As companies and organizations grow, they may find they need to graduate from using a human capital management (HCM) application that’s narrow in scope (such as payroll or time and attendance) to a fuller-featured business applications suite. For example, they may need features that guide employees in their careers and guide managers as they assess and reward their staffs, or they may need to give business leaders in finance and other departments a clearer sense of compensation and benefits costs.

The next step usually is to consider integrating those HCM applications with existing enterprise resource planning (ERP) and other systems of record. The challenge for these organizations is to manage the integration process so that data is shared seamlessly, while preserving data security and privacy, and with a minimal negative impact on employee productivity. This article will lay out some best practices.

What Is Human Capital Management (HCM) Integration?

HCM-specific integration involves unifying employee data from various HR systems, including data from narrowly focused payroll or time and attendance management applications, into a single, unified platform. One of the benefits of unified HCM systems is that they give businesses access to all employee data in one place, making it easier for departments to analyze and share that data, while making it easier to integrate HR processes. For example, integrating previously unconnected payroll and 401(k) applications can simplify benefits management for the company and retirement planning for employees.

Key Takeaways

  • HCM integration involves centralizing and mingling data from a variety of HR applications, from recruiting and onboarding through workforce management, engagement, benefits, and payroll.
  • HCM integrations can help organizations achieve greater visibility into their workforces, and how different HR processes relate to each other and ultimately affect business performance. For example, they can help a company understand how the costs and liabilities related to employee compensation and benefits affect its financial outlook.
  • HCM integration can be challenging when organizations are still using legacy on-premises systems because those older applications have often been customized, making it harder to map data types and mirror existing functionality.

HCM Integration Explained

HCM integration is a process that helps organizations centralize and manage all employee-related data, including compensation, hire dates, performance appraisals, vacation accruals and approvals, time and attendance, and so much more. It also connects this data with niche applications such as electronic document signing apps or automated Sendmail systems for celebrating employee birthdays, hire anniversaries, and other special occasions. Such integration can also connect HCM applications and data with systems of record, such as financial systems.

These systems, when they’re not already part of an integrated suite, are typically connected using application programming interfaces (APIs). Data mapping helps ensure that disparate systems accurately recognize various data types, such as date and name fields.

What are the Advantages of HCM Integration?

HCM integration helps organizations automate, streamline, and connect a variety of HR and other processes, giving managers holistic views of otherwise siloed data. Such integration provides the following benefits:

  1. Reduces manual errors. Staff no longer need to export or import data, reconcile reports, or ensure that data for new hires has been correctly accounted for.
  2. Connects systems. Connecting disparate HCM, finance, and other business applications helps organizations ensure that decisions across the organization are being made based on the same data sets.
  3. Improves efficiency. Properly integrated systems allow for more efficient data analysis. For example, business analysts can drill down into the details of compensation data in financials that originated in the HCM system, rather than having to ask for detailed reports from the HR team.
  4. Enhances reporting. Integrating HCM with other systems helps improve the quality of reporting by, for example, allowing payroll data to flow into financials without someone having to manually export payroll data from an HR system to the general ledger. It can also let finance teams drill back into the HCM data to get more granular data about, for instance, a given employee’s compensation.
  5. Increases employee satisfaction. Connected systems make it easier for employees to find the information they need to do their jobs, reducing frustration levels and helping them feel more productive. For example, managers can consult planned PTO data when looking to assign staff to new projects; employees can easily review pay stubs or request time off; and managers can approve such requests without having to log into disparate systems.

The Different Types of HCM Integration

As previously discussed, HCM applications can be integrated with each other or with other applications, either natively or by using APIs, with the goal of facilitating data sharing and helping business leaders get a holistic view of operations. Examples include:

  • Enterprise Resource Planning (ERP). Data from HCM systems, such as compensation, accrued time off, and benefits, as well as data used to forecast future workforce needs, including headcount and allocations for training and development, can be reflected in the general ledger and other financial systems within an ERP.
  • Payroll: Typically, payroll is either a standalone application or part of a more comprehensive suite of HCM applications. In either case, integration with other HR applications, or with financial and other systems, is crucial to helping organizations ensure that the right number of hours are paid, tax withholding details are reflected properly in financial systems, and that internal controls are in place to help ensure that the numbers are reported consistently across systems.
  • Time and Attendance. Similarly, integration between T&A and other applications helps reduce copy/paste errors. It also helps organizations plan for shift rotations, staff new projects, and help ensure compliance with relevant labor regulations.
  • Applicant Tracking Systems. ATSs help organizations track job candidates throughout the recruiting and hiring process. It’s important to integrate standalone versions of such applications with more comprehensive HCM suites to smooth the transition of new hires through onboarding, training, and other HR processes
  • Workforce Management Applications. Integrating such applications with, say, an automaker’s manufacturing resource planning applications can help that company schedule optimal workforce levels based on demand. Integrating workforce management applications with a broader HCM suite helps ensure that compensation and benefits are properly disbursed and that taxes are withheld appropriately.

Managing HCM Integration Challenges

Integrating HCM applications with other systems comes with number of technical and process-related challenges, including the following.

  • Integrating Legacy Software.

    The code underpinning much of the legacy, on-premises software companies use is a decade or more old. As such it may not use standard protocols, could have cybersecurity vulnerabilities, and may have been heavily customized, making it difficult to integrate with modern cloud applications. Such integrations can nonetheless be managed by using extract, transfer, and, load (ETL) processes to consolidate, cleanse, and reorganize data from different applications, while APIs are used to expose specific functionality from legacy applications and to integrate data updates in real time.

  • Standardizing Disparate Data Sets.

    Integrating HCM with other systems often requires organizations to do the preliminary work of defining uniform formats for employee data (such as ID numbers, names, job titles, hire dates), establishing data governance rules, and validating data to help ensure that clean data is being used and reported.

  • Maintaining Privacy and Security.

    Data transferred during HCM integrations should be encrypted at rest and in transit, and organizations should put in place role-based access controls to limit data access to only those employees who need to see it.

  • Controlling Costs.

    Integration projects can spiral out of control if they’re not properly scoped and vendor contracts aren’t negotiated carefully. Project goals should be spelled out up front, and project teams should use existing tools and processes, such as APIs and pre-built solutions whenever possible.

  • Managing Complexity.

    Organizations integrating HCM and other systems need to address not only the technical challenges noted above, but also stay on top of change management as employees adjust to new processes. Be aware that employees often resist using new tools and processes until they’re convinced that they make their work lives easier. Employees likely will need some training on the use of new user interfaces. Organizations can avoid some technical complexity by choosing pre-integrated suites of cloud-based HCM and other applications, as opposed to trying to integrate various systems from multiple vendors.

HCM Integration Best Practices

Integrating HCM and other applications, whether enterprise-wide platforms such as an ERP or point solutions such as a time and attendance, requires all hands on deck. Critical steps include the following.

  1. Involve multiple stakeholders.

    Establish a cross-functional team from among HR, finance, IT, and other affected departments and involve those individuals in every step of the process, from drafting business requirements to final user acceptance testing and training on the integrated system.

  2. Map your tech stack and prioritize needs.

    This step creating a complete inventory of applications, identifying existing data flows, tracing the path of data as it moves from system to system, and identifying where data is created, updated, and consumed. Determine areas or systems where data has to be reconciled manually. Depending on the size of your organization, you may not be able to accomplish every integration you’d like. Maybe your CRM, which tracks the number of deals closed by each salesperson, will need to be integrated at a later point, after ERP and other integrations, depending on your business needs.

  3. Test before going live.

    Use test data to ensure that the integration is properly mapping data so that reporting is accurate and consistent, then test using actual data in a controlled environment. Make sure users understand new user interfaces and functionality.

  4. Thoroughly understand your compliance obligations.

    Use modern, cloud-based applications and make sure that they’re compliant with relevant regulations, especially those governing employee health and compensation data. Even the smallest organizations can be responsible for complying with regulations protecting consumer and employee data, and with establishing internal controls. And if you operate in different jurisdictions, ensure that your newly integrated HCM application allows you to be in compliance with all of them.

  5. Maintain detailed documentation.

    People come and go, but PDFs are forever. Document not only user instructions, but also why certain steps were taken if they run counter to the standard way of doing things. People won’t necessarily have the institutional memory for every decision or integration point, so make sure that operational instructions, customizations (if any), and troubleshooting guides are available for future managers and employees to consult.

Unify HR Data Together with NetSuite

NetSuite’s SuitePeople gives HR staffers and company employees alike a single, integrated suite of applications for managing hiring, benefits, payroll, employee performance, scheduling, time and attendance, and other HR functions. It also includes data analytics tools to help make better-informed decisions to align workforce performance with business performance.

HCM Integration FAQs

What is an HCM system?

Human capital management systems are used by HR teams, as well as by managers and employees, to help with every aspect of an employee’s tenure at an organization, from recruiting and onboarding to employee compensation, benefits, training, career advancement, performance appraisals, succession planning, and more.

What is an HCM integration?

HCM integrations involve combining data from various HR and other applications, notably ERP systems, to provide business leaders with a single, holistic view of financial and HR-related data.

Is HCM integration the same as an HR integration?

No, they aren't the same. HCM integration often involves a comprehensive suite of human capital management applications, whereas HR integration typically refers more narrowly to integrating systems that handle core HR tasks, such as basic personnel administration.