What Is Strategic HR and How To Do It Right

Introduction

Here at Techopedia, we understand that strategic HR often feels like an alien concept. Most people think of HR as a purely bureaucratic function, limited to payroll, recordkeeping, and other administrative tasks. However, this couldn’t be further from the truth.

Without a robust HR strategy in place, you risk running a business where employees are dissatisfied, unproductive, and misaligned with company goals. But what is HR strategy?

In this guide, we answer this question by explaining what strategic HR is and how it differs from traditional HR. We also offer step-by-step guidance and best practices for creating and implementing an effective people strategy for your company.

Key Takeaways

  • Strategic HR focuses on connecting a company’s workforce and HR practices with overall business objectives.
  • It looks at employees as valuable assets who can perform to their maximum potential through effective hiring, training, recognition and reward, and other strategies.
  • Tailor your HR strategy to company goals and ensure that each HR function has its own set of objectives and key performance metrics.
  • Engage company leaders from the start and keep them up to date with HR successes, so you can secure the right funding and resources to implement your strategies.

What Is Strategic HR Management?

Strategic human resource management (SHRM) focuses on aligning a company’s workforce, working practices, and culture with an organization’s overall objectives.

For instance, if the company’s mission is to build a reputation for the best customer service in the industry, its HR strategy will focus on hiring and retaining the most talented customer success managers in the market. This gives the company a competitive advantage versus those without a relevant strategy in place.

Strategic HR management typically focuses on the following areas:

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  • Talent acquisition or recruiting
  • Compensation and benefits
  • Training and career development
  • Employee feedback assessments
  • Performance management
  • Organization structure (org structure) reviews
  • Employee relations and risk mitigation
  • Succession planning

What Is the Difference Between Strategic HR and Traditional HR?

Here are some of the key differences between traditional and strategic HR practices.

Traditional HR Strategic HR
Focus Concentrates on supporting the business with day-to-day operations and administrative HR tasks Aims to align HR practices with business strategy, viewing employees as assets and leveraging their skills and capabilities to achieve company goals
Approach Typically takes a reactive approach focused on addressing immediate needs, such as resolving employee queries, filing paperwork, and paying employees Takes a proactive and long-term approach, forecasting business and employee needs, and creating action plans for hiring, training, and more to meet these evolving needs
Functions Key roles include payroll, benefits administration, onboarding and offboarding, recordkeeping, compliance paperwork, and reporting Key roles include recruitment, rewards and recognition, talent management, training and development, performance management, and employee relations and feedback

Benefits of Strategic HR Management

A well-thought-out HR strategy has several robust benefits for your business.

Improved Business Performance

HR strategic planning involves identifying talent gaps in the workforce and hiring or training employees to bridge these gaps and boost productivity.

Additionally, HR strategy looks at setting clear employee goals that align with the company’s mission and tracking performance to make sure individual and company-level targets are met effectively.

Better Engagement and Retention Levels

Employee feedback strategies, such as surveys and focus groups, help to understand employee needs and devise plans to improve the overall employee experience in your company. Strategic HR also provides the right compensation, benefits, and other incentives to motivate your employees and retain top talent.

Fosters a Culture That Aligns With Company Values

A good HR strategy involves making data-driven decisions and promoting a culture of fairness in hiring, promotions, pay raises, and more. Further, strategic HR adopts initiatives that enhance work-life balance, diversity, equity, inclusion, strong ethical practices, and other qualities that align with your company’s values.

Effective Crisis Management and Risk Mitigation

Many HR strategy professionals are experts in organizational change or transformation, supporting a seamless transition for employees during periods of change. Additionally, HR strategists create succession plans for top talent, thus mitigating risks and minimizing friction should you lose an important company leader or business head.

Cost-Efficiency and Streamlining

A key aspect of HR strategy is optimizing your human resources. Effective HR teams regularly review the organizational structure, ensuring it aligns with company workloads and HR budgets.

They also take charge of addressing any areas of concern that emerge during this exercise—for instance, hiring employees if there are gaps in the workforce or conducting layoffs if teams are over-inflated.

5 Steps To Create and Implement Strategic HR in the Workplace

Follow the below steps to establish and implement strategic HR in your organization.

1. Understand Business Objectives

The first step in creating an HR strategy is to understand your company’s mission and goals. Look at your company’s website and read investor pitch decks, newsletters, marketing materials, and business plans to gain a high-level understanding of the company’s mission and aims.

Speak to company owners or business leaders to dive into the organization’s short and long-term objectives and understand key areas for improvement.

Additionally, consider engaging individual department heads for an in-depth view of their targets, how they’re performing to attain their goals, and what kind of support they need from an HR perspective to meet current and future business demands.

2. Analyze Current HR Practices To Define HR Objectives

Next, conduct a detailed analysis of your existing HR strategies, or lack thereof. This can help to provide perspective on what’s working and not working—forming a base to create meaningful HR objectives.

You can achieve this using the following methods:

  • Gather data on your company’s current HR practices, policies, and resources by speaking to the current Head of HR or going through the company’s employee handbook.
  • Conduct feedback surveys or focus groups with existing employees and founding members to understand how things have been run so far.
  • Analyze HR reports, such as hiring and headcount metrics, performance evaluations, training statistics, and more to identify areas for improvement.
  • Conduct a SWOT analysis to list out the strengths, weaknesses, opportunities, and threats to your current HR strategy.

3. Create Data-Driven HR Strategies for Each HR Function

Once you’ve analyzed existing HR analytics and established objectives, you can create HR strategies for each HR function.

The following functions are typically part of HR strategic plans:

Recruitment

Analyze existing gaps in your workforce, in terms of both the quantity of resources and existing skills gaps, and devise a suitable strategy to bridge these gaps.

For instance, your analysis might reveal that your sales department is under-resourced. In this case, you’ll need to create a hiring strategy to source qualified salespeople. This way, you can meet business demands and prevent your existing sales team from burning out.

Compensation and Incentives

Gather employee feedback to assess satisfaction levels with salaries, bonuses, and company benefits, such as healthcare or retirement plans, plus other perks. Employee input can provide valuable insights into what they value and how you can improve in this area.

Further, conduct a benchmarking analysis to understand what compensation and benefits similar businesses provide their teams with. This is a great way to stay competitive and ensure you keep employees incentivized to remain at your company.

Performance Management, Training, and Development

Evaluate employees’ performance reviews to make informed decisions regarding promotion and pay. Further, look out for those employees who are underperforming and may need additional support in the way of training, mentoring, and more.

Also, conduct surveys and speak to managers to learn about employees’ career goals and development areas respectively. This provides you with powerful information to devise relevant career development initiatives—for example, providing tailored leadership coaching to a soon-to-be department head.

Talent Reviews and Succession Planning

Assess your company’s current organizational structure to identify areas of concern. For instance, you may notice that a team that’s becoming increasingly important to the company’s objectives is currently under-resourced and needs to grow in size to meet business demands.

In addition to ensuring that your company is appropriately resourced, talent reviews also help you to check that each business leader has a successor. This mitigates risks and keeps your business running smoothly in the event of senior leader departures.

Employee Relations (ER) and Culture Management

Speak to an attorney or someone who fully understands labor laws in your location to learn the right processes and protocols for disciplinary action, grievance management, conflict resolution, and other employee relations practices. Use this information to write or update your company’s existing practices so your ER strategy is fair, compliant with the law, and always up to date.

Finally, use employee engagement or pulse surveys to learn how you can better engage your workforce and what cultural changes you can make to create a positive and safe work environment in your company.

4. Map Out Your Implementation Plan

With all your HR strategies in place, think about what resources you need to implement them. This could be a particular budget, technology, or even the HR personnel needed to carry out these strategies effectively. Additionally, assign roles and responsibilities so each HR professional understands what strategies they’re working on.

Moreover, list the key metrics for each strategy, along with a timeline and milestones to achieve. For example, your objective for training could be to have every employee complete the mandatory training courses by the end of the first quarter.

5. Monitor and Adapt Your HR Strategies

There’s no point in devising HR strategies if they don’t work. So keep monitoring progress by looking at key performance indicators for each strategy and gathering feedback from employees, managers, and other stakeholders.

Use feedback results to adapt strategies and foster a culture of innovation and continuous improvement in HR.

Best Practices To Implement Effective HR Strategies

Adopt the below best practices when creating and implementing robust HR strategies.

Engage Key Stakeholders

Keep company leaders and other important stakeholders involved in all strategic HR plans—from conception to implementation to measurement of success. Their feedback and thoughts are invaluable to creating good strategies and staying aligned with business goals.

Secure a Suitable Budget

Sharing your HR strategies with senior leaders is also critical to securing funds to implement these strategies. You can do this by creating an HR business plan or pitch deck that explains the reason behind each strategy and expected business outcomes. Also, monitor the budget regularly to prevent overspending.

Use Data To Make Objective Decisions

Make sure your HR strategies are devised using data from HR reports or even qualitative feedback through interviews and surveys. This helps you make impactful data-driven decisions and prevent subjective biases in your HR strategy.

Leverage Technology

There are plenty of good HR software solutions available to run your HR strategies. For instance, applicant tracking systems can be used to streamline hiring processes, saving you time and effort and reducing mistakes, such as missed candidate communications.

Don’t Forget the Basics

The strategic side of HR is interesting and relevant to business outcomes. But don’t forget to ensure that your strategies comply with labor laws and regulations. Otherwise, you could put your entire company at risk of financial and legal penalties.

Conclusion

The role of strategic HR is often misunderstood or completely missed. This is because many believe HR is solely focused on hiring, firing, and paying employees. Good HR strategies can help you recruit and retain top talent, engage and motivate your employees, and create a positive work environment where employees can thrive.

To create meaningful HR strategies, you need to understand your business inside and out, evaluate your current HR practices and data, and curate suitable strategies for compensation, training, employee relations, and more.

Finally, to implement your strategies effectively, be sure to secure sufficient resources, adhere to legal compliance, and engage key stakeholders from the start.

FAQs

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Yashna Wahal

Yashna has nearly a decade of experience in HR, covering topics like Talent & Development, Hiring, HR Business Partnering, Employee Engagement, Compensation and Performance Management. She's the former VP of HR at JP Morgan in London, followed by being the Head of HR at Plotify Financial in both London and New York. Yashna earned a BSC in Psychology from UCL and an MBA from Imperial College London.