human resource management software

HCM, HRMS and HRIS: 5 HR software misconceptions debunked

What does HCM stand for? What’s an HRMS? And how are they different from an HRIS?

If your quest for HR technology has you drowning in alphabet soup, you’re not alone. There’s a lot of confusion around these three acronyms, but once you get past some common misconceptions, it’s a lot easier to understand them.

Here are five myths we’ve debunked to help you gain some clarity around the different types of HR software and make sure you choose the best platform for your business:

Myth #1: HCM, HRMS and HRIS are three distinct platforms

Although these three terms are sometimes referred to as three distinct types of HR technology, each with separate offerings, there’s really no gold standard for defining them. Chances are, if you asked 10 different people to list the attributes of each platform, you’d get 10 different lists and there’d be some overlap between them.

Sure, they all exist to facilitate your HR operations. But, with such loosely defined specs, how can you discern between the different HR technology platforms available to you when it comes time to make a decision?

Shift your perception.

Stop trying to define HCM, HRMS and HRIS. Understanding their differences is more about a timeline than a particular type of software. Instead of classifying the three platforms and trying to fit them neatly into their own unique categories, think of them more as stages in the HR technology evolution.

Here’s how that looks:

1980s – 1990s: Human resources information systems (HRIS) were introduced to help with core HR processes.

  • They were limited to mainly back-office functions run by HR and IT specialists.
  • Typically, only HR and payroll staff had access, and maybe a few supervisors for reports, without broad adoption into the enterprise.
  • HRIS software handled only basic HR tasks and didn’t include employee self-service or other integrated features to foster employee empowerment, engagement and communication.

HRIS mindset: Transactional HR – “Keep accurate records, automate payroll, and get the job done day to day.”

Late 1990s – early 2000s: Human resource management systems (HRMS) became the preferred nomenclature (over HRIS) as we moved into the web era.

  • HR companies began equipping their systems with more front-facing features and re-engineered them to be delivered through the internet.
  • HR technology began to reach further into the business – managers had some level of self-service to be able to go in and potentially make changes on employees’ behalf.
  • Reporting and analytics became a more fundamental part of the HR process.
  • Employees began to get more involved in the HR process (e.g., online pay stubs, time and attendance, and benefits enrollment); however, the focus was still on basic HR mechanics.

HRMS mindset: Still largely transactional with only minimal attention to process improvement – “Get my job done and manage my information … oh, and maybe help me route requests for approvals.”

Last decade: Human capital management (HCM) platforms are defining a new era in HR technology.

  • HCM systems have transformed HR technology from the core “payroll plus employee data” capabilities of its predecessor HRIS and HRMS systems.
  • Core HR processes are integrated with additional features and functionality – which would have been stand-alone add-ons in the HRIS and HRMS days – all in one comprehensive system.
  • These “additional features” include employee self-service, engagement and performance management tools, human capital analytics, online learning and development, and community-based resources for built-in collaboration.
  • The integrated nature of HCM systems has broadened the HR experience from back-office and management-focused to a more inclusive, employee-focused one.

HCMs have shifted the trend away from on-premise, installed software toward cloud-based solutions.

  • This shift has literally put HR technology in the hands of employees, with features like mobile apps, a more robust web experience, and 24/7 remote access beyond the corporate network.
  • HCMs are empowering businesses to take their HR capabilities far beyond the basics of simply keeping records, and getting people paid and signed up for things.
  • The result is an immersive, richer environment where employees are engaged on a day-to-day basis.

HCM mindset: Transformational HR – “Empower employees with a comprehensive system to facilitate HR processes and improve efficiency and engagement company-wide.”

Where we are today

Although HR technology has evolved to the HCM era, some HR technology providers may still be offering HRIS and HRMS systems. Just know that these may be less robust platforms or software than an HCM model.

Myth #2: An HCM is an HCM

This common misconception couldn’t be further from the truth.

True, most HCM platforms will share many common features and capabilities. But the real differentiator comes down to the human capital management companies providing them.

There’s a big difference between a software vendor that expands its product line to include HR technology, and an experienced HR solutions company that includes HR technology as part of a multi-pronged approach to service and support.

Do you just want someone to configure the software, show you how to run the system, and then direct you to technical support for any additional questions? Maybe you’re at a place in your business where that’s really all you need – and that’s okay.

But if you’re like most small and medium-sized businesses, you’ll probably benefit from a more consultative relationship with your provider. Think tactical versus strategic, meaning you not only get the support you need to run the HCM system – but also the guidance to help you run your business more efficiently, stay compliant and grow your people.

It’s the difference between “software as a service” (SaaS) and “software with a service” (SwaS). And, determining where you sit on the SaaS-SwaS spectrum will depend on the specific needs of your business. Asking the right questions (of yourself and your team) can help you drill down on the right fit for your business.

Myth #3: HCM systems will eventually replace HR people

Remember the last time you flew on a commercial flight? Was there a pilot? Probably so, or you might not be reading this now.

That high-tech control panel in the cockpit isn’t intended to replace the pilot, just make their job easier and more efficient. The airplane’s gadgets and gauges work with the pilot – not instead of the pilot. Armed with powerful technology, pilots are equipped to fly with greater precision and safety, which is a big win for the airline industry and everybody on the plane.

The same principle holds true for HR technology. Comprehensive, integrated HCM systems don’t eliminate the need for your HR staff. They just allow them to work smarter and become more strategic in their operations.

Think about all the things your HR team could be doing with the time they currently spend on repetitive tasks and processes, like payroll, time and attendance, benefits enrollment, PTO approvals and more. An effective HCM system frees people throughout the entire chain of command. With less administrative burden, your managers and employees can dedicate more time to revenue-generating activities.

So, if the idea of HCMs has you envisioning a future HR department manned by robots, save that for a sci-fi screenplay you write one day. In reality, the “H” in “HR” is pretty vital to the equation. Human resources will likely always need humans.

Myth #4: On-premise software is more secure than cloud-based platforms

Does this sound familiar?

“I want my HR technology software in my building, behind my firewall and my locked door.”

Just because something is physically under lock and key within your organization, that doesn’t necessarily make it more secure. In fact, it’s probably actually less so.

One of the greatest security advantages cloud-based systems offer is the physical separation of your employees and property from your data. Think about it. Less physical access makes it harder for third parties to get hold of your company’s sensitive data and use it negatively. It also prevents a disgruntled employee who’s about to quit or be fired from sabotaging your records. You’re also protected from natural disasters and catastrophic events that could destroy onsite data.

Plus, with cloud-based technology, you don’t have to worry about your software and cyber-security becoming outdated and ineffective. A reliable HCM platform will seamlessly take care of updates for you.

The convenience and added security of a cloud-based system make it the preferred model for most business leaders today. However, if you prefer purchasing and owning your software outright, versus accessing it through a subscription, you might opt for a traditional on-premise solution (which will likely be an HRMS or HRIS).

Myth #5: An HCM will entirely eliminate the need for individual add-on solutions

HCMs come with feature sets and capabilities designed to support most of your company’s HR needs. And the good ones do it really well.

But there may also be a compelling reason why a best-of-breed solution is warranted from time to time to offer a strategic add-on with single capability for a specific function. Is there a software product tailored to your particular industry?

If you’re in manufacturing, for example, you might require more specialized enterprise resource planning (ERP) functionality than an HCM platform provides. As long as your add-on solution integrates well with your main system and fits your model, it shouldn’t be a problem.

So, what’s really in a name?

As it turns out, not much.

In general, most comprehensive, integrated systems will be labeled HCMs, and less feature-rich systems will probably be considered an HRMS or HRIS platform. But that’s not a naming convention you can rely on, as it will vary by company and as trends come and go.

So, when you’re looking for the right HR technology for your business, don’t put a lot of stock into how it’s labeled. The important thing is to look at the feature set. Figure out the value a particular system offers to all the stakeholders in your company. Don’t try to align it with an HRIS, HRMS or HCM, because tomorrow it may be called by a completely different acronym.

One question to keep in mind: What are you hoping to accomplish with your HR technology system?

When you have a solid sense of your company’s objective for purchasing new HR technology, it can help simplify the process and ensure you get the best fit for your business. Know your “why” first.

Why an HCM?

If all you want is a nuts-and-bolts system for processing payroll and keeping records, you may not need a platform with full-blown HCM capabilities right now. But be careful not to limit your thinking.

You’ll want whatever system you get to be scalable to your vision for the company. As your business grows, so will your HR needs. Make sure your HR technology can keep up, and that it’s backed by a company that can provide the support you need at all stages of your business. Don’t make the mistake of rushing your decision – do your due diligence.

Here’s what you should expect from a reputable HCM system provider (software with a service):

  • Comprehensive, integrated technology: One single system for your payroll, HR administration, time and attendance, employee onboarding and performance management (no need to synchronize data or deal with multiple logins and user experiences).
  • Streamlined, paperless processes: Automated technology facilitates HR operations and minimizes errors.
  • Convenient, secure and easy-to-use platform: Managers and employees can get the information they need, when they need it, with mobile and remote access.
  • Cloud-based subscription: Greater security than conventional on-premise software, with seamless updates that won’t interrupt business.
  • Scalable solutions: Features and capabilities that adapt to your business’s changing needs.
  • Actionable workforce analytics: Readily available data at your fingertips means more informed decision-making.
  • Dedicated technical support: Personalized service from a dedicated team, not a call center.
  • On-demand HR support: Online library of resources that may include ready-made forms, checklists, HR guides, job descriptions, employee handbooks and training videos.
  • Support for key HR-related compliance issues: Experienced HR professionals available to provide additional guidance when you need support beyond on-demand resources.
  • Brokered benefits management: Employee self-service functionality makes benefits enrollment easier for everyone – your employees and your HR team.

What’s next in HR technology?

Two words: predictive analytics.

Most top-tier HCM platforms already include strong, reliable analytics that can show you trends and patterns. But predictive analytics takes things a step further.

More than just charts and graphs, predictive analytics arm business leaders with actionable data that tells you something that isn’t obvious about your employees. As a result, you’ll be better able to project things like flight risk or future performance trends – even financials.

Predictive analytics will be the next frontier as HR technology continues to evolve.

When you get every employee in your company engaged in your human capital strategy, it’s powerful. And HR technology is the easiest way to do that. Find out more about choosing the right platform for your business by downloading our free e-book, HR Technology: How to Choose the Best Platform for Your Business.

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2 responses to “HCM, HRMS and HRIS: 5 HR software misconceptions debunked

S
Sandy White

Matt, this fantastic ~ a great overview of the differences in the technologies, as well as when/how they apply.

Insperity Blog

Thank you, Sandy. Your comments are greatly appreciated – hope you found this article helpful!

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