Human resource management software: A buyer's guide
A collection of articles that takes you from defining technology needs to purchasing options
Some companies just need a payroll system. Some companies need help in recruiting and developing talent. Others want to replace an entire HR system; maybe their system is obsolete, or there's a desire to consolidate all HR applications under a single vendor.
When determining HRM software system requirements, companies must first identify needs and then clearly understand how the HR systems will address them. Doing this upfront and ensuring everyone is on the same page are absolutely paramount.
Understanding the company's HR needs also requires more than just a single observation.
For example, what new functionality are the HR systems expected to deliver? How will employees use the system today and in the future? Is it important for the new system to interact with existing systems?
These are just a few of the drill-down questions companies should include in a request for proposal (RFP) before shopping for a new HR tool or software suite.
Finally, decision-makers must do a company assessment. Is the company small, with a limited budget? Or is it a large, multinational organization that requires human capital management (HCM) tools to address the varying needs and regulatory issues of all locations? Does the company want to add to an already in-place system, or has it outgrown this software? What are the integration challenges if new HR management (HRM) software is implemented? And from a strategic standpoint, has the company already decided it prefers on-premises, cloud or SaaS HR software?
The answers to these questions are unique for every company, but they should factor in to the RFP process.
Elements of a strong RFP for HCM software
Do the core HRM software system requirements align with company needs?
Most core HRM software can track time and attendance; administer payroll, taxes and benefits; store information in a central database; and generate periodic and ad hoc reporting on this information. However, there's also a new set of differentiating elements in core HR software, which include must-have features for many companies:
- a central HR department employee database with the ability for departmental and business managers to reference and input information based on predefined user access permissions;
- a multilevel payroll system that can concurrently handle the payroll requirements for both union (e.g., union dues deductions, union pay rates and benefits administration) and nonunion employees;
- compliance monitoring in areas such as hiring, employee relations, risk and safety;
- the ability to expand HR compliance monitoring and administration beyond the U.S. to other countries in which the company has employees;
- a global payroll function that supports multiple countries, languages, currencies and processing requirements;
- easy-to-use interfaces from the payroll and benefits administration systems to third-party providers of insurance, 401(k) plans, etc.;
- employee access to insurance and benefits information 24/7 from anywhere, on commonly deployed desktop and mobile platforms; and
- scalability and flexibility, enabling companies to turn certain software features and modules on or off as the company grows or the business climate necessitates, with the company paying only for what it uses.
Does the company want talent management software?
Basic talent management software enables companies to manage their human capital by providing a set of tools for recruiting employees, administering and tracking employee performance, and offering different levels of compensation for employees based on their performance. The software also provides workforce reporting and analytics for the HR department and other business managers. In addition to this core functionality, talent management software also offers these differentiating capabilities that are crucial HRM software system requirements for many companies:
- ease of use and workflow automation for the employee performance review and management process;
- performance analytics reporting that delivers workforce trends and results and predictive analytics that assists with employee retention by assessing which employees are the company's top performers and which are most likely to leave the company;
- the ability to easily create and revise job descriptions;
- flexible compensation systems so the company can use both standard compensation and pay-for-performance compensation simultaneously and in different business units in the company;
- the ability to narrow the funnel in the employee recruitment process with selective criteria that HR provides in order to isolate the most attractive candidates for job interviews;
- an internal training system that lets employees sign up for training, take online classes, receive grades from instructors and certify for positions within the company; and
- an internal job and project bulletin board that shows employees different opportunities open within the company.
Does the company want employee engagement tools?
HCM software vendors now offer ways to engage employees through an assortment of mobile devices and social media-style collaboration.
This is an evolving area for most software providers and also for most companies. Because the employee engagement area is still evolving, employment engagement tools have yet to reach the same level of maturity as core HR and talent management tools. At a minimum, companies should expect HCM software vendors with employee self-service engagement tools to provide easy-to-use interfaces and support for the common mobile device platforms. HRM software system requirements companies should also consider include:
- instantaneous project collaboration across locations, without limitations;
- the ability for employees in large companies to quickly locate a subject matter expert anywhere in the company when an urgent business problem must be resolved;
- company-provided online courses, available on mobile devices;
- employee self-service access on mobile devices to the company HR system in order to update benefits elections; and
- employee input and surveys that enable HR and senior managers to evaluate employee satisfaction levels within the company.
What are the system implementation and support expectations?
HR software should be easy to implement and support, which is why nearly every HR software vendor focuses on minimizing the pain of adopting new software. That includes making sure the software fits with existing hardware and software and integrates with existing company systems.
However, not every vendor guarantees, in specific terms, the degree of implementation and support it will provide. That's why it's important to define expectations with the vendor. Critical areas of system implementation and performance that vendors must support and answer:
- How will the new software be integrated (if integration is necessary) with the company's existing software? Will it rely on APIs, packaged integrations with cross-vendor working support agreements or custom integrations?
- Service-level agreements (SLAs) should address system uptime and support commitments (e.g., 24/7 uptime and support), mean time to response for system problem resolution, as well as HR and IT questions, and a tested and certified disaster recovery plan.
- For cloud-based vendors with third-party data centers, a contingency plan should be in place in the event of a third-party's data center failure.
- Vendor system and data security standards should at least meet those required by the customer's own corporate governance.
What are HRM software's pricing and ROI?
Budget is a key consideration for every company and so is the ability to have HR systems that are flexible and scalable. HR software vendors are aware of this and offer both scalable pricing and scalable software, often based on either per-seat employee use or on per-module software use.
These vendors also have preconfigured ROI formulas to quantify value. However, companies need to be actively engaged in the pricing and ROI discussion.
- If feasible, work with HR to establish an independent ROI formula for the payback on software investment, without help from the vendor. There's no set way to devise an ROI formula, because payback and needs are unique to every company. However, most companies look at elements such as cost or time savings they expect to achieve by using the new software or improvement in areas such as recruiting talent, developing talent or retaining valuable employees.
- Vitally, understand the primary HR software product features and elements and which software modules are add-ons that come with additional charges.
- Assess if the HRM software system requirements will necessitate additional investments in IT or HR (e.g., corporate network expansion, more mobile devices, an additional HR person to develop a training curriculum, etc.).
- Research the viability of a leasing option, compared against buying the software outright.
Will the HR solution vendor be a strong business partner?
All vendors are likely to offer a fully developed implementation plan for the new software, as well as a dedicated project manager who will direct or codirect the project. Most vendors also offer on-site training for HR and IT personnel on the new software and a capable support organization that stands behind the product.
Ensuring a wise decision
Once determining specific HRM software system requirements, it's time to examine the leading HR products. Indeed, there are many variables that need to be evaluated, all to ensure a wise decision.
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