Introduction
According to Gartner, 91% of businesses globally use digital technology, with 87% prioritizing it and 67% leveraging it for competitive advantage. Among these technologies, full-scale enterprise Human Capital Management (HCM) software is a prominent player, designed to help organizations manage human capital throughout the employee life cycle. Many companies have fully embraced HCMs and the transformative journey they’ve brought along. You might also hear HCM software referred to as Human Resource Management Systems (HRMS), and that’s because it effectively manages an organization’s workforce.
HG Insights’ report data shows that 362000 companies currently use HCMs globally while 77.1% of total spending on HCM comes from 117,466 companies with employee sizes greater than 1000. The data also reveals that in the U.S. alone, around 2 million companies spend nearly $13.3 B on HCMs, accounting for roughly 38.94% of the total HCM market size.
While HCMs can handle a myriad of activities including workforce management, recruitment, payroll, and performance management, enterprises worldwide face consistent roadblocks with this software, which leaves them wondering whether this technology actually pulling down their overall HR efficiency instead of enhancing it. Even when organizations recognize these issues, they may hesitate to invest in new systems due to concerns about implementation complexity or a lack of awareness of superior alternatives, as noted by Forbes.
In this blog, we’ll explore the major factors that cause enterprise HCMs to fall short and outline a three-step framework to ensure these issues never arise.
What do enterprise HCMs do?
Enterprise HCM systems provide a comprehensive set of functionalities within a single platform, designed to help companies manage their human resources effectively. These systems enable HR teams and managers to oversee a wide range of HR functions, from employee data management to workforce planning.
With enterprise HCMs in place, both managers and employees can enjoy streamlined operations and improved communication and collaboration across departments. They also ensure legal compliance across different regions, which is essential for global organizations.
Additionally, enterprise HCMs come equipped with robust reporting and analytics capabilities, offering valuable insights into employee performance, workforce trends, strategic planning, and more.
Here are some of the core functions typically performed by an enterprise HCM:
- Time and Attendance Management
- Applicant Tracking & Recruitment
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Popular Enterprise HCM Solutions
#1 Workday
Workday is a robust cloud-based HCM solution that helps businesses worldwide manage their finances and human resources. It’s the go-to software for major companies like Walmart, Amazon, McKesson, CVS Health, and General Motors, enabling them to streamline HR processes and enhance workforce management.
#2 SAP SuccessFactors
SAP SuccessFactors stands out as one of the leading HCM software vendors, particularly recognized for its Human Experience Management (HXM) approach. This focus on people emphasizes individual values and aims to create enriching experiences for employees. Notable users of this platform include industry giants like Apple and ExxonMobil, who leverage its capabilities to enhance employee engagement and satisfaction.
#3 Oracle HCM Cloud
Oracle HCM Cloud offers a comprehensive solution for global HR, talent, and workforce management. Its integrated modules provide a complete end-to-end experience for HR teams, allowing them to manage employees at every stage of the employee life cycle. Companies like JP Morgan Chase, American Express, and Marriott rely on Oracle HCM Cloud for their HR operations.
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Major limitations of enterprise HCMs
Even though HCMs handle everything from HR information systems to talent recruiting, their potential is limited by certain challenges and risks that can incur costs if not addressed properly. Let’s take a look at some major reasons that trigger frustration with enterprise HCMs.
#1 Tech-Business Misalignment
It is not uncommon for companies across various industries to adopt technology without a clear vision of what they aim to achieve or whether it aligns with their overall objectives. They typically notice the misalignment only when it starts impacting their ROI and creates more issues than it resolves. The right software should always support your business goals and operations. Additionally, moving forward with technology implementation should only occur after a thorough understanding of its impact on all aspects of business functions, not just one. If your HCM is enhancing your business decisions, process agility, and employee experience, there’s no need to worry. However, if it’s the other way around, you know there’s a problem.
#2 HCM Implementation
Configuring and customizing HCM modules to meet organizational requirements can be daunting due to their complex nature, particularly with cloud-based HCMs. Data migration to the new HCM is time-consuming, and any errors in the migrated data will later manifest as fragmented information and inefficiencies. This may require HR teams to maintain multiple platforms to manage HR operations, leading to increased risks of errors and a slower decision-making process. Employers may also face incompatibility or collaboration issues if existing systems and tools that should ideally work together with the newly integrated HCMs do not align.
#3 Flexibility limitations
The dynamic business environment demands technology solutions that can keep pace with rapid changes and advancements. Many HCMs are rigid and fail to adapt quickly to evolving technologies, trends, and business requirements. Adding or removing capabilities can be complex and time-consuming, leaving HR teams with more manual work and less time to focus on strategic initiatives. Furthermore, HCMs that are not cloud-based do not offer scalability features, which may hinder your plans to expand market share, open new branches, or hire internationally.
#4 High Expenses & Compliance Issues
The upfront and maintenance costs for enterprise HCMs can be quite high, given their sophisticated, all-in-one nature. The cost of HCM implementation can vary based on company size and business specifications, but it can reach up to $100,000 for enterprises and $10,000 or less for smaller companies. Additionally, HCMs often struggle to keep up with the ever-evolving regulatory environment, which can create compliance challenges, especially for global companies. Most legacy HCM systems lack comprehensive tools for real-time audits and reporting, leading to inaccurate compliance documentation, fines, or other legal penalties.
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How to Overcome Enterprise HCM Challenges
It’s common knowledge that bad software can cause more harm than having none at all. However, with the right technology that aligns perfectly with your business requirements, you can embrace efficiency in a fast and satisfactory manner. Many HCMs have made a transformative impact on businesses, and this is widely embraced. However, despite their broad functionality, many enterprise HCMs face challenges related to cost, customization, and keeping pace with evolving business demands. This is when you need to delve deeper into these challenges and come up with a plan to ensure they won’t arise again.
Here is a 3-step framework to keep in mind while planning to integrate an enterprise HCM or any similar software.
- Step 1: Analyzing Expenses and Flexibility
When choosing HCM solutions, look for modular and cloud-based functionalities that offer both scalability and adaptability. It’s also essential to find options with transparent pricing models so you know exactly what you’re spending. HCM systems that automatically update with changing regulations are a plus! Be sure to conduct a detailed cost analysis based on the features and compliance requirements to determine if the investment is worthwhile.
- Step 2: Ensuring Strategic Technology Alignment
To get the most out of your HCM adoption, define clear strategies that align with all areas of your business objectives. Involving stakeholders in the process ensures the system meets everyone’s needs, and regular monitoring allows you to make timely adjustments as necessary.
- Step 3: Facilitating Simplified Implementation
To streamline implementation, seek expert guidance to help you configure the system quickly and minimize errors. Conducting pilot programs can also be beneficial, as they allow you to identify and address any issues before rolling out the system on a larger scale. This proactive approach can save you time and resources in the long run!
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How a Recruiting Platform Can Complement Your HCM
Recruitment is a crucial HR operation that requires a reliable, streamlined framework for effective talent attraction and retention. Having a recruiting platform alongside your HCM system can significantly enhance your talent acquisition and overall HR processes. For example, Hyreo’s AI-powered recruiter co-pilot can automate over 70% of recruiter activities, such as prescreening assessments and interview scheduling, while also boosting candidate engagement through an AI-led candidate agent. With seamless integration, reasonable pricing, a user-friendly interface, and enhanced flexibility and scalability, Hyreo ensures that your recruitment processes run smoothly without any obstacles.
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Conclusion
While enterprise HCMs pack a lot of functionalities, they often miss the mark in key areas. But don’t worry—these challenges can be tackled with a strategic approach! Plus, if you integrate specialized platforms, you can simplify and boost the efficiency of your HR operations even more.
Here’s an interesting fact: According to Fortune Business Insights, the HCM market is expected to skyrocket from $31.34 billion in 2024 to $63.14 billion by 2032, growing at a rate of 9.1% each year.
As the HCM market keeps expanding, organizations that stay ahead of these challenges will be in a prime position for success.
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FAQs
- What are the key limitations of enterprise HCM systems?
Enterprise HCM systems often face challenges such as tech-business misalignment, complex implementation processes, limited flexibility, high costs, and compliance issues.
- How can organizations improve their HCM effectiveness?
Organizations can improve HCM effectiveness by selecting modular, cloud-based solutions that offer scalability, aligning technology with business goals, and simplifying the implementation process through expert guidance and pilot programs.
- Why should I consider a recruiting platform alongside my HCM?
A recruiting platform can enhance your HCM by providing specialized tools for talent acquisition, improving candidate engagement, and streamlining the hiring process. This integration ensures a more efficient and effective HR operation overall.
