4 ‘essential components’ for an effective HCM system

Human capital management (HCM) has undergone immense change in recent years as tech evolves, forcing leaders to rethink strategy. So, what makes a system effective?

HCM refers to a set of practices and processes used by organisations to manage and optimise their workforce. Falling under its umbrella are things like recruitment, training, development, and retention.

In the modern workforce, there are systems that can be used to make this process operate more efficiently.

“In a time where the workplace is rapidly evolving, HCM solutions are pivotal for organisations looking to stay competitive and navigate changing demands. Organisations are facing a complexity crisis driven by a world of work that is fluid, borderless, and always on. Work has changed, and so have people’s expectations on what they want from work and what they are willing to accept from their employers,” Dayforce’s chief AI officer, David Lloyd, said.

“Given that HR teams oversee various critical business functions – encompassing payroll, time management, scheduling, performance evaluation, and employee development – it is imperative to streamline these operations to ensure efficiency, efficacy, and regulatory compliance. Even with all these operational accountabilities, they are also the champions of employee experience.”

The big 4 enablers of effective HCM

When deciding on a system, Lloyd noted that there are “four essential components” that make a system effective:

1. Clear objectives and strategies: Clear objectives provide a basis for measuring the return on investment for HCM software. By having defined specific goals and objectives, companies can measure outcomes against anticipated benchmarks, such as time saved, cost reduction, and enhancement of HR operations.
2. Top-down support: Buy-in from senior leadership significantly shapes user engagement with the chosen HCM system. Leaders who wholeheartedly embrace HCM implementation signal to their organisation that they are committed to allocating resources and investing in the optimisation of their people processes. Sharing this vision of alignment with employees directs collective attention towards the intrinsic value of the HCM system and lays a solid foundation for change management.
3. Change management: For an effective and successful HCM implementation, a change management plan must be put in place, which must include communicating the benefits of the system, providing training to employees, and managing any resistance to change. The ultimate objective is to foster user adoption and engagement where employees understand the benefits of the system. To ensure success is sustained, management must continue regular assessments, provide ongoing training, and make adjustments based on feedback from employees. Consistently reinforcing the message that the HCM system serves as an asset to employees demonstrates the ongoing benefits it can bring to them on a personal level.
4. A cross-functional team: Prioritising that your organisation has a cross-functional team ensures that the deployment of HCM technology is comprehensive and efficient. Although a thoughtful HCM implementation creates time-saving automation, having a cross-functional team supporting the project after going live brings a holistic view of the workforce and a better understanding of the user experience.

Where does AI come into the picture?

As with many business functions, HCM can be assisted through the use of AI. With HCM relying heavily on data, AI can be utilised to streamline processes.

“Organisations and individuals will have better employment prospects if they understand the skills they need to work effectively alongside AI-based tools that grow smarter by the year,” Lloyd said.

“The world of HCM is no different. HCM deals with worker data, the very people who are critical to a company’s success. Being thoughtful with AI is important, especially when evaluating the rapidly growing plethora of AI-based HCM software tools.”

According to Lloyd, there are a few key considerations that must be acknowledged before deploying an AI-based HCM system:

• Vision: Crafting a vision for AI integration in HCM begins with a deep understanding of organisational goals and aspirations. Executives must articulate a clear vision that aligns AI initiatives with broader strategic objectives.
• Definition: Defining use cases is a critical step in unlocking the potential of AI in HCM. Organisations must identify specific pain points and opportunities where AI can deliver tangible value. Successful organisations today combine the business function, legal, and IT in the evaluation of use cases.
• Guardrails: Ethical considerations and data governance are paramount in the responsible deployment of AI in HCM, and it is critical to ensure that the provider you choose has great data governance.
• Performance: Evaluating the performance of AI solutions requires a comprehensive approach that goes beyond traditional metrics of accuracy and efficiency. Organisations must assess the impact of AI on key business outcomes, such as productivity, employee satisfaction, and organisational agility.
• Partners: Choosing between implementing AI internally or partnering with external experts depends on organisational capabilities, resources, and strategic objectives. Organisations should evaluate whether it makes more sense to leverage the expertise of trusted partners who specialise in AI implementation or develop in-house capabilities.