Woman in HR service

One of the most important questions HR professionals and businesses face in today’s fast-paced digital era is, “Which human resources technology is the best fit for our needs?” And it often boils down to HCM vs. HRIS software. While there are overlaps, these types of software are more effective at certain functions.

That is what we will discuss in this article – the similarities and differences between HCM and HRIS, the pros and cons of each, and how you could utilize them within your organization for maximum efficiency. 

Additionally, as we explore Human Capital Management (HCM) and Human Resources Information Systems (HRIS), we’ll also trace the evolution of HR technology. So let us start with that. 

The Evolution of HR Systems

Over the last 30 years or so, vendors have turned these systems into productive management and workforce tools with, among other things, self-service functionalities, mobile readiness, and now AI (artificial intelligence) and ML (machine learning). 

The focus here is no longer just on managing core HR functions but also on end-to-end talent management and performance, as these systems have become essential in today’s competitive business landscape.

Historical Phases of HR Technology

Human resources software has evolved through four distinct phases, each of which has improved some aspect of the employee lifecycle:

Systems of Record: 
In the 1970s and 1980s, businesses started putting systems in place whose primary function was to store human resources records.

Systems of Talent: 
There was a shift in the 1990s and 2000s towards talent outcomes, simplified hiring practises, and a greater focus on employee engagement.

Systems of Engagement:
With the rise of cloud computing came platforms designed to boost employee engagement by incorporating talent capabilities.

Systems of Intelligence: 
The integration of AI and analytics in the 2020s has brought about a new era of actionable insights and ethical considerations.

Major HR Technology
source:Josh Bersin

What Are Human Capital Management Systems?

Human Capital Management (HCM) systems are all-encompassing software suites that handle every facet of the employee lifecycle, and go beyond transactional systems to systems of intelligence, as described in the previous section. 

Many of the major vendors, such as Workday, Ceridian, SAP, and Oracle, have recently added cutting-edge AI-powered services for enhancing the employee experience and real-time analytics for gauging the effectiveness of teams and projects.

The Benefits of HCM Systems

  • Talent Acquisition: Streamlines recruitment.
  • Performance Management: Enables employee performance reviews.
  • Learning and Development: Provides modules for continuous reskilling and career mobility.

Advanced Features in HCM Systems: A Deeper Dive

As the field of Human Capital Management (HCM) evolves into the next phase, “Systems of Intelligence,” cutting-edge capabilities have taken centre stage. They are geared towards today’s workers and the ways in which they use technology to boost efficiency and output. 

Let’s take a closer look at these cutting-edge functionalities.

  • AI and Chat Bots
    Chatbots and other forms of AI have rapidly become an integral part of cutting-edge HCM platforms. These bots can help with anything from recruiting new talent to fielding questions from current workers in real time. They not only provide immediate assistance but also gather valuable employee data for future reporting and analytics.
  • Surveys and Augmented Analytics
    Modern HCM systems also feature survey and analytics tools to collect and analyse employee feedback. Through the use of data analytics, such tools can reveal previously unknown information about factors like employee engagement and satisfaction.
  • Engagement Tools
    Tools for engagement go beyond simple polls and reviews of employee output. They use pulse surveys, mobile feedback, and real-time analytics, among other methods, to measure and enhance employee engagement, allowing HR professionals to make quick, data-driven decisions.
  • Nudge Engines and Unbiased AI
    These characteristics incentivize selected employee behaviours without mandating them. These tools, when combined with objective AI algorithms, can recommend things like taking a break, finishing a learning module, or participating in a team discussion, all with the goal of reducing the impact of bias on the decision-making process.
  • Real-time and Digital payments
    Real-time and digital pay features are replacing traditional biweekly and monthly payroll cycles, making it possible to process payments instantly. This feature is especially helpful for contractors and seasonal workers who need access to their money more frequently.
  • Gig and Alternative Work and Internal Gig Projects
    The modern HCM system is able to accommodate not only full-time employees but also those who work part-time, freelance, or in the gig economy. Having employees take on internal gig projects on a short-term basis encourages a culture of lifelong learning and development.
  • Continuous Reskilling and Career Mobility
    Modern HCM tools place special emphasis on ensuring that employees’ knowledge and abilities are always up-to-date. Modules for ongoing reskilling, career planning resources, and even skill recommendation tools powered by artificial intelligence (AI) ensure that workers never reach a professional plateau. 
  • Video Learning and Gamified Onboarding
    The onboarding process and the accompanying training can be made more fun and interactive by using video-based learning modules and a game-based strategy. These elements allow L&D programs to better serve a diverse workforce by catering to their individual preferences for how they learn.

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  • Social Recognition and Perks
    Employees can now be recognised and rewarded in a variety of ways, such as through customer recognition, perks, awards, and anniversaries. This boosts morale and encourages a positive sense of belonging and inclusion.
  • AI-based Employee Experience Services
    Advanced HCM systems offer AI-based services that create a more personalised and streamlined employee experience. Increased levels of employee satisfaction and retention can be attributed to these types of features, which can include customised learning paths and career guidance.
  • Performance Management of Teams and Projects
    The days of relying solely on annual reviews for performance management are long gone. With the advent of real-time performance analytics, teams and projects can be continuously evaluated and managed, making evaluations more dynamic and less taxing.

    Organisations can greatly enhance their human resources operations -from talent acquisition and engagement to continuous development and performance management – by implementing an HCM system with these cutting-edge features. These features signify the new age of HR technology, tailored for the future of work.

What Are Human Resources Information Systems?

Human resource information systems (HRIS) are primarily data-driven solutions that centre on administrative tasks like payroll, time and attendance, and benefits administration.

The Benefits of HRIS Systems

  • Payroll Management: Automates salary computations.
  • Time and Attendance: Monitors employee hours.
  • Benefits Administration: Manages employee benefits.

The Similarities and Differences Between HCM and HRIS Systems

The two platforms share the capabilities of protecting data, analysing it, and automating routine tasks. Yet, we would not be talking about HCM vs. HRIS if all of the functionalities were the same.

HCM is more all-encompassing and places an emphasis on broader aspects of human capital management, while HRIS is more narrowly focused on administrative tasks.

Similar Functionalities in HCM and HRIS Systems:

  • Data Management
    Both HCM and HRIS systems have powerful ways to manage data. Whether it is employee profiles, payroll information, or information about benefits, these systems are a centralised repository for all HR-related data.
  • Reporting and Analytics
    The ability to make sense of raw data is critical in today’s data-driven world. Both HCM and HRIS systems include reporting and analytics tools that can provide insights into HR metrics such as employee turnover, time-to-hire, and engagement levels.
  • Compliance Features
    Regulatory compliance is a major concern for human resource departments. HCM and HRIS systems include features that ensure your organisation complies with local and region-specific laws. This includes automated compliance reporting, non-compliance alerts, and audit trails.
  • Employee Self-Service
    Employee self-service portals are available in both systems, allowing employees to view and manage their personal information, benefits, and pay stubs. This feature empowers employees while also reducing the administrative burden on HR, who can be assigned more strategic tasks.
  • Time and Attendance Tracking
    The ability to track employee time and attendance is a fundamental feature of both HCM and HRIS systems. Whether employees clock in and out or manually log their work hours, these systems provide the tools required to effectively manage and report on employee time.
  • Payroll
    Payroll functionality is available in most HCM systems, though it is generally more robust in HRIS systems. These include features such as automated salary computations, tax calculations, and benefit deductions.
  • Benefits Administration
    Both HCM and HRIS have benefit administration modules that enable HR teams to manage employee benefit programs. This includes everything from medical and dental insurance to retirement plans and stock options.

    Understanding these parallels can assist HR leaders in making a more informed decision when selecting a system. In my experience, knowing your organization’s specific needs and priorities will help you navigate the vast landscape of HR technology solutions. 

So What Are the Differences?

The purpose of this article is to discuss HCM vs. HRIS software – and that means delving into the differences. So let’s do that:

  • Depth of Features – Comprehensive vs. Specialised:
    HCM solutions typically provide a broader range of features that go beyond core HR functions and include talent acquisition, performance reviews, and employee engagement tools. HRIS solutions, on the other hand, frequently specialise in one or two core administrative functions, such as time and attendance tracking, payroll, or benefits administration.
  • Strategic vs. Operational – Employee Development vs. Administrative Efficiency:
    HCM systems are designed to contribute strategically to the organisation by improving employee engagement, development, and performance. HRIS systems, on the other hand, aim to improve operational efficiencies by streamlining administrative tasks and managing compliance.
  • Analytical Capabilities – Predictive Analytics vs. Descriptive Analytics:
    Modern HCM systems are increasingly incorporating predictive analytics and machine learning algorithms to forecast trends such as employee turnover or skill gaps. HRIS systems typically provide more basic, descriptive analytics that provide insights into current states but are less predictive.
  • User Experience – Employee-Centric vs. HR-Centric:
    HCM solutions frequently provide a more interactive, user-friendly experience, with intuitive dashboards and mobile capabilities to engage employees. HRIS solutions may be more functionally oriented, with a focus on HR professionals.
  • Integration and Scalability – Built for Expansion vs. Limited Scalability:
    HCM solutions are frequently designed for scalability, allowing for easy integration with other systems and future expansion. HRIS systems, particularly older versions, may be more rigid and offer less flexibility for integration with other software solutions. 

How Do Human Resources Management Systems (HRMS) Fit Into the Equation?

To better support HR’s strategic and operational goals, HRMS systems merge some of the features of HCM’s human capital management with those of HRIS’s human resources information system. 

So HRMS is somewhat of a halfway house. Additionally, sometimes HRMS and HCM are used interchangeably, which can lead to some confusion. In modern parlance, the former is more of a legacy term, while HCM is a modern-day acronym. 

The Future of HR Systems: Beyond Cloud-Based Solutions

Human Resources departments have greatly benefited from HRIS and HCM systems, but the HR industry is on the cusp of yet another technological revolution with the advent of Composable HR Applications Frameworks (CHAF).

What is CHAF?

Human resource technology is widely anticipated to advance to Composable HR Applications Frameworks (CHAF) in the near future. The frameworks provide a la carte features that can be easily plugged into an organization’s preexisting infrastructure. 

By breaking down HR software into smaller, more manageable pieces, this modular approach promises to make HR systems more agile, adaptable, and in tune with the needs of today’s workforce.

CHAF vs. Traditional HCM Systems

CHAFs offer adaptability to meet the specific needs of each organisation, as opposed to the rigidity of more traditional cloud-based HCM systems. This customization is particularly beneficial for companies undergoing rapid change or those with unique, industry-specific requirements that off-the-shelf solutions may not adequately address.

Enabling Seamless Integration

The ability to easily connect to other HR programs is one of CHAF’s most exciting features. Whether it’s payroll, talent management, or employee performance analytics, CHAF allows these different applications to “talk” to each other, automating workflows and improving data accuracy.

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Scalability and Future-proofing

CHAF frameworks offer unparalleled scalability, a significant advantage for organisations planning for growth. As a company expands, additional modules can be easily incorporated without the need for a system overhaul. This feature ensures that a company’s investment in HR technology is future-proof and capable of evolving to meet the organisation’s needs.

Expected Market Transition

According to Gartner, by 2030, experts predict that CHAF will have supplanted conventional cloud-based HCM systems as the de facto standard, and many of the major vendors are quietly re-architecting their solutions in line with the new era. 

While it may seem far-fetched, forward-thinking organisations are already considering how CHAF could fit into their long-term HR strategy and using low-code platforms to extend the capabilities of their existing HR systems.

By adopting a CHAF-based approach, organisations will not only enhance their current HR functions but also better prepare themselves for the future landscape of HR technology. This transition promises to revolutionise the way businesses manage their people, processes, and platforms, making HR processes more streamlined, data-driven, and aligned with organisational goals and objectives.

Gartner Pace Layering Model
Source: Gartner

Which Software Solution Is Right for You?

Deciding on HCM vs. HRIS is more than a matter of convenience – it’s a strategic imperative that requires alignment across the organisation. Whether you choose Human Capital Management (HCM) or Human Resources Information Systems (HRIS), your decision should fit your organization’s specific needs and prepare your HR operations for the future. 

In an era of economic volatility, workforce shifts, and a growing emphasis on employee engagement, an agile and adaptable HR system is not just a ‘nice-to-have,’ it is critical for long-term success and resilience.

By proactively aligning your HR technology with your overarching business goals, you not only solve today’s problems but also prepare for tomorrow’s. An HR Technology Portfolio Audit can serve as a road map for this journey, assisting you in assessing the potential and limitations of your current and future technology investments.

Invest in agility, adaptability, and innovation. Begin your journey by conducting an HR Technology Healthcheck today and make a strategic choice that will serve your organisation well into the future.

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Marcus Dasilva is the Managing Partner and Head of HR Technology at BaseLinked. He has worked as an HR technology expert for 25 years. Marcus leads the technology and automation practice, specializing in helping organizations digitally transform HR. His mission is to drive business value and efficiency through HR innovation in an ever-changing environment.
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