Need help launching your HCM vendor selection process? Here’s a guide.

HCM Vendor Selection
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Need help launching your HCM vendor selection process? Here’s a guide.

Getting started with identifying a new Human Capital Management (HCM) solution may seem like a daunting task but having a roadmap to follow will help provide you with the guidance you need to achieve your goals and obtain the stakeholder buy-in you’ll need to move forward. There are lots of great vendors to select from in the HCM market space including Dayforce, ADP, UKG, Paycom, Workday, SAP, BambooHR, Rippley, and Paylocity to name a few. The trick is identifying the vendor that best aligns with your requirements and organizational objectives. Here are some key steps you’ll want to follow to make your HCM vendor selection search a success.

Define your Organizational Objectives

Clearly understanding the business needs for identifying a HCM solution and defining the outcomes for your project will help guide the decision-making process. First – determine your HCM business objectives and the challenges that may prevent your organization from achieving those goals. After all, you can’t hit a home run without a fence, and you can’t reach a goal without setting it.

Analytical tactics like a SWOT analysis and goal setting frameworks like SMART can be extremely useful at this early stage because you’ll need to be specific about the outcomes you want to obtain from a new HCM platform and how it will benefit your organization. As part of this process, be sure to:

  1. Define clear goals
  2. Establish a baseline
  3. Ensure that key players and stakeholders are included
  4. Define measurable outcomes
  5. Develop a roadmap that includes your desired timeline

Develop an Assessment Plan

Once your organizational objectives have been established, developing a clear plan of action is important for project success. Plan considerations should include:

  • Scope of the project
  • Cultural and organizational impact
  • Current systems and 3rd party providers that may be improved, modified, or removed from your HCM landscape
  • Identify the vendor selection team and internal stakeholders
  • Be familiar with internal and external security requirements

Document and Prioritize your Functional and Technical Requirements

Documenting your current HCM requirements (e.g., pay policies, entitlements, organizational structure, employee self-service functions) can guide your organization towards a best-fit human capital management solution that covers your key business requirements. Without a structured approach, HCM software selection can be a complex process. A HCM requirements document also serves as a tool that you and key stakeholders can use to complete a gap analysis and then drive an open discussion to identify must-have features to support business requirements and build consensus.

You’ll want to invest a fair amount of time and energy into this stage of the vendor selection preparation process because the information you gather and document up-front can be leveraged later to develop your Request for Proposal (RFP) as well as provide you with clarity when you’re comparing different HCM solutions.

Conduct a Gap Analysis

Completing a gap analysis is a critical step of the process. Be sure to evaluate your current state, document the challenges and lack of functionality that may exist, understand where practices and policies misalign with industry best practices, and define the key characteristics of the desired future state. The results of this gap analysis can be incorporated into a Request for Proposal (RFP) so vendors can self-report on whether their product functionalities can/cannot meet your requirements.

As part of the gap analysis process, it’s often helpful to conduct an internal survey of key stakeholders and end-users alike to understand what they like in the current solution, what areas are problematic, and what HCM functionality your organization is lacking.

Develop a Budget

HCM systems can be expensive. Establish a budget that factors in the estimated cost of the solution including the ongoing subscription or software fee, one-time implementation costs, training fees and hardware costs.

When calculating your estimated subscription fees, mid-market HCM providers typically use a per-employee-per-month (PEPM) rate. As the name implies, you’re charged by the number of employees you have on a monthly basis. The PEPM rate tends to be lower for larger organizations and you can anticipate that the rate will be in the $15 – $35 range for the full HCM suite of products including core HR, Payroll, Benefits and Workforce Management.

Implementation costs can also vary significantly. Implementing HCM software is usually a one-time fee, charged up front. Costs, however, may vary depending upon how much historical data you plan on migrating, whether you have other products that need to be integrated, if your end-users require training and other factors. Confirm what is included in the implementation fee before making a purchase. From a budgetary perspective, one-time implementation fees tend to be 50 – 70% of your annual spend based on the PEPM rate. For HCM providers that support larger enterprises, they tend to leverage third-party partners to implement the solution who typically charge 125 – 150% of the annual software fee.

Another key budgetary factor involves deciding if you want to own or lease hardware including time clocks. If your organization has the money available upfront, it is often best to purchase your own time clocks. Buying a time clock will likely cost you more money up front than leasing one, but it does have its benefits. The main advantage of buying a time clock is that your organization will not have to sustain any costs other than the retail costs of the system and regular maintenance.

The benefit of leasing time clocks is that it allows you the flexibility to choose something now without consequences for wanting to change it later. This is especially beneficial if you foresee your business needs changing over the short term. While leasing a time clock may have a smaller price tag upfront, it will cost you much more in the end. You are essentially paying a larger fee for the added convenience, new technology and routine maintenance.

And don’t forget about training fees to ensure your company’s end-users are effectively prepared to use the new HCM technology. While some vendors include training in their implementation fee, other vendors charge a separate fee to provide a mix of instructor led training under a train-the-trainer approach as well as customized training based on your organization’s business needs.


Once you’ve completed these key steps, you should be well positioned to start developing your Request for Proposal (RFP) and create a short list of vendors that are aligned with your requirements. You’ll also be prepared to secure stakeholder commitment with key decision makers and influencers before moving forward.

If you have questions or need help with your Global HCM vendor selection process, contact us. Our team has the skill and expertise needed to help guide you through the process and select a vendor that best aligns with your company’s needs.

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