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What is an HR Strategy and How to Create One?

24 min read

what is a hr strategy

What words spring to mind when the term “HR strategy” is mentioned? It could be centered around programming and planning your HR processes. 

Well, you may not be far off from the real definition! 

In order to accomplish corporate business goals, an HR strategy specifies the HR and workforce practices and actions to pursue and enhance. HR processes greatly influence the life cycle of a company. As a result, developing an action plan can completely alter the business goals. 

Strategies are evolving alongside HR’s function and responsibilities. Therefore, HR must adapt to new agile methodologies to maximize goals and programs.

 What is an HR strategy? 

HR strategy means a system of human resource practices for a particular job or collection of jobs aimed at the best employee performance possible to meet the firm’s ultimate goals.

In simple terms, HR strategy is all about managing modern tribes/employees in a way that aligns with an organizational culture. It involves HR input and coordination of actions in different HR areas, such as hiring, development, performance, compensation, culture, and partnerships. 

Theoretically, there are two types of HR strategies;

  • Overarching strategy: The overall management of a company’s people
  • Specific strategy: Manages the subsets of HR, such as talent management or recruitment.

Great strategies depend on great action-oriented plans. HR strategy must blend inspiration, collaborative, and employee-centric solutions. Depending on an organization’s unique challenges, needs, and responsibilities. 

Considering the 21st-century workforce scenarios, HR strategies must incorporate purpose-driven metrics into compensation and benefits policy, payroll, performance management, recruitment, etc. For that, aligning the ecosystem and technology is the best way to resolve forthcoming problems. 

According to McKinsey research, organizations outperform 1.3 times more where HR facilitates a positive employee experience. Take Airbnb, for example, which rebranded the CHRO role as global head of employee experience. In addition to coaching HR professionals on managing employee experiences more effectively, PayPal focused on HR’s capability and processes to create a better employee experience.

Thus, agility and HR strategy must go hand in hand to thrive in the driving force of growth and success. 

Why is HR strategy important? 

In 1995, Dyer and Reeves defined these practices as ‘internally consistent.’ Richardson and Thompson (1999) suggest that a strategy, whether it is an HR strategy or any other kind of management strategy, must have two key elements: 

  1. there must be strategic objectives (i.e., things the design is supposed to achieve), 
  2. and there must be a plan of action (i.e., how it is proposed that the goals will be met).

Once the objectives and action plan have been set, the next step is to carry them out.

Similarly, among many small businesses, HR practices drive cooperation, customer orientation, employee commitment and managerial competence—and, therefore, significantly influence customer satisfaction (Rogg et al., 2001).

Therefore, HR strategy is crucial because it helps in the following.

  • Aligning the workforce with business goals.
  • Attracting and retaining top talent.
  • Boosting employee engagement and productivity.
  • Developing skills and succession plans.
  • Promoting diversity and inclusion.
  • Managing costs and legal compliance.
  • Adapting to change and fosters well-being.
  • Shaping employer brand and reputation.

Components of HR Strategy 

Are you looking to create a perfect HR strategy? Let’s look into some components of HR strategy that solve business challenges with a people-centric approach.

hr strategy components

1. Workforce Planning and Staffing  

Workforce planning and staffing is one of the most creative acts. Cultivating a positive workplace culture that enhances employee experience is crucial for flourishing. By leveraging workforce planning and staffing, you can guard against uncertainty, address gaps in your workforce, and improve business results. 

2. Talent Acquisition and Recruitment Strategies 

Companies struggle a lot in finding ideal candidates. The right ones always prioritize company culture, perks, incentives, and supportive teams more than a paycheck. 

To meet these demands, HR strategies must streamline a system that simplifies candidate tracking and enhances the hiring process. This shift ensures a better fit between candidates and roles, fostering an environment where employees thrive, benefiting both the organization and its workforce.

3. Employee Development and Training Initiatives 

Research says that the need to revamp and improve learning programs is pivotal among HR executives. Many employees still need help improving and enhancing their effectiveness despite spending billions of dollars on learning and development programs.

Moreover, it should be a more continuous and ongoing campaign. Ultimately, the development and growth of your talent is vital to your success, ability to innovate, and overall productivity.

Knowing the trends emerging in our learning and development programs will help your company drive results, increase employee engagement, and increase innovation.

4. Performance Management and Evaluation Strategies 

Effective performance management is essential in every organization. Setting clear SMART goals, maintaining open communication with regular feedback, and conducting comprehensive appraisals, including 360-degree feedback.

Investing in skill development, recognizing outstanding work, and supporting struggling employees with structured improvement plans. Ensuring continuous feedback through regular one-on-one check-ins helps foster a culture of accountability and high performance.

5. Compensation and Benefits Framework: 

Compensation and benefits refer to the benefits a company provides to its employees. It is thus a key part of Human Resource Management. 

Compensation and benefits are crucial to company success, employee engagement, and turnover. For companies to attract and retain quality employees, well-defined compensation and benefits policies are crucial. 

6. Employee Engagement and Retention Plans  

Gallup defines employee engagement as employee involvement and enthusiasm at work. Thus, to measure and manage workplace culture, employee engagement is crucial. 

It is all about the employee’s experience, well-being, and contribution, leading to employee engagement. 

7. Succession Planning and Leadership Development 

Data emphasizes how crucial leadership development and  strategic succession planning are in firms. Robust leadership pipelines increase a company’s chance of outperforming its competitors by 1.5 times, resulting in 1.8 times better earnings per share. 

Effective succession planning lowers turnover rates by 20–30%, saving significant money. Businesses can use this data to optimize their HR operations, resulting in smooth transitions, increased revenue, and long-term success.

How to create a human resource strategy 

To create an HR strategy, organizations must evaluate the process through SWOT analysis. And get an overview of the entire structure and system.

hr strategy formulation

To start with,

  1. Identify the organizational division for which HRS is created/designed: Determine which department or business unit within your company is the target for the Human Resource Strategy (HRS). It is critical for the strategy’s effectiveness to tailor it to the division’s specific needs.
  2. Recognize the trends in the business world: Keep up with current business trends, such as technical breakthroughs, demographic shifts, and changes in consumer behavior. Understanding these trends aids in aligning HR practices with changing market and industry demands.
  3. Examine the gap: Conduct an in-depth gap analysis to discover the gaps between the current state of HR affairs in the chosen division and the intended future state. Identify areas for improvement in talent acquisition, employee engagement, and skill development. 
  4. Identify the essential assets for competitive advantage organizational capabilities, both positive and negative: Understanding these characteristics is the foundation for strategic human resource planning. Create and implement critical HR procedures to fill identified gaps. This could include redesigning recruitment processes, improving employee training programs, or implementing performance management systems.
  5. Establish the important HR procedures: Well-defined functions are essential for effective HR procedures. Also, determine the division’s strengths and weaknesses. Recognize organizational strengths, such as a talented workforce or efficient procedures, and weaknesses, such as old technology or a lack of employee training
  6. Focus on Plan of Action: Create a clear plan defining the actions, responsibilities, and dates for implementing the identified HR procedures. Establish key performance indicators (KPIs) to track success. A well-structured plan ensures that everyone engaged is aware of their responsibilities and the anticipated outcomes.
  7. Evaluate the outcomes: Assess the outcomes of the adopted HR practices against the KPIs regularly. Keep track of staff performance, levels of engagement, and overall departmental efficiency. Gathering input from employees and stakeholders aids in determining the effectiveness of the strategy and making required adjustments for continual improvement.

Implementation and Execution of HR Strategy 

HR practices are emphasized as a whole rather than apart. It aims to define human capital values, align HR products and services, and deliver value.

frame work of hr strategy

So, HR strategy is determined by various approaches, not just by individual tests, recruiting or interviewing techniques. Here are a few implementation and execution strategies that might help you understand better. 

  1. HR Components’ Individual Action Plans: Plans should be detailed explicitly in defining the tasks and actions for different HR operations, like hiring, training, and employee engagement. These plans offer a road map for successfully implementing HR strategy. 
  2. Assigning Roles and Responsibilities: Ensuring accountability by whoever is in charge of the HR strategy is crucial. Especially the roles that are assigned. So that everyone is aware of their responsibilities, which improves coordination and teamwork.
  3. Creating Key Performance Indicators for HR Goals: Measurable indicators, such as staff retention rates or training completion rates, can be identified and set to assess the performance of HR projects. These metrics offer concrete information to evaluate the approach’s effectiveness and make informed decisions.
  4. Timelines and Objectives for Executing the Strategy: Establishing precise deadlines and benchmarks instills a sense of urgency and direction. It can aid in tracking development. Also, ensuring that activities are finished by the due date and allowing for necessary revisions if the strategy is not playing out as expected.

What are the benefits of strategic human resources planning? 

An effective strategy plan is essential for your business to thrive over the upcoming year. One of the defining traits of successful companies with efficient operations is strategic personnel planning.

hr strategy benefits

Moreover, a good HR strategy must focus primarily on:

  • Reducing turnover
  • Improving employee engagement
  • Enhancing productivity
  • Attracting superior talent
  • Enacting better policies
  • Minimizing business disruptions

Best practices for implementing an HR strategy 

For HR strategies to succeed and stay ahead of future trends in HR, strategic human resources planning is crucial. Targeted talent acquisition, responsible redundancies, and effective training align workforce needs with organizational goals. 

As a result, leadership development, cost management, and outsourcing decisions are made based on it. In the current business trends, data-driven decisions ensure business agility and future-proofing through integration with HR analytics.

1. Modern Planning: Modern workforce planning enables HR to be aligned with business goals and to ensure the right talent is available at the right time. Additionally, HR should assist in executing company strategy by propelling and directing serious discussions of how the organization should be arranged to achieve this.

2. Data-Driven Decision Making: The former CEO of Sony stated organizations have access to the same technology and information. The difference between any two organizations is the “people”- the human resource. Empowering the workforce is essential for aligning strategies with business objectives and staying up-to-date. 

About 70% of companies consider people analytics to be a high priority. This is because data-driven decisions make it easier for HR to achieve targeted goals, get better insights and predict workforce trends.

3. Continuous Learning: Promote and invest in employees. Offer employees ongoing learning, development and training for upskilling and market relevance. For organizations to grow, they must value and help employees upskill.

4. Diversity and Inclusion: Cultivate diverse and inclusive workplaces for more innovation and creativity. By including diverse people, companies can better identify employees who are capable of helping them achieve their goals, whether for increased innovation, influence, or efficiency. 

5. Employee Well-being: Employee well-being is the future of work. Therefore, opting for corporate wellness is a must for today’s workforce. Employee health and wellness goes beyond physical health to focus on building a culture of holistic well-being that includes physical, emotional, financial, social, career, community, and purpose.

For employees to perform well, they must be in good health. And likewise, for companies to grow, they need happy and healthy employees.

6. HR Technology Integration:  For organizations looking to optimize their HR management practices, integrating HR technology has become increasingly important. With the increasing use of cloud-based solutions, artificial intelligence, and mobile applications, HR technology has become more powerful.

Employee experiences will be enhanced if cloud-based software and advanced tools are implemented in the workplace.

7. Agile Work Policies: Agile work policies are a more dynamic way to define how, where and when someone works. It reviews existing working practices and utilizes new technologies to create a more responsive, productive and efficient workforce based on more balanced, motivated and engaged employees. This includes remote work, flexible work hours or leave policies designed for a modern workforce.

Challenges and Solutions in HR Strategy Implementation 

HR strategies need to simultaneously focus on building skills, motivation and behavior for a successful business strategy.

Well, conducting a strategic HR plan can be very challenging. Especially considering the contemporary challenges, such as scattered workforce, culture, compliance retention, requisition or management changes. But leveraging it is quintessential. 

Here are a few common challenges and solutions in HR strategy implementation. 

1. Overcoming Change Resistance:

Problem: Employees frequently oppose changes in HR methods because they fear disruptions and uncertainty.

Solution: Encourage open communication, include staff in the change process, and offer support and training to smooth the transition.

2. Managing Resource Constraints:

Problem: Limited resources, such as budget and staff, might hinder the implementation of the HR strategy.

Solution: Invest in technology for efficiency, outsource non-core operations, investigate cost-effective solutions, and prioritize efforts based on their potential impact.

3. Finding Your Way Through Legal and Regulatory Compliance

Problem: Risks and compliance problems are posed by complex and growing legal and regulatory requirements.

Solution: Stay current on laws and regulations, conduct frequent compliance audits, contact legal experts, and implement stringent rules and procedures to ensure compliance.

Examples of HR strategy: 

1. Delta Airlines + IBM:  

In 1994, CEO Ron Allen introduced a new approach known as “Leadership 7.5” in response to two consecutive years of huge financial losses. Allen wanted to lower Delta’s cost per available seat mile (CASM) from more than 10 cents to 7.5 cents, which would be on par with big rival Southwest Airlines. A significant overhaul of Delta’s HR strategy coincided with adopting a new corporate plan.

Delta’s latest HR strategy involved cost-cutting measures, including reduced training budgets, laying off experienced employees replaced by contingent staff, reducing staff on flights and gates, and freezing or cutting pay for various employee groups. These initiatives aimed at cost efficiency but may have impacted employee morale and service quality.

Similarly, IBM’s HR strategy motivates employees through performance-driven opportunities, diversity hiring, flexibility, and a values-based environment. HR plays a key role by anticipating skills, leading transformations, and contributing to IBM’s growth. 

 2. Unilever: 

According to Unilever’s current HR strategy, the company focuses more on developing diverse leaders and serving the global demand. Stressing more on the uniform HR strategy for all the countries. But that is only viable for some regions because the culture, social norms, and political situation differ everywhere. 

Therefore, they are moving towards a Soft and Hard approach to HRM. The soft approach known as the Harvard Model of HRM involves four issues to manage the human resources in the organization. The hard approach of HRM, also known as the Michigan School Model, stresses using human resources to achieve the organizational strategy. 

Even so, some areas require changes to get more success and implement the company’s growth targets. 

3. Google: 

Most companies cannot manage people as well as Google (parent company – Alphabet). In every aspect of its business, including human resources, Google relies on innovation.

The HR function is a strategic partner at Google. A key focus of the program is to hire and retain the very best employees to benefit the company’s core operations. Google has fame and success primarily because of its innovative and efficient human resources department.

Apart from culture and work environment, its HR strategy plays a significant role in sustaining;

  • Committed employees.
  • Efficient leadership 
  • Recognition and incentive system.
  • Learning environment 
  • Committed to innovation
  • Inclusive policies 

Conclusion

HR strategy is more than simply a plan; it’s a concept that puts people at the center of company success. Every facet of HR strategy is critical, from workforce planning to talent acquisition and performance management. 

Employers may ensure continuous growth and innovation by integrating HR technologies, promoting inclusion, and placing a high priority on staff development. The key to a resilient, people-centric corporate future is HR strategy, which is more than just a road map.

FAQS

1. What is the purpose of HR strategy? 

The purpose of HR strategy serves to align HR practices with broader business objectives, optimizing human capital management to achieve organizational goals effectively.

2. How does HR strategy align with overall business goals? 

HR strategy fosters alignment by adapting HR efforts like people acquisition, development, and engagement to support and enhance overall corporate goals, building harmony between HR and business strategy. (Source: Harvard Business Review)

3. What are the components of an HR strategy? 

The main elements are workforce planning, talent acquisition, employee development, performance management, compensation frameworks, succession planning, and promoting a positive workplace culture. (Source: Deloitte, HR Dive)

4. How is an HR strategy developed? 

HR strategy is developed through detailed analysis, including SWOT assessments, identification of organizational needs, setting strategic objectives, planning actionable steps, and continuous evaluation and adaptation based on outcomes and feedback. (Source: McKinsey, The Balance Careers)

5. What role does technology play in HR strategy?

Technology plays a vital role in HR strategy, streamlining processes, providing data-driven insights, enhancing recruitment, enabling efficient performance management, and fostering employee engagement through advanced HR platforms and tools. (Source: HR Technologist, Gartner)

6. How does HR strategy impact employee engagement? 

HR strategy significantly impacts employee engagement by creating a positive work environment, recognizing achievements, offering growth opportunities, and ensuring transparent communication channels, resulting in higher employee satisfaction and productivity. (Source: Gallup, Glassdoor)

7. What challenges might organizations face in implementing HR strategies?

Challenges include addressing change resistance, managing limited resources, ensuring legal compliance, and harmonizing global HR practices. Overcoming these hurdles requires open communication, strategic technological investments, and legal expertise. (Source: HR Magazine, Society for Human Resource Management)

8. Is HR strategy a one-time effort or an ongoing process? 

 HR strategy is an ongoing, dynamic process that necessitates continuous adaptation to market trends, technological advancements, and organizational changes, ensuring its relevance and effectiveness over time. (Source: Forbes, Human Resources Today)

9. How can organizations measure the success of their HR strategy? 

Success is measured through key metrics such as employee turnover rates, productivity enhancements, talent acquisition cost reduction, and employee satisfaction surveys. These quantifiable data points provide tangible insights for evaluating the impact and effectiveness of HR strategies. (Source: HR Daily Advisor, Talentsoft)

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    Meet the author

    Parismita Goswami

    Content Writer

    A writer, poet and cinephile by passion. Parismita is Content Writer at Keka. She shares her interest in having good conversations over tea, traveling, exploring and reading. When she is not experimenting with her culinary art, you can typically find her introspecting or taking a cozy corner.

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