What Is SAP Human Capital Management (HCM)

What Is SAP Human Capital Management (HCM)?

Last updated on 10th Oct 2020, Artciles, Blog

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What is Human Capital Management?

Human Capital Management (HCM) is defined as a set of practices for human resource management, with the goal of achieving organizational competency for workforce acquisition, management and optimization.

The 3 core aspects of Human Capital Management (HCM)

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Human Capital Management covers a wide spectrum of talent acquisition and management processes throughout the employee life cycle. To understand better, let’s divide the whole spectrum into three broad functionalities – (A) Talent Acquisition (TA), (B) Talent Management and (C) Talent Optimization – and deep dive into the nuances within each of these categories

Talent Acquisition

It’s always best to start at the beginning – where the employee life cycle commences. To be precise though, it actually starts just before the TA processes with Talent Gap Analysis. Predictive workforce planning tools like SAP HR Analytics and Oracle HCM Cloud take into consideration the current talent spread, the immediate talent requirements and business strategies to map future requirements based on a holistic analysis.

A comprehensive TA-centric Human Capital Management system needs to cater to the needs of the primary TA process:

  1. 1. Recruitment/ eRecruitment – This includes sourcing, screening, qualifying, and skill-matching
  2. 2. ATS (Application Tracking System)
  3. 3. Onboarding – background checks, joining formalities, orientation, and a 30-60-90 day growth plan to get the new recruit started.

Human Capital Management suites can also make the first day at work a lot smoother and a lot less daunting with conversational bots to guide the way and help in a preliminary orientation to software, processes and organizational charts.

Talent Management

The nature of talent that present-day organizations have to manage has changed more in the last decade than it had changed over the 30 years before that. Work is no longer a place but a function with teams dispersed across continents, freelancers pitching in and increasingly flexible work-hours. Human Capital Management systems need to be aware of and conscious about these new tweaks to the work ecosystem. Keeping that in mind, here are the must-have features for a talent management HCM system:

1. Time and attendance

  • Leaves and Absence management
  • Self-service application and tracking systems
  • Biometrics and security

With an increase in remote workers, freelancers and globally dispersed teams, mapping time and attendance while also maintaining security needs is crucial. Tools like TimeAttend and CeiPal Workforce make it easier to track and manage on-the-job timings, leave applications and security requirements. Moreover, HCM tools enable self-service by allowing employees to manage their data themselves thus creating greater transparency and improved engagement.

2. Payroll

  • Compensation mapping
  • Remuneration tracking and roll-out
  • Compensation planning for gig workers

While the focus has been growing on the non-monetary aspects at work, compensation and benefits would always remain a key motivator. No matter how hard we try to eliminate the transactional nature of jobs, at the end of the day, while the paycheck is not the only thing that matters, it surely matters a lot. Using Human Capital Management tools to manage payroll has been in practice for quite a few years now since it is one of the easier things to automate. AI-enabled payroll HCM like Zenefits and RUN help in mapping industry trends to benchmark compensation plans for the different sets of workers from full-time on-location to remote gig-workers.

3. Performance management

  • Goal-alignment
  • Task-tracking
  • Internal communication and team planning

HCM systems encourage and enable better communication. These mechanisms allow anytime-anywhere access, help in planning goals, aligning individuals and teams on the relevant business objectives and also allow 360 degree task-tracking. With tools like Performly, AssessTEAM, PerformancePro and BirdDogHR, organizations can boost productivity in ways that are more congenial to employees.

4. Culture connect

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  • Rewards and recognition
  • Grievance addressal and redressal systems
  • Weaving ethics into the system

What employees do at work everyday makes up the culture of the organization. With tools like Globoforce and TinyPulse, organizations can build a branded culture of ethical behavior, recognition, gratitude and engagement. Moreover, with Human Capital Management software, the culture can be translated to every employee in all the functions that they serve and all the processes that they are a part of.

Talent Optimization

The journey does not end with finding the right talent – it begins from there. In that journey there can be no room for stagnation. Organizations need to constantly try to create avenues for talent optimization – for individual and collective growth, without turning on business goals and objectives. You need to future-proof your employees. Here are four ways in which the right HCM can enable that:

  1. 1. Career-pathing
  2. 2. Competency mapping
  3. 3. Succession planning
  4. 4. Learning and development

With a tailored HCM solution, organizations can not only train their employees on immediate skill needs but also for the skill requirements of the future. Coursera, for example, enables skills benchmarking with the use of AI (Artificial Intelligence). With efficient cloud-backed, data-driven HCM systems, organizational leaders can make the right career-pathing decisions in advance thus providing both the organization and the individual a map to follow. Succession planning has been proven to a great way to optimize HiPos and the right HCM tools can help in decisions regarding the same by studying gallons of data. Tools like SuccessFactors HCM by SAP encourage diverse teams to collaborate better and optimize on the positives of having a team of very different individuals.

The Right HCM Solution: Finding the “Suite” Spot

Like we stated in the beginning, when it comes to choosing an HCM suite, best-fit matters more than best practices.

Here are some key considerations and questions when choosing the right HCM solution

1. Why do we need an HCM system?

You need to know what are the areas that need greater intervention, what are the reasons that some processes have been difficult or stalled and what you wish you achieved with the investment in a new tool-system.

2. What are the must-have and nice-to-have features we want?

The MoSCoW (Must Have, Should Have, Could Have, Won’t Have this time)  priority list is a great start for any decision. You need to be able to answer what the HCM solution must do, should do, could do and also what it would do in the future.

3. Present budget v/s growth needs?

To answer this, you might first have to identify where in the spectrum you fall. Are you an SMB (small and medium business) with less than 1000 employees, an MM (mid-market) player with an employee strength between 1000-5000, an enterprise with over 5000 employees, a well-established MNC with over 10000 employees or are you a cusp organization transitioning between these segregations? Based on where you fall in the spectrum and where you are headed, you need to choose a solution that caters to your immediate needs but that is also dynamic enough to incorporate your future needs. Your budget would differ accordingly.

4. What is the level of customization you require?

There are multiple HCM suite players in the market today that offer need-based plans. Most basic plans do not allow for customization but you need to be clear about what customizations you would need.

5. Are you ready to adapt?

Before you build your case for investing in a new or upgraded HCM solution, ask yourself whether your organization is ready for the change. There is often the need for training with the introduction of any new tool and employees need to be allowed some teething time as well. The organization must be willing and capable of letting employees and HR adapt to the change.

The 5 Big HCM Trends for 2020

Here’s a glimpse into the future and the five key trends that would shape up the HCM space in the years to come:

1. An end to worries about job-stealing-AI

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Contrary to the “AI Apocalypse” narrative, recent studies point out that 93% of people are willing to take orders from a robot and 70% of employees are already using some form of AI in their personal lives. By 2020, with this mentality seeping into work culture, employees would become a lot less fearful and a lot more adaptive to AI.

This would lead to greater, more effective human-AI collaboration in the super-job era, and better rationalization of high-value jobs and roles for humans. It also means that HCM systems need to be set up to manage all kinds of ‘employees’ – human and non-human.

2. AI will no longer be optional

According to a recent study by Oracle, 79% of HR leaders believe that failure to adopt AI will have a negative impact on their overall organization; however, only 6% of HR professionals are actively deploying AI solutions. Realizing this discrepancy will push more companies than ever – including those that have traditionally been hesitant – to embrace artificially intelligent solutions.

While more involvement and encouragement from the HR to create an AI-enabled work culture would be ideal, the fact is that many HR teams are still struggling with basic digital transformation and automation challenges. A step-change approach is needed to ensure the drastic transformation – and your systems need to be able to support this transformation with agility and scale.

3. HR to lead the predictive analytics movement

While many think of HR as a “soft” skill, the future of this industry is built on the use of predictive analytics to make intelligent employee decisions. A recent survey by HBR shows that 31% of HR professionals are already using AI-backed data analysis to identify at-risk talent, source best-fit candidates via resume analysis, and predict high-performing recruits. In 2020, I expect this number to jump much higher.

Smarter decisions backed by data and powered by predictive tools are on the cards, but what new skills do HR leaders need on their teams to ensure they can make the most of these smart decision-making tools? What new workflows need to be defined, designed and automated to ensure these smarter methods of talent acquisition and employee retention are executed flawlessly

4. Digital assistants will become “co-workers”

Digital assistants, accessible through voice or SMS, work 24/7 and can provide nearly-instant, tailored responses on simple tasks like vacation balance and expense approval to complicated subjects like taxes and benefits. Over time, the digital assistants can even take on more sophisticated personas such as mentors, coaches or counselors.

The need to understand generational diversity at work better and in ways that are more actionable will be strategic to organizational success. Smart HCM Systems will create a seamless employee experience for everything from efficient and effective employee onboarding; day-to-day time-consuming tasks like expense reporting; and career-defining initiatives such as coaching with real-time, always-on systems that employees can access at their convenience

5. Smarter, mobile recruitment

With the human attention span averaging just 8 seconds and the unemployment rate at its lowest in 50 years, applying for jobs needs to be easy and able to be done on-the-go. Moving into 2020 and beyond, HR professionals will be forced to adapt their recruiting techniques to this new norm or risk losing quality talent to competitors.

Organizations need to create their employer brand based on candidate expectations, technology trends, and the changing business environment. The ‘last mile’ between the job opportunity ad the potential candidate is a crucial and vulnerable link – using technology to close that gap at the last mile with speed, accuracy and as per process is going to be central.


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what needs to be kept in mind is that the right HCM solution can prove to be a lot more than a system that simply manages data and processes better. It can be a tool to motivate your employees, to engage them organically and to provide an augmented employee experience through the duration of their employment or even career. That said, how well a Human Capital Management system functions within an organization depends on how well you use it and how motivated your employees feel to adapt to the upgrade. In the end, it’s all about how you, the HR manager can HCM – handle change meaningfully!

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