How Integrating HCM and ERP Systems Benefits Your Business
Business and human resources leaders must manage critical data ranging from company finances to accounting practices to compensation and benefits as well as workforce data.
While some of this information may not seem related to the average person, savvy business and HR leaders understand how one impacts the other in various ways. Consider just a few of the everyday HR concerns that arise.
How many full-time employees do we need to open a new facility?
- How much overtime should we expect to achieve our third-quarter goals?
- What organizational structure would allow us to be most efficient?
- What development gaps do we have that will hinder our ability to enter a new market/produce a new product?
- What percentage of our workforce has competencies in any number of skills?
These and a myriad of other questions related to human capital are what keep business and HR leaders up at night. They’re important questions. But they’re not questions that are limited to considerations of human capital. To answer them accurately, leaders also need to have a solid appreciation not only for human capital management (HCM), but also for enterprise resource planning (ERP).
Big Benefits from the Right HCM Solution
HCM solutions ensure that companies are allocating their human resources appropriately—and cost effectively—across the enterprise, that staff have the training and capabilities needed today and in the future, and that they have ready access to the information and support they need. The best systems go beyond the traditional operational tasks of maintaining employee information, processing payroll, and managing benefits to provide support for managing the workforce strategically—and interface seamlessly with other critical systems such as enterprise resource planning. ERP systems offer insights that lead to business management solutions focused on resource allocation and management and fiscal responsibility.
Both HCM and ERP are aided by technology—the right technology.
Together, these technology solutions allow organizations to streamline operations as they integrate the various aspects of getting their work done—from planning, to inventory management to sales, and the human resources required to make it all happen. Integrating HCM into ERP benefits the business in many ways. It’s the smart strategy for midmarket companies hoping to optimize and leverage the data incorporated into each platform for maximum utilization. While the two systems often operate independently of each other, integrating them enables HR access to information that can better inform on employee training and workforce management data.
Understanding the Business as a Whole
Without minimizing the importance of all of the elements of an effective ERP, the human resource element for most organizations can be the most complex—it must both help organizations to manage human resources and related expenses (payroll and benefits) and serve as a repository for information and transactions. The right HCM solution will help HR leaders and business managers ensure the cost-effective use of staff time today and while planning for future needs.
- An HCM automates, tracks, and provides robust reporting on the management of human resources—from recruiting and hiring, to training and development, productivity and engagement.
- ERPs focus on the financial aspects of business operations, helping business leaders control costs while maximizing resource utilization.
Given the critical nature of both systems, it simply doesn’t make sense to operate them independently. Increasingly, the enterprise must be looked at as a whole to ensure both efficient operations and the effective allocation and use of resources—financial and human. In fact, according to CIO, three of the top priorities of CIOs for 2020 are:
- Understanding the business as a whole
- Technology that enables communication and collaboration
- Better and more consistent training
That’s what an HCM, tied to the organization’s ERP, can deliver.
To achieve the goal of understanding the business as a whole, there must be a seamless interface between finance and HR to allow business and HR leaders the ability to successfully manage the business while allocating human and other resources cost effectively. That seamless interface, unfortunately, is not always easy to find.
HCM and ERP at Work Together
Pepper Construction, a $1 billion general contractor with five offices throughout the Midwest needed better systems to manage both the business and its human resources. That was the conclusion of Julie Kellman when she accepted the position of Director of Compensation and Benefits and joined the company. But finding the right solution—and one that would integrate with the company’s existing ERP, wasn’t easy.
Kellman and Pepper Construction eventually settled on a Criterion HCM solution. Now, says Kellman, employees love having one unified portal for everything HR. She and other company leaders appreciate the ability to leverage the value of the company’s ERP, along with the HCM, to provide the integrated intelligence and support needed.
Because the financial and people sides of the business are so integrally intertwined and interdependent from an operational standpoint, it just makes sense that his same seamless integration is also realized through a company’s technology support systems.
ERP systems track the projects being worked on, the resources needed to make those projects happen, and the availability of both inventory and capital. HCM solutions track the people needed to work on these projects. If the two systems don’t overlap, it’s impossible to know whether the human side of the capital equation is being effectively deployed.
From the ERP side, it’s critical for companies to have real-time access to information about what projects are active and what funding sources are available. From the HCM side, it’s critical to know what people are working on, to be able to allocate their time against specific projects and—in combination—to know the true costs of producing and delivering products and services to the market.
For both, it’s important to ensure that the information accessed by anyone throughout the enterprise will be easily accessible, accurate, and consistent. And that it provides them with the information and answers they need without the need to manually “crunch the numbers,” build complex spreadsheets, or cobble together information from a variety of sources. These are the kinds of actions that can lead many organizations to draw the wrong—and often costly—conclusions to critical questions.
Enabling Communication and Collaboration: One Source of Truth
In technology circles, the phrase “one single source of truth” refers to a data storage principle that ensures information is being drawn from a reliable place—that anyone in the organization, regardless of their division, department, or physical location, could seek an answer to a question and be assured that the answer would be consistent for all.
Tracking that information accurately and consistently, while providing real-time access to managers across the enterprise is critical. That’s only possible, though, through a tightly integrated technology solution that gives companies access to insights that allow them to remain competitive while operating as efficiently as possible.
One of the costly challenges that most businesses face today is the ability to ensure data integrity throughout the enterprise.
Data stored in silos by various “data owners” challenges the organization to ensure that people are making the right decisions.
Technology solutions such as HCM and ERP systems can help to address this. But only if those solutions are actually understood and used—and seamlessly integrated. They will be if they provide intuitive ease of use and an exceptional user experience.
Better and More Consistent Training Learning
HCM solutions are only as useful as they are used. Systems that are overly complex, or that represent add-ons to data entry and other tasks that employees already perform are likely to languish from lack of use. Those systems don’t save money—they add cost.
Many organizations invest significant time and money in training employees on how to use the various technology systems that they adopt. But, while training can help, Criterion HCM believes that software should be simple and easy to use, requiring minimal training. The systems that get used are those that offer a platform that is intuitive and easy for most employees to simply navigate on their own.
Seamless ease of use and an exceptional user experience leads to adoption—ensuring that a company’s technology investment drives desired outcomes.
Today, mid-sized companies can have access to the same powerful systems that larger enterprises have traditionally invested in heavily. Criterion HCM simplifies every aspect of workforce and talent engagement across the entire employee lifecycle. And it interfaces seamlessly with other critical systems, such as ERP, to ensure data integrity, eliminate unnecessary duplication, and drive more well-informed decisions.
For more information about how Criterion HCM can enable fully integrated HCM capabilities into your ERP system, explore our website or visit the Resource Center.