One of the most critical functions in an organization today is its Human Capital Management (HCM) system. It enables to streamline HR processes and leverage the true potential of the organization’s human capital. However, it is often used interchangeably with Human Resource Management System or HRMS.
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How does HCM differ from HRM?
Firstly, let’s understand that there are two aspects namely Human Capital Management (HCM) and Human Resources Management (HRM). The key difference between the two is that HRM is all about the process of establishing the management of human resources in accordance with the policies set by the organization. This includes employment contracts, reports on employees according to key parameters, administration of payroll, legal aspects of employee management etc.
HCM, as the name suggests, views employees as a capital for the organization and works on the principal that if the organization invests well in employees, it stands to gain well in the long term. It helps the organization to hire the right people that aptly fits into the culture and value system of the organization. It also enables to attract the right talent, onboard them seamlessly, upskill or re-skill as required, and retain the best among them.
However, HCM systems are now evolving to include Payroll and Labour Management and expand their span of control.
Benefits of a good HCM System
Employees are the most important asset in any organization. A set of good employees can enable to create a market leading organization. On the flip side, disgruntled and unhappy employees can negatively impact the organization’s growth and prospects. Hence, HCM systems become extremely important in today’s digitally empowered organization.
The benefits of a good HCM system are:
It enables to identify the requirements of the human capital with respect to the operations and deliverables. An HCM system can identify the re-skilling or upskilling needs for certain projects and enable leaders in the organization to empower their team’s basis this insight.
Also, in addition to the benefits such as attracting the right talent, training and development of employees, review and course-corrections with respect to performance, and managing rewards and recognition, a good HCM system can enable organizations to manage productivity. It can help organizations to access processes minutely and find solutions to increase productivity of employees thereby empowering the organization.
Global HCM Market and Key Players
As per a report by Allied Market Research, the global HCM market was valued at $13,004 million in 2016. Due to the above-mentioned obvious benefits of an HCM and its ability to empower informed decision making, the HCM market is expected to reach $22,174 million by 2023. With cloud based HCM taking centre stage, the growth has only begun and the CAGR of 7.8% from 2016-2023 is highly likely to sustain.
While North America is generating the highest demand due to the increasing need for automating HR processes, the developing countries in Asia are also seeing hyper growth in adoption of HCM due to the increasing internet penetration and rise in smartphones as well as accelerated adoption of the cloud.
The key players in the global HCM market include the renowned OEMs such as IBM, Oracle, SAP, etc. We also have Workday, Kronos, etc. which are focused HCM systems.
The HCM market Outlook
With the emergence of digital-first and cloud-first business models and increasing adoption of remote and hybrid work models getting a strong impetus due to COVID-19, HCM systems are gaining increasing traction.
The key factors enabling growth of HCM markets is the rising comfort and adoption of cloud by organizations. Even in markets where regulations are placed on managing customer data on cloud, the norms for employee data on the cloud may not be as stringent and hence Cloud HCMs will see great adoption.
There is also a growing need for a one-view of the HCM suite and to streamline the operations with respect to employees. Moreover, leveraging automation to manage rule-based, redundant processes and generating insights and reports to better manage the human capital make HCM a very popular piece in an organization’s internal digital transformation roadmap.
The impediments or concern areas include managing the security of employee data on the cloud. As for multi-national organizations, the regulations by the governments and regulators at respective nations may create challenges in seamless implementation.
However, the future looks bright. There are no doubts on the importance of adoption of a good HCM system and the benefits power over the challenges. Hence, adoption is set to increase as organizations are keen to invest in systems to manage their most critical asset – their human capital. A huge fillip for the same is the rise of Digital HR technology which leverages the power of social media, mobility, analytics, and cloud to empower HR teams to become more informed and efficient.