The Difference Between Human Capital Management and HR Management Systems

What’s the difference? 

Well, quite a bit; they are separate applications with different functions and intended uses. While there may be an overlap in capabilities between the systems, one is not a replacement for the other. 

Let’s start by defining them. 

Human Capital Management (HCM) – This is the system of record for employees. It contains (and automates) the internal functions of HR departments, including: recruiting, training, payroll, compensation, performance, etc. It can also encompass the strategic side of HR, including workforce planning, capacity management onboarding, and more.

HCM applications have traditionally been ‘back-office’ applications that didn’t engage end-users well, if at all. Through application modernization and cloud migrations, some HCM applications are working towards directly engaging employees, but I would argue few do it well. Also, few (if any) HCM applications spread across the organization, as they were not designed to do so. From the employees’ (end users’) perspective, this limitation has real consequences, as it requires them to engage multiple portals/applications/interfaces and systems to complete daily activities such as submitting timecards, requesting PTO, getting an IT issue resolved, etc. 

Human Resources Management System (HRMS) is a software or technology that aids HR departments in handling their external human resources processes. It typically integrates service management principles to efficiently manage workflows for end users. 

In this context, we’ll refer to the HRMS as the system of engagement (ServiceNow) – the focal point of employee interactions. This is where the focus really shifts to enhancing the employee experience, which encompasses both the employees utilizing the portal as well as the often-overlooked agents operating within the systems.

How End Users Benefit from integrated HCM and HRMS systems 

When it comes to employee experience and the goal of making a meaningful impact, we’ve seen a significant benefit for our clients by connecting their ServiceNow system of engagement with their HCM – it essentially elevates the engagement system, transforming it into a core tool in their organizations.  

Picture this: an employee interacts through a unified portal. This portal, which can be accessed from anywhere via native mobile app, empowers employees to: 

• Check their PTO balance and request time off. 
• Enroll a beneficiary in their health insurance. 
• Access information on W2 release dates through
  knowledge resources, eliminating the need to create a support ticket. 
• Report laptop issues. 
• Request a new device. 
• Report restroom problems. 

All these functions consolidated in one portal? Yes! Now, imagine the added feature of chatting with an HR or IT representative, a virtual agent (chatbot), or an AI-powered
agent. Sound like the future? It’s not!  

Achieving all of this is possible with ServiceNow as your system of engagement, but it’s not magic. It requires developing capabilities and processes throughout the organization, establishing technical integrations to facilitate data transfer, and, ideally, developing a comprehensive roadmap that outlines the path to your near-perfect end goal. 

Figure 1: Sample Roadmap Diagram

How an Integrated System of Engagement Benefits the Back End Employee Experience 

What about agents and fulfillers? Simply, placing them within an HRMS platform like ServiceNow will dramatically improve their day-to-day experience at work.  

Let’s look at a common example of what this kind of transformation looks like: A few years back, I had the opportunity to observe HR agents prior to a major transformation. These agents, classified as ‘tier 1’, were responsible for handling calls received on the company’s 1-800 number. Before the transformation, these agents had to juggle multiple windows on their desktops – one window open for their legacy case management tool, another for their HCM system to verify the caller’s identity and retrieve relevant information, a separate window for their knowledge management system (distinct from the case management tool), and a Word document for taking notes. These poor agents had to flip between all of these various screens just to handle a single call and address the needs of their teammates. 

The solution we put in place for this client (implementing ServiceNow as their engagement platform) quickly and directly led to a profound transformation in the daily operations of agents and fulfillers. The Workspace technology within ServiceNow, along with integrations with the HCM system to populate essential employee details like leave and pay information, combined with the built-in knowledge base, enabled agents to streamline their work within a single screen.  

To streamline even further, we developed an integration into the client’s interactive voice response (IVR) call system to provide agents with screen notifications when calls were incoming. This integration also facilitated caller pre-authentication and high-level categorization of the call reason.  

Below is an illustration of the HR agent workspace within ServiceNow. 

Figure 2: HR Agent Workspace (Vancouver Release, Demo Data)

Identifying the Line Between HCM and HRMS

When embarking on HRSD transformation projects, we commonly get this question: “Where should the boundary lie between my HCM and HRMS in terms of capabilities and services?”

To give the classic consultant’s answer: It depends.

It depends because every organization is unique (and we’re not in the business of giving generic cookie-cutter advice to our clients). Typical variances between organizations include different types of HCMs, Applicant tracking systems (ATS), and the like – all of which bring with them unique capabilities and modules. My suggestion is to view all of this through the lens of employee experience and let that be your compass; There’s no need to reinvent the wheel. Take, for instance, employee onboarding, background check, and drug screen integration processes that are already established in the ATS or HCM, while the HRMS is in ServiceNow. Is it practical to shift these integrations to the system of engagement? Not really!

In order to identify this boundary within your organization, some exploration is necessary. It’s crucial to understand which processes (such as benefits, payroll, talent, etc.) are managed within the HCM and ATS (if using a separate application). Conduct a brief gap analysis to pinpoint any absent processes and determine the most suitable placement for them. An advantageous aspect of a system of engagement is its ability to overlay nearly all HR processes as an input and case management tool. This concept epitomizes the essence of ServiceNow as the ‘platform of platforms,’ as while it may not store data as the primary system, it sits atop the systems of record and streamlines workflows (see to figure 3 below).

Figure 3: ServiceNow Platform of Platforms

Employee experience is a continuous journey, not a destination reached. It’s an ongoing process that necessitates revisiting, particularly post the initial transformation and implementation phases. Though subsequent updates may not match the magnitude of the original implementation, it’s still valuable to carefully assess each new feature and functionality release. This ensures your organization maintains a best-in-class work environment for all employees