https://www.adp.
com/resources/articles-and-insights/articles/h/hr-strategy
Examples of strategic HR functions include compensation planning, recruitment, and succession
planning and employee development.
What is an HR strategy?
HR strategy is a roadmap for solving an organization’s biggest challenges with people-centric solutions.
This approach requires HR input during policy creation and elevates the importance of recruitment,
talent management, compensation, succession planning and corporate culture
Why is HR strategy important?
Without strategy behind it, HR remains an administrative function and business growth may be
hindered. Consider, for instance, two different companies that would like to expand into new markets.
One of them is strategic and gives HR a seat at the table from the very beginning. It researches locations
that would be the most advantageous from an employment standpoint and then develops a long-term
plan for networking highly-qualified, passive candidates in the chosen regions.
The other company takes transactional approaches to solving problems. Instead of including HR in its
expansion discussions, it delegates a hiring manager to recruit candidates without knowing if the desired
talent exists in that market or if the employment rules add a significant number of unexpected
obstacles.
As the first example shows, when HR is involved and integrated at many levels of an organization, it can
create a powerful advantage.
Examples of strategic HR functions include compensation planning, recruitment, succession planning
and employee development.
What are four human resource strategies?
Limit transactional problem solving
Be proactive, rather than reactive
Provide people-centric solutions to large-scale challenges
Connect people who can solve each other’s problems
What are the types of HR strategy?
There are essentially two types of HR strategies – those that are overarching and those that are specific.
Overarching strategies apply to the management of an organization’s people as a whole, while specific
strategies address subsets of HR, like talent management or recruitment.
How do you develop a strategic HR plan?
A strategic HR plan can be created by thoroughly evaluating an organization’s strengths, weaknesses,
opportunities and threats. This is known as a SWOT analysis. Once employers know this information,
they can create realistic goals that account for what they do well and where they need improvement.
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/
practicingstrategichumanresources.aspx
Overview
This article provides a definition, background, information, resources and suggested reading on how to
begin the process of strategic human resources. Topics include the following:
Benefits to HR to engage in strategic planning.
Developing a strategic HR plan.
Assessing the organization's current environment.
Creating statements of vision, mission and values.
Implementing, monitoring and evaluating the HR strategic plan.
Background
Strategic human resource management involves a future-oriented process of developing and
implementing HR programs that address and solve business problems and directly contribute to major
long-term business objectives.
HR management was once largely an administrative function focused on day-to-day responsibilities such
as employee recruiting and selection and managing employee benefits. Changing labor market
conditions and new business thinking call for HR business strategies that include recruiting and retaining
the right people, as well as providing ethical and cultural leadership.
Strategic planning presents great challenges and opportunities for HR professionals. Nearly all HR
leaders in the largest global companies are involved in strategic decision-making and participate on the
organization's strategy team, and a majority of HR professionals report that strategic planning is part of
their function. In contrast, HR professionals in many medium and small organizations are not often
involved in organizational or functional strategic planning. Consequently, to achieve long-term strategic
HR objectives and to be a key player in the organization's strategic planning process, some HR
departments may need to convince senior management of the value and contribution HR can provide.
Benefits of HR Strategic Planning
The closer the alignment between HR and an organization's overall business strategy, the better the
company's ability to anticipate and respond to customer needs and to maintain competitive advantage.
Rigorous research, planning and development involving workforce culture, behaviors and competencies
promote the successful execution of business strategy.
Particular benefits of HR strategic planning include the following:
Avoiding costly and disruptive surprises that interfere with achieving goals.
Addressing key issues in a timely manner to avoid crises.
Promoting employee productivity and overall organizational success.
Providing a sense of direction to positively affect how work gets done.
Keeping employees focused on organizational goals.
Providing a strategic focus to guide training and development initiatives.
Giving leaders tools to help focus and implement their strategic initiatives.
Developing a Strategic HR Plan
HR's role includes developing a plan of HR initiatives to achieve and promote the behaviors, culture and
competencies needed to achieve organizational goals.
Results-oriented goals broadly include the following:
Correctly assessing staffing and skills needs and keeping training up-to-date.
Developing and maintaining competitive pay and benefits.
Managing performance and designing a rewards system that keeps employees motivated.
Knowing what competitors are doing to recruit and retain talent.
Providing training, including ethics, which reinforces corporate values.
The strategic planning process begins with four critical questions:
Where are we now? (Assess the current situation.)
Where do we want to be? (Envision and articulate a desired future.)
How do we get there? (Formulate and implement a strategy and strategic objectives.)
How will we know if we are on track toward our intended destination? (Establish a mechanism to
evaluate progress.)
See HR as Strategic Planning Facilitator.
The following sections examine each step in greater detail.
ASSESS THE CURRENT SITUATION
Being a strategic business partner means carrying out HR activities with the long-range goals of the
organization in mind. To do this, HR professionals must do the following:
Understand how the various organizational components interact and recognize the long-term
implications of HR decisions. The impact of HR decisions must be thoroughly researched and analyzed
before changes are implemented.
Have a firm grounding in business basics, including finance, marketing, sales, operations and IT. These
skills help with budgeting and with maintaining a workforce with the correct mix of skills.
Develop and exercise analytic skills directed at "the why" as well as "the what." This may mean spending
more time on so-called translational work (such as coaching business leaders, planning and
implementing HR practices that effectively execute strategy, and helping teams manage change) than on
transactional work (such as recruitment, training, human resource information systems and other
traditional HR functions).
Conduct a strengths, weaknesses, opportunities and threats (SWOT) analysis of their organizations. The
SWOT approach offers a clearer picture of customers, markets and competitors.
See:
What are the basics of environmental scanning as part of the strategic planning process?
What is SWOT analysis, and how does it apply to an HR department?
How to Make Strategic Choices in Uncertain Conditions
Aligning the HR function to the organization's business strategy
For HR departments, intradepartmental strategic planning can be a good way to start the functional
alignment process. However, regardless of whether strategic planning begins in the HR department or in
another department, or is managed on an organization wide scale, the actions of the HR department will
be integral to the success of the strategic plan. Thus, HR professionals must take care to align the HR
function with every aspect of the strategic plan, even if the strategic plan does not explicitly address HR
issues. Recent SHRM research reveals that HR professionals foresee significant workplace challenges,
including rising health care costs, the retirement of large numbers of Baby Boomers and the increased
demand for work/life balance. Retention programs, work/life programs, succession planning, and
health, safety and security programs are among the HR efforts that are viewed as key workplace
challenges through which HR can strategically contribute to organizations. See Aligning Workforce
Strategies with Business Objectives.
The HR alignment process is often driven by workforce composition issues. Although every
organization's particular strategic plan is unique, the demographics and other characteristics of the
available workforce have a major effect on the way businesses are staffed. In turn, the way
organizations are staffed has a significant impact on the execution of the organization's strategy.
HR professionals should monitor and respond accordingly to factors that may affect workforce
composition, including the following:
Age. The age of the existing employees, the age of the available workforce, and the patterns of
retirement for older workers and for the entrance of younger workers can significantly affect workforce
availability.
Current economic conditions. Unemployment rates, natural disasters and political changes can also have
an impact the availability of workers.
Globalization. One aspect of globalization that will affect almost all organizations is the increasing
diversity of the workforce. Another aspect of globalization is the economic incentive to outsource labor
and production activities to wherever such costs are lower. A third, and related, aspect is immigration,
both legal and illegal, in the United States and abroad.
Conducting a SWOT analysis
Understanding of the current situation can be enhanced by conducting a SWOT analysis. This analysis
includes an internal assessment of the organization's capabilities and limitations as well as an external
environmental scan to review its customers, markets and competitors, and to forecast to external
opportunities and threats.
See:
What is a S.W.O.T. analysis, and how does it apply to an HR department?
Cultivate Critical Evaluation with a PESTLE Analysis
How To Build On Your Organization's Strengths
Major areas to consider during an external scan include economic, demographic, political, social and
technological trends. An analysis of customers, markets and competitors is used to determine how the
market is changing, to predict who the future customers will be and to analyze competitors in the
marketplace. See Strategic Planning: What are the basics of environmental scanning? and Report: HR
Lags in Using Data to Make Decisions.
When conducting a customer/market/competitor analysis, HR professionals should answer the following
questions:
What business are we in?
What is going on in the world in which we do business?
What business should we be in?
What are our resources?
What are our core competencies?
Who are our competitors?
How will we compete?
ENVISION THE FUTURE
When the HR strategic planning team has fully evaluated the current situation, it should consider what
the ideal future would look like from an organizational perspective.
The question "Where do we want to be?" can be answered and clearly articulated by creating
statements of vision, mission and values. A vision statement provides a description of what an
organization wants to become or hopes to accomplish in the future. An effective vision statement paints
a mental picture of the organization's preferred future that is inspirational, aspirational, compelling and
concise. See Human Resources Mission Statement Examples.
A values statement describes what the organization believes in and how it will behave. This statement
can serve as the organization's moral compass and should be used to guide decision-making and assess
actions taken. See Mission: What Is the Difference Between a Company's Mission, Vision and Values
Statements?
DEVELOP STRATEGIC HR OBJECTIVES
Setting strategic objectives is an important part of the strategic planning process. Therefore, these
objectives must be aligned with the organization's mission, vision and overall strategy. Strategic
objectives will vary from organization to organization.
To identify whether strategic objectives have a solid foundation for success, HR should consider the
following questions:
Have the benefits of obtaining the defined objectives been outlined and communicated?
Are the strategic objectives relevant to the organization's position in the external market? For example,
do they consider competitor positions, organizational size and financial strength?
Do the strategic objectives recognize the organization's strengths and weaknesses?
Do employees throughout the company understand how these objectives affect them and how they
contribute independently and collectively to the defined objectives?
Are the strategic objectives realistic and feasible? Unrealistic objectives typically result in
disappointment for all involved.
Have timelines for benchmarking progress and targets for completed objectives been set?
Will the organization realistically be able to identify the success or lack of success in the accomplishment
of strategic objectives in some quantitative fashion?
Can the strategic objectives be linked back to the organization's overall strategy?
As an example, ABC Company may identify in its strategic planning analysis a need to improve the talent
acquisition process. The strategic objective to address this issue is to design selection criteria to ensure
best-fit hiring while reducing the time-to-fill positions.
Once a key initiative is identified, the organization should do the following:
Continuously ensure that the objective and action plan are aligned with the organizational and HR
strategy.
Identify the primary actions required to achieve the objective.
Set milestones for each action, and plan for contingencies.
Identify the required resources, including budget and staff.
Establish success measures.
Communicate key messages.
Ultimately, a strategic objective is only as good as the overall strategic plan.
At this step of the strategic planning process, the focus is on specifying short-term answers to the
question "How do we get there?" Specific, concrete short-term objectives that can be completed within
six months to a year should be established to answer this question.
Although many organizations engage in strategic planning, very few of them believe they are highly
successful at strategy execution. According to a survey by the American Management Association and
the Human Resources Institute, only 3 percent of executives polled said their organizations were very
successful at executing corporate strategy, whereas 62 percent stated their organizations were
moderately successful. However, the companies that reported relatively high success in strategy
execution were more likely to realize favorable revenue growth, market share, profitability and
customer satisfaction.
Though every organization has its own strategy execution challenges, this study found that mastering
the following areas is essential to successfully implementing strategic plans:
Clarity of communication.
Alignment of practices.
Leadership.
An adaptive organizational infrastructure.
Resource management.
The single greatest barrier to executing strategy is the lack of adequate resources, the study found.
MONITOR AND EVALUATE
The final step should be establishing a mechanism to monitor and evaluate progress toward the
achievement of strategic objectives. Most organizations conduct annual or quarterly strategic reviews
for this purpose. These reviews do the following:
Determine whether the organization is on track to achieve key objectives.
Provide the opportunity to identify and adapt to significant internal or external changes that affect the
strategic plan.
Update annual action priorities.
Some organizations may find that systems or tools such as balanced scorecards, benchmarking and
dashboards are helpful for keeping focus and monitoring results.
