Traditionally considered an administrative function, human resources (HR) has shifted to a more active role of managing a company's most precious asset: its people. Corresponding with the trend, the goal of HR software packages -- also referred to as human capital management (HCM) -- is to improve and streamline management of employee and prospective employee activities that are relevant to a company.
HCM includes talent scouting and recruiting employment candidates, administering employee payroll and benefits, managing the performance review process, enabling employees to advance themselves and grow their skills through internal training and job opportunities, and facilitating collaboration between employees through social media tools. The human resource management software market has responded to this.
In 2012, Oracle acquired Taleo and SAP completed its acquisition of SuccessFactors. Both companies were seeking cloud-based talent management software to bolster their existing core HR offerings. Also in 2012, IBM completed its acquisition of Kenexa as part of its Smarter Workforce offerings, which Kenexa's social business capabilities enhanced. In May 2016, Ultimate Software acquired Vestrics, a predictive analytics company that brings additional strength to Ultimate’s workforce analytics products.
Categories of human resource management software tools
The foundation or "core" tools are the minimum required to run any corporate HR function. Common modules within them include:
Benefits, which manages employee 401 (k) plans and participation, employee healthcare (medical/dental) and life insurance policies, paid time off, etc.
Payroll and compensation to manage employee salaries, bonuses and 401 (k) contributions, and also factors in deductions for healthcare and other programs that employees contribute to. It calculates withholding for taxes, cuts paychecks and provides integration with banking systems for direct deposit.
Time, attendance and scheduling, which provides tools for staff to schedule work and to track time and attendance. It also tracks available and used sick days. Based on company-defined business rules, many products can automatically issue alerts when employees fail to meet scheduled work targets.
Talent management tools
Talent management tools augment core HR with software that enables organizations to develop their employees. They include:
Recruiting, which stores applicant information and employment applications, tracking them through the entire process. It also provides integration with other HR applications and has the ability to perform background checks.
Training, which creates a centralized employee training repository with an access portal for employees, managers and instructors. It tracks new and existing employee training and skills development. It also enables the development, delivery and management of course content, and the definition of training curriculum and certification paths. It has the ability to link these paths to skills and certification requirements for internal job postings. Online testing and reporting are often available.
Performance management for recording and tracking employee performance reviews, and which includes tools for performance measurement and goal tracking.
Compensation management for optimizing compensation systems by rewarding top performers with bonuses or incentives based on performance and avoiding overpaying underachievers.
Succession/leadership planning, which creates succession plans that retain high-potential leaders, build talent pools for business growth and avoid disruptions caused by unplanned turnover. This enables companies to systematically evaluate both internal and external talent for key roles.
Workforce planning, which provides analytics for evaluating workforce trends and future planning.
Employee engagement tools
Employee engagement tools capitalize on social media and mobile technology that lets employees actively collaborate with each other across the company and also access self-service HR portals that enable them to sign up for classes, check job openings and requirements, manage time and attendance and review company benefits. Tools in this area include:
Mobile access/collaboration that allows employees access across the company to communicate "on the fly," exchanging vital information on projects, locating experts and content and contributing new content. Mobile access also enables the issuance and receipt of real-time alerts and contains full company employee contact information. In addition, this self-service access lets employees check their benefits and paycheck records and enroll in and manage their own training. Most software supports iPhone, iPad, Android and BlackBerry.
What can HR software do for my company?
Regardless of size, companies expect cost-effective human resource management software that effectively integrates with their existing operations and systems. They also expect these new tools to address some of the emerging employment needs in today's business environment. For example:
How HR software is sold
More companies, especially in the small- to medium-size range, are also opting for cloud-based instead of on-premises HR software because HR in the cloud is more affordable and requires less maintenance. In the cloud, the five top players are SAP, which acquired SuccessFactors; Ultimate Software; Workday; Oracle, which acquired Taleo; and IBM-Kenexa.
On-premises software predominates in large enterprises because it's already firmly entrenched and installed there. These enterprises have highly qualified HR professionals on staff to operate the software, and they also already have sizeable investments in operational and internal systems integration built around these on-premises packages. For security purposes, large enterprises prefer to have their workforce information under direct management with an on-premises system in their own data center, and not in the cloud. Conversely, small and medium-sized businesses (SMBs) are seizing the opportunity to move to cloud-based software so they can avoid purchasing on-site software and hardware and having to maintain it. Buying into the cloud also enables SMBs to compete more effectively with their larger enterprise counterparts, especially when the cloud is a software as a service (SaaS) company that can also offer IT and HR expertise.
Regardless of whether the software is on-premises or cloud-based, HR tools vendors are keeping pace with the market by either innovating (e.g., Workday with its "no IT" cloud-based software) or by building onto their time-tested offerings through strategic acquisitions (e.g., SAP/SuccessFactors and Oracle/Taleo). This innovation is focusing in the areas of talent acquisition and management and employee engagement. In some cases, new HR tools also reach beyond the boundaries of corporate employee workforces and into the management of contractors and other outside work resources. This is a critical need for global companies as well as for companies that rely on outside contractors and temporary employees to augment their core workforce.
Who manages the software?
Although corporate HR generally assumes overall responsibility for HR software management, the introduction of more technology (e.g., the cloud, social media and new mobile capabilities) makes it equally important for IT to take an active role in both software and vendor management.
Determine your company's needs
Companies expect that the human resource management software they invest in will provide solutions to the workforce recruitment, retention, compensation, development and administration challenges they face today. Core HR tools will be expected to function capably as they have in the past; but increasingly, companies of all sizes will look to talent management as the focal point of their HR investments, followed by a two- to three-year roadmap in which to define and build out their HR software into tools that employees can use to collaborate and participate in HR self-service through social media. The HR software your company selects should be able to scale to this roadmap.
Does your company need HR software? To help you determine your needs, it's best to take a look at the many features these tools offer as well as typical use cases for which they're optimized.
Learn what puts organizations on the path to HCM success
Learn more about the value of cloud HR