Humans are unrivaled as the most complex and important component of any business.
We are the creators of ideas and are able to make them a reality in the world of commerce through a collaborative effort. Yes, of course, we can get things done on our own, but scaling a business requires a joint effort between many stakeholders.
This necessity for effective teamwork means that companies need to find, train, and retain employees that fit the workplace environment, gel with other team members, and feel motivated to consistently produce their best work.
While this is the responsibility of managers in all departments, the human resources department is on the front line, and need to have effective systems in place to execute core HR functions, in particular hiring and onboarding processes that set a solid foundation for happy and productive employees.
In this post, we’re going to take a close look at the giant of HR management when it comes to software: Human Resource Management Systems (HRMS).
As company culture, employee satisfaction and productivity have become increasingly important due to the proliferation of job opportunities and demand from younger generations to engage in meaningful work, HRMS has become widely considered as a necessity for HR departments, for SMBs as well as enterprises.
“Whilst a good company with good people used to be able to get by with many a manual procedure, these days it’s hardly going to be enough. The competitive edge modern business demands mean every procedure and process needs to get it right first time – and for far less than it cost in the past. This competitive edge can only be achieved through software systems whose intelligent implementation leads not only to greater automation and the benefits this brings but also to a digitalization of the intellectual property which constitutes a traditional HR department.” – Orange HRM, The Importance of an HRMS to Any Company
Let’s explore why HRMS has become so popular and what impact it can have on your business.
I’ll also go through some of the main challenges companies face while integrating an HRMS, provide some insight into a handful of the best providers currently on offer, along with a quick, practical guide to getting started.
What is HRMS?
An HRMS (Human Resource Management System) is an all-in-one, centralized type of HR software that enables the management of several HR functions.
Ultimately, the aim of an HRMS is the improve the productivity and efficiency of a business through efficient management of HR processes, primarily by consolidating data and automating manual and repetitive tasks.
An HRMS offers a simple way to integrate all of the core and strategic HR functions into one solution. The most common HRMS modules are:
- Recruiting and onboarding
- Payroll management
- Scheduling and time management
- Monitoring employee performance
- Reporting and analysis of workforce data
As popularity for HRMS software has grown over the past decade or so, other slightly different systems including Human Capital Management (HCM) and Human Resource Information System (HRIS) have entered the market, each offering varying levels of functionality at different price points. I will clarify the difference between these three systems a bit later on.
A quick summary of HRMS history
The world of HR management started a tremendous phase of evolution in the 1970s, before which tasks related to HR were managed solely by mounds of paperwork.
The shift to modernization kicked off with the introduction of Enterprise Resource Planning (ERP) systems into HR territory, spearheaded by the launch of SAP R/2 in 1979. This milestone piece of software, integrating HR functions with general business functions like operational and financial management, sparked a new era of digital technology designed to enable a better way for HR departments to manage their employees.
Things really took off in the late 80s and 90s. The founding of PeopleSoft in 1987 was a significant milestone because rather than being an add-on to ERP systems, it was designed solely for HR requirements.
ERP integrated functionality for HR soon became a fast-growing market, with key players like Oracle and JD Edwards developing their own software that offered a solution for all core HR functions including recruiting, onboarding, payroll, and reporting.
Since the 1990s, HRMS systems have migrated from client-servers to the internet, and entered what we refer to as the cloud. This transition meant that there was no longer a need to install software locally, enabling a tremendous phase of growth for the market and improvement in functionality, specifically the ability to engage employees through self-service.
The development of HR technology to enable employee self-service was a huge milestone, because now the use of HRMS software extended beyond just the HR department and into the individual work experience for each employee. Employees can easily manage and update their own personal data while managers can use HRMS to keep track of employees’ attendance and performance
There are now a ton of HRMS providers out there, some more specialized than others, but they all share one thing in common – the ability to empower both HR managers and employees to consolidate data, minimize paperwork, and streamline core processes to foster a motivated and productive workforce that is nothing short of essential for business growth.
HRIS vs HCM vs HRMS
There is quite a bit of confusion around the difference between an HRIS, HCM and HRMS in the HR community.
Whilst the three are undoubtedly similar, there are some key differences that should be acknowledged and understood when evaluating which solution is most suitable for your organization.
Nevertheless, its also not correct to put them in 3 completely separate boxes as there is a significant amount of overlap, and the primary reason for there being 3 different acronyms is simply the development of HR technology from a time standpoint.
An HRIS is the most basic and oldest of the three, dating back to the 1980s and 90s. It provides modules for core HR processes like recruiting, training, benefits, and reporting. HRIS software does not include employee self-service or other integrated features to directly address employee engagement and communication.
The limited functionality of an HRIS creates a notable distance away from the other 2 systems. Where the line gets really blurry is when comparing HCM with a HRMS.
HCM vs HRMS: Depends on who you ask
Now, when it comes to the difference between an HCM and HRMS, the line is not so clear, and is a topic of debate among industry analysts.
“Not everyone agrees on the difference between HCM and HRMS. Some consider HCM the most extensive solution, while others reserve that distinction for HRMS.” – Zachary Totah, SelectHub
One thing that is for certain is that HCM is a more modern acronym, and represents the shift away from on-premise, installed software to cloud-based solutions. HCM is also a solution designed primarily for large enterprises, while an HRIS and HRMS are equally applicable to small and medium-sized businesses.
Below is a table showing differences in functionality. Once again, bear in mind that not everyone agrees on this, and it’s unlikely any clear lines of separation will be drawn in the future.
“The hot HR technology industry continues to move at the speed of light with the addition of new cloud vendors and consistent M&A activity. I don’t foresee the vendor and analyst landscape getting to the point of 100% agreement on these definitions, but I do believe that by putting definitions to the acronyms and applying a specific level of expected functionality to each term, provides some clarity to individual’s better evaluating HR technology vendors.” – Mike Maiorino, Founder and CEO of HRMS Solutions
The table above may seem a little confusing at first, but what it is illustrating is that the greatest level of functionality is offered by an HRMS, which includes all functions offered by HRIS and HCM with the additional of payroll and time & labor management.
The best way to choose between the three options is to determine which modules and features your company needs, and evaluate the available options from a selection of vendors with a solid track record and reviews from existing customers.
5 Essential Benefits of HRMS
Let’s dive into some of the most important benefits of integrating an HRMS solution. Then we’ll address some of the main challenges of integration and run through a useful guide to getting started.
While reading through the benefits, it’s important to keep in mind that each benefit can be broken up into other, more specific benefits. The capabilities of an HRMS stretch so far that the impact it can have on your organization is incredibly broad; influencing numerous aspects of business performance from an individual employee perspective as well as overall business efficiency.
1. Improves the efficiency of core HR processes
This is obviously a big one, in that by optimizing core HR processes you are in turn improving the efficiency of a variety of functions like recruiting, onboarding, and performance reporting.
Because an HRMS solution provides a central hub for information, employees and managers can track and update information in real-time right from the software, avoiding the inefficient process of tracking down fragmented spreadsheets and paperwork.
For example, by standardizing processes related to employee information (employment history, education, certifications, skills, compensation information, etc.), an HRMS eliminates much of the paperwork associated to HR and provides the visibility necessary to effectively recruit and onboard new hires.
In essence, it is the tremendous improvement in data management that enables the optimization of HR processes.
2. Enables a high degree of employee self-service
This is the ultimate win-win benefit of adopting an HRMS solution, as it simultaneously frees up HR manager’s time to focus on critical tasks and forward strategic goals, while improving employee engagement and satisfaction.
The software is designed to engage employees and improve job satisfaction as well as making the lives of HR managers less stressful. An important function considering that highly engaged employees are 87% less likely to leave their companies than their disengaged counterparts.
It’s also a source of competitive advantage because the majority of organizations are beginning to recognize that high employee turnover is often a result of poor engagement, and yet few are really doing something about it.
Studies have found that 90% of leaders think an engagement strategy would have a notable impact on business success but barely 25% of them actually have a strategy.
While an HRMS isn’t an all-in-one solution to engaging employees, it is a big help.
For example, if an employee wants to check their available paid time off, paid sick leave, or ability to work remotely, they can do it themselves from their own personal account. They can track their own attendance, performance and request time off without having to contact HR directly.
Don’t be fooled, however. Adopting an HRMS with excellent self-service functionality is only one side of the coin. You actually need to get your employees to use it before any benefits are noticed.
“Just to state the obvious; buying the right system is only part of the battle, the key to getting the most from your self-service is an installation and implementation process that sets you up for success.” – Dave Foxall, 6 Steps to HRMS Self-service Implementation Success
I snapped up the above quote from a great article by Dave Foxall where he breaks down 6 practical steps for successfully implementing HRMS self-service. I’d highly recommend having a read through if you are looking to improve employee engagement with an HRMS.
3. Fast and easy reporting
The collection and centralization of real-time data paired with powerful filters and graphical representations allow managers to generate any reports concerning the workforce based on a variety of parameters, on an on-demand basis.
A “big-picture” view of critical information can also be easily accessed and reviewed on a single screen with detailed dashboards.
The ability to easily access and create rich, insightful reports empowers managers to make quality decisions in a timely manner, and gain the insight necessary to take action in order to prevent any inefficiencies that the reports suggest may arise.
For example, perhaps an employee has had the same role for an extended period of time and is beginning to slow in terms of productivity due to a lack of motivation. An HRMS monitors how long every employee stays in their position and reminds HR managers when it’s time to consider promotion, so no employee is left stuck in a role they are unsatisfied with and may ultimately cause them to leave.
4. Data centralization & security
Employee data is arguably the most sensitive and important data held by any organization.
Before HRM software, the method of storing and managing this data was, you guessed it, paper-based, which then migrated to libraries of spreadsheets. This approach is fragmented, error-prone and time-consuming to manage.
An HRMS solution provides a cutting-edge level of security for all employee data, maintained within robust software that is incredibly difficult to penetrate and provides an easy way for managers to store and review data.
The centralization of data is also incredibly beneficial in terms of scalability because as the company grows and the headcount increases, there is minimal risk of losing sight of information concerning new employees.
5. Compliance with labor laws
The nitty gritty of HR – ensuring statutory compliance with state and federal labor laws. There is a wide range of labor laws, tax codes, and other regulations that HR needs to keep a close eye on.
HRMS solutions typically keep track of changing regulations, notifies managers to make sure they are complying with the latest regulations, and updates the system to reflect these changes.
3 top challenges of integrating HRMS software
1. Tying the software to strategic goals
Before even going ahead and making the investment in an HRMS, senior management and the HR department must be in agreement as to what goals the software is going to help accomplish.
Is the focus on improving the recruiting and onboarding process? Is it on establishing a way to centralize data and track employee performance?
It’s essential to outline exactly what you want to get out of the software, so that you can work closely with the vendor of choice to utilize the most relevant modules that will actually enable you to achieve the specific goals you have set.
The point about utilizing the most relevant modules for your needs brings me to the next challenge.
2. Understand which modules you really need
HRMS software is incredibly broad and complex. Most vendors offer a high level of customization with varying price points, so it’s really up to you to make the best decision for your company.
For example, you may already have a payroll solution in place that works perfectly fine, but would like an HRMS solution for talent management.
The key takeaway, as stated by Better Buys in their Definitive Guide to HRMS, is that you should list what goals you want the software to meet and what modules you are looking for.
This will put you in prime position to make a well-informed decision when selecting an HRMS.
3. Gaining support from senior management & IT executives
We are all at least somewhat resistant to change. When it comes to integrating a giant piece of software that will have a significant effect on multiple processes and the way people work, it can be challenging to get everyone on board and willing to learn a new way of doing things.
It’s common for the IT department to have concerns regarding data security, or perhaps they would rather not have the responsibility of hosting and maintaining the software on company servers.
In addition, HR managers might be intimidated by the new, modernized way of running operations and need to be convinced that it will be a good move for their individual job as well as the company as a whole.
To overcome this challenge, managers leading the charge to adopt HRMS software must encourage open communication with stakeholders to get the team on the same page.
If senior management is not excited about the new software and actively encouraging employees to use the product, then how can they expect employees to engage with it in any meaningful capacity?
How to get started with an HRMS solution
So then, we’ve gone through what HRMS is, how it can benefit your organization, and a few of the main challenges you can expect to face when integrating the software.
Now let’s look at some of the most important steps to getting started.
- Involve key stakeholders from the get-go
- Consider hiring an HRMS consultant
- Work closely with the IT department to migrate data
- Conduct thorough testing to ensure all modules are working properly
- Begin user training
Involve key stakeholders from the get-go
As I briefly mentioned in the previous section regarding challenges of HRMS integrations, involving key stakeholders and getting them excited to use and encourage the use of the software is a must-do if the implementation is going to be successful.
Executives and senior management are ultimately responsible and so will be looking for a clear return on their investment along with clear reporting and predictive analytics to have an up-to-date understanding of what impact the software is having.
On the other hand, employees are the largest stakeholder group, and need to be involved in the software adoption process so that their interests and concerns are factored into the how the system is used, and to ensure they are trained on using self-service functionality.
Consider hiring an HRMS consultant
Depending on the complexity of your integration and level of internal expertise, it’s a good idea to consider hiring a specialist HRMS consultant to guide you through the integration process and set you up for success.
This may not be necessary, particularly if you are a small business with a tight budget, but with a quick cost-benefit analysis you can figure out whether or not it would be a smart move.
Work closely with the IT department to migrate data
The process of migrating data is complicated, sensitive, and requires a certain level of expertise. Working closely with the IT department by delegating and closely monitoring progress is a critical component of HRMS integration.
It’s also worth asking users to personally check their own information is correct. While this maintains data integrating, it also provides an opportunity to engage employees with self-service functionality and get them used to checking and updating personal information.
Conduct thorough testing to ensure all modules are working properly
Before implementing the software across the whole organization and encouraging user adoption, be sure to test each module to confirm everything is functioning as expected.
Begin user training
The system is in place. Everything is working as it should be. Now its time to train users and get them comfortable with using the software.
Ideally, training should have a personalized and team component.
Hold a number of team meetings over the course of a few weeks to demo usage of the software for various roles (employees, managers, executives), and have in-depth Q&A sessions to answer any questions employees may have. Doing so will make them more inclined to use the product as they are expected to, increase accountability, and enable HR managers to do their jobs more effectively.
Personal training and coaching should be conducted for employees that are having trouble getting used to the software.
Key players in the HRMS space
Below is a selection of popular HRMS solution providers that should be considered when researching the vendor most suitable for your needs.
Integrating your HRMS with simple workflow software
By pairing your HRMS with simple workflow management software like Process Street, you can establish a comprehensive way to document processes, assign specific tasks to users, and track progress in real-time.
The point is to minimize human error, increase accountability, and provide employees with all of the tools and information necessary to complete their tasks as effectively as possible.
Helping HR departments streamline processes is a big focus area for us. We’ve created a range of HR checklist templates which you can use for free. These cover common processes such as employee onboarding (and the recruitment process in general) and are ready to use as they are, but you can also use them as a base and customize them to your specific needs.
Our extensive integration capabilities allow you to connect our checklists with over 1000 other apps, so you can create automation rules between Process Street and the tools you already use to extend the capabilities of your HRMS.
For example, if you use BambooHR, a popular HRMS for small-medium size businesses, you can create zaps (they literally take 10 minutes to build and require no knowledge of coding), to automate mundane repetitive tasks.
A classic use case is when a new employee is hired, a zap will automatically create an employee onboarding checklist and assign it to the relevant individual(s).
Below is an example of one of our most popular checklists for employee onboarding that you can start using right away.
I hope you found this article interesting and took away some valuable insights, whether you are searching for an HRMS solution or looking to improve an existing one. If its the latter, What kind of results are you and your team seeing from implementing an HRMS? Let me know in the comments below, I’d love to hear your thoughts!