS (Software as a Service) or is it on-premise?
Can you describe your implementation and roll-out process?
Is the system GDPR compliant? Where is data stored and, if outside the EU/EEA, does the hosting facility also meet with privacy regulations?
How scalable is the system with regards to number of users, data capacity and development capabilities?
How does this system support our specific HR processes?
Is it user-friendly? Ask if you can test the system yourself or get references from other customers.
How flexible is the system? Can it be customised to suit our needs?
Is the system module-based? If so, how are the modules divided up, and is it possible to start with one or more and expand later?
What kind of access control and data management will users at different levels have?
How flexible is the system in terms of translation/localisation, and is localised support available?
Can I see a roadmap of future system development?
How frequently are system updates and new versions available, and what is the implementation process?
Can we make changes or customisations to the system without your assistance?
What security measures are in place in the system?
Is it possible (and straightforward) to integrate with other systems?
Do you have any guarantees in regards to up-time, bug reporting, release schedules, etc.?

Price and operating costs

What is the license/subscription cost and what does it include?Does it include, for example, upgrades, support, etc.?
What is the total cost over 3-5 years?

The supplier

Where are you based and what knowledge do you have about Nordic business culture? Do you offer support in our local language? How do you handle international customers/locations?
Can we see a competence profile of the consultant(s) responsible for implementation?
What do your other customers say about their experiences, the product, support, and service?
What is your general company culture? (Make sure the vendor’s general attitude matches well with your own company culture and that you sense good chemistry.)
Is this a supplier we can trust and cooperate with for years to come?
Can we see the entire product scope? This will help avoid having to talk to a lot of different suppliers to cover your needs.
Is the vendor’s business GDPR compliant? What data privacy measures do you take generally?

Our project methodology

Conclusion

We hope this has been a helpful start to your thinking process, regardless of far you have come by yourself. These are the key takeaways you should have gained from reading this guide:

Always keep in mind the challenges your chosen HR system is trying to solve. It’s important to remember that software is only a means to achieving an overall goal, and not an end in itself.
Develop a business case that shows management how an efficient HR system will positively impact the business overall.
Select your supplier wisely; it’s likely you’ll stick with your chosen HR system for many years.
Choose a supplier whom you feel is flexible and compatible with your company culture. Think of your supplier as a partner who will help you achieve your HCM and organisational goals.

If you’d like to talk to us about your HR-system needs, we’re happy to meet with you and talk over your options, even if you’re not ready to start evaluating vendors yet. Get in touch with us to set up a workshop or demo at your convenience.

Read more articles on our blog: blog.catalystone.com

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All you need to know to kick off your selection process with confidenceA Buyer’s Guide to HCM Systems