What is HCM? [A Beginner's Guide]
HR often has the highest costs for an organization, and the latter needs modern methods to use employee data to its advantage: to optimize costs, empower staff, and provide managers with proactive actions.
Human Capital Management (HCM) software is a comprehensive approach to managing an organization's workforce, from performance to development and retention.
With technological advancements, HCM software is now available as a Cloud solution, making it easier for companies to streamline their HR processes and enhance employee engagement.
Keep reading to learn why organizations use HCM software to optimize HR processes, discover its components, and unearth its benefits.
What is HCM?
HCM software is a modern approach to managing an organization's employee data, encompassing every aspect of performance and talent management. HCM aims to optimize an organization's human resources, recognizing that employees are the driving force behind an organization’s success.
Not only does HR have a lot of costs, but also lots of data per employee, which is exasperated in modern working conditions, including remote operations, international complexity, and flexible working.
Integrating HCM within an ERP suite gives you a single source of truth that aligns HR and finance, as well as other key functions, to enable HR to understand how they affect finance, and vice versa. When HR and finance have seamless collaboration and flow of data, it’s easy to optimize HR processes for productivity, costs, and engagement.

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Components of HCM software
HCM is made up of different components designed to optimize various aspects of human resources management, which can differ per vendor:
- Talent Management - Talent management enables organizations to have a centralized repository of employee data, ensuring optimal management of performance, employee engagement, and planning.
- Payroll - Ensuring accurate payment for your workforce is crucial. With a seamlessly connected payroll module, you can synchronize HR data with local regulations and other requirements, all while streamlining the process to ensure your teams use their time where it counts most.
- Employee Self-Service - This component empowers employees by allowing them to access and update their information, view payslips, request time off, and perform other HR-related tasks. Self-service promotes self-sufficiency and reduces the administrative burden on HR.
- Performance Management - Performance management helps companies optimize processes for goal setting, continuous feedback, performance reviews, and development planning. With performance analytics and reporting, managers can gain insights into employee performance and make data-driven decisions.
- Compensation Planning - Compensation planning enables managers to make fair and timely pay decisions and communicate effectively with employees during one-to-ones.
- Learning and Development - HCM solutions facilitate employee development through a robust learning management system. It allows companies to create, deliver, and track training programs, ensuring continuous learning and skill enhancement within the organization.
- Time and attendance - Time tracking and attendance management provide features for scheduling, time recording, leave management, and absence tracking. This ensures accurate and efficient employee time management, leading to better resource allocation.
- Expense management - Travel and expense modules enable simple and easy expense registration, approval, processing, posting, and payment. It simplifies submitting and calculating employee claims and can integrate with other financial modules easily.
Click to read Unit4 HCM product brochure - Blog - FG
The benefits of HCM software
HCM software is more than just a technology solution; HCM solutions create clear paths to optimize organizational culture and employee engagement, align HR data with organizational goals, and are a key tool for creating a collaborative work environment to attract and retain the best talent.
- Automation – Cloud capabilities can automate repetitive HR tasks associated with data consolidation. This saves time, reduces errors, and ensures compliance. With added capabilities like employee self-service, HR professionals are generally less burdened by admin tasks, allowing them to interpret data.
- A single source of data truth – When HR data is integrated into the Cloud, HR and finance can work from the same data set, which doesn’t just reduce errors but enables seamless collaboration between an organizations two key drivers: people and finances. This is key to enabling a data-driven HR culture in your organization.
- Employee engagement visibility – Organizations often lack the time and ability to properly understand and create strategies for employee engagement. When engagement is high productivity and satisfaction often follow, but this requires integrated data and time for strategy-building analysis.
- Develop data-led talent strategies - By analyzing data, tracking progress, and creating personalized development plans, organizations can boost employee growth and satisfaction, allowing CHROs to better understand employee behavior and needs, adapt to modern trends, and develop data-led strategies to retain and attract key talent.
How can Unit4 HCM help you optimize HR processes?
Unit4’s Cloud HCM breathes new life into common HR processes, transforming performance reviews from year-end box-checking exercises into a valuable space for employees and managers to have two-way conversations about performance, for employees to raise feedback, and for managers to create action based on feedback.
Unit4 Talent Management (TM) is a key module that can give employees the scheduled feedback, prompts, and ownership of data that they need to feel heard, while Unit4 TM provides people managers with opportunities to act on feedback as well as clear processes for gathering employee data.
To hear more about Unit4 HCM and TM, consult our website, to get more detail on how Unit4 HCM and TM can help turn around employee engagement rates in your organization and generally provide control and strategy to your HR teams.
Frequently Asked Questions
Why do organizations need HCM software?
Organizations use HCM software to streamline HR processes, enhance employee engagement, optimize costs, and ensure compliance. It helps in managing HR data efficiently, supporting proactive decision-making, and aligning HR with organizational goals.
How can HCM software enhance employee engagement?
HCM software enhances employee engagement by providing visibility into engagement levels and providing measurable engagement scores. With improved visibility of this data, organizations can form data-led strategies, and facilitate continuous feedback and communication between employees and managers.
How can Cloud-first HCM help HR teams?
In the Cloud many time-saving benefits from automation help reduce the administrative burden on HR teams, allowing them to form data-led strategies to improve the employee experience, which teams often lack the time for with legacy systems.
