Inside the modern HCM evolution

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Sometimes we’ll say things meant as a given that upon further reflection provide us with far greater understanding of how we can (and should) view our world. Martin Hartshorne, VP of Products at Ultimate Software, provided me with one of those moments recently at the annual Ultimate Software Advisory Summit.

During his talk, Hartshorne showed a simple slide on the evolution of human capital management systems. He outlined the HCM software evolution as:

● System of record. Store the truth.
● System of automation. Help us be more efficient.

● System of engagement. Be interesting and useful to employees.
● System of insights. Be smart enough to help us make quality decisions.

Pretty simple, right? Where it gets interesting is in the deployment of these systems.

As clean and illuminating as the HCM evolution framework is, we know that not every solution, or company buying solutions, is moving at the same pace. You may have an established company that has a longstanding system of record and possibly even a strong system of automation. But they’re lacking engagement — and insights are a pipe dream that a cost-conscious, risk-averse CFO just won’t approve. Conversely, you may have a young company with the luxury of no technical debt and, hence, the freedom to adopt new software but without the boring administrative foundation to make the insights worth the functional gaps.

There are as many variations on where companies find themselves along the HCM evolution scale as there are companies.

We know that HR budgets have generally not been growing relative to other departmental budgets — or have been “growing” only from increased healthcare spend — for decades. HR professionals have been asked to do more with less for a long time, which has led to some spending on new systems but not always consistent value and administrative consolidation of tasks. The evolution, in many cases, has been disjointed and limited the outcomes that companies have sought.

Take the first step

This requires action. Employers should understand why the HCM evolution is important so that they can understand the products in the market, then they should think about how to think about making the right decisions on HCM solutions in the mindset of these basic positions along the evolutionary curve.

Here is an expansion of Hartshorne’s comments to add to your knowledge.

System of Record. A CTO I worked with once said that every software program ever created is essentially an inventory management system. Your HCM needs are, at the foundation, a need to manage your inventory. Everyone who’s ever had inventory would tell you how important it is to have an accurate read of what you have, what you need, and so on. That’s why we started with HCM software as systems of record. Just a bunch of tables with stored information. If you don’t have that, you don’t have anything.

System of Automation. Bill Gates reportedly said he always gave the hardest problems to the laziest people because they would find the quickest and most efficient solution. The lesson is that we all want automation. HR administrators are going to be most focused on this component of the software evaluation because it hits most directly on what’s in it for them. The next two items, engagement and insight, are typically more flashy and therefore can be overly hyped by those who are selling HCM solutions as a means to another end. Keep focused on automation as making life easier for administrators, because happy administrators can make everyone else happy.

System of Engagement. This step in the evolution is the movement of the moment. There’s an entire marketing vocabulary that has been built around engagement. What it means from a practical advisory perspective is that we are all consumers. Software that works well as a system of record and helps make lives easier for administrators may get you by, but it won’t set you apart with employees in a competitive talent economy. The software you suggest must pass this simple test: in Hartshorne’s words, “It can’t suck.”

System of Insight. Where engagement is the movement of the moment, insights are the promise of a better future. By having a reliable system of record that automates administrative tasks and engages employees, you are generating and storing vast amounts of data. With this data, AI and machine learning can then go back and make every previous phase of the HCM evolution even more powerful through constant, progressive analysis. You are already seeing incredible changes to talent attraction strategies, retention and employee engagement, and benefits selection and healthcare consumerism. It is essential to understand its impact and then share with your clients how to make the most of this data.

One more consideration that often has an impact on how and where companies go with adopting HCM technology is how the systems align with their company needs. We all have opinions on whether a single system is the way to go or a “best in breed” approach to HCM solution adoption is better. In reality, one probably can’t lay definitive claim to being better than the other. As my kids would say, YMMV — your mileage may vary.

Rather, employers' mileage may vary. This is why it’s important for companies to think about how they ultimately chose their strategies. With this knowledge, an employer's HCM journey will get them where they ultimately need to be, with the confidence that they’re in the right place when they get there.

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