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What Is Strategic Human Resource Management?

Strategic human resource management is a proactive approach to human resource management that supports long-term business goals and outcomes by aligning HR policy and practice to organizational objectives.

With a deep understanding of the organization's strategic priorities and needs, HR professionals can devise and implement initiatives to attract, motivate, develop, and retain talent and ensure the effective functioning and survival of the organization and its members.

Why Is Strategic Human Resource Management Important?

Strategic Human Resource Management directly impacts an organization's ability to achieve its long-term goals and maintain a competitive edge in the market. Here are the main reasons why strategic human resource management is considered crucial:

  • Aligns HR with business strategy: Ensures that the human resource policies and practices are fully aligned with the strategic objectives of the organization. This alignment is critical for ensuring that the organization's talent is effectively utilized to achieve its goals.
  • Improves organizational performance: By focusing on strategic workforce planning, talent management, and employee engagement, strategic human resource management plays a vital role in enhancing overall organizational performance. A well-managed and motivated workforce is more productive, innovative, and committed to achieving the organization's objectives.
  • Enhances competitive advantage: Helps organizations develop a unique set of competencies through their human resources that competitors find difficult to imitate. This could be through cultivating a unique organizational culture, developing a skilled and adaptable workforce, or fostering innovative capabilities.
  • Facilitates change management: Organizations operate in dynamic environments and effective change management is crucial for success. Strategic HRM provides a framework for managing organizational change, from restructuring to adopting new technologies or entering new markets, by ensuring that the human aspects of these changes are addressed effectively.
  • Supports talent attraction and retention: In today's competitive job market, attracting and retaining top talent is a major challenge for organizations. Strategically managing HR helps create an attractive employer brand, design effective recruitment strategies, and implementing HR policies that contribute to high employee satisfaction and retention rates.
  • Promotes legal compliance and ethical practices: Organizations can ensure compliance with employment laws and regulations. This minimizes legal risks and promotes ethical practices, contributing to a positive organizational reputation and reducing the risk of lawsuits and penalties.

How To Create A Human Resources Strategy

Creating a human resources (HR) strategy is an ongoing process that aligns the HR function with the overall strategic objectives of the organization.

It requires a deep understanding of the organization's goals, challenges, and the competitive landscape in which it operates. 

Here's a step-by-step guide to creating an effective HR strategy:

1. Understand organizational objectives

  • Begin by thoroughly understanding the organization's strategic plan, including its long-term goals, competitive positioning, and key business drivers.
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2. Workforce analysis

  • Conduct a talent review to assess the current workforce in terms of size, skills, competencies, age, turnover rates, and other relevant factors.
  • Assess the external labor market for the availability of required skills and competencies.
  • Assess employee feedback about any challenges they’re facing in the organization and how they’d improve things

3. Forecast demand for talent

  • Predict future workforce requirements based on organizational objectives, projected turnover, technological advancements, and market trends.
  • Consider both the quantity and quality of employees needed to achieve organizational objectives.

4. Identify skills gaps

  • Perform a skills gap analysis to compare the demand for labor with the current supply, both internally and externally. The aim is to identify where the organization may face shortages or surpluses of specific skills or roles.

5. Develop HR strategies to address gaps

  • Formulate strategies and initiatives to bridge identified gaps and optimize talent usage This could include recruitment, training and development, restructuring, outsourcing, workforce reduction, and retention strategies
  • Create goals and key performance indicators (KPIs) to make it easier to track progress
  • Consider long-term strategies like succession planning.

6. Assess HR’s capabilities

  • Complete the above steps for the HR department. Is there capability within the team to meet the new objectives and deliver projects?
  • What HR software solutions could help and which processes could be improved?

7. Plan and implement HR Initiatives and Programs

  • Plan how these initiatives will be implemented, including timelines, responsibilities, and required resources.
  • Implement initiatives in accordance with project plans and timelines.

8. Monitoring, evaluation, and feedback:

  • Periodically monitor the implementation of HR plans against set objectives.
  • Evaluate the effectiveness of HR strategies and make adjustments as needed.
  • Collect feedback from stakeholders to inform future HR planning efforts.

9. Review and revision:

  • Regularly review HR planning processes and outcomes in light of changing organizational needs and external conditions.
  • Revise HR plans to ensure they remain aligned with organizational goals and responsive to the dynamic nature of the labor market.

Best Practices For Developing An HR Strategy

There’s a lot to consider when developing an HR strategy. Here are some best practices to help ensure the success of your strategic human resource planning efforts.

  • Engage senior management: Ensure that senior executives are involved in the planning process. Leadership buy-in is critical for securing the necessary resources and for cascading the importance of the strategy throughout the organization.
  • Use data. Being able to accurately measure key HR metrics such as attrition and retention rates is vital for implementing your strategy. Technology such as HR analytics software can help here.
  • Set clear KPIs. Your human resources strategies and initiatives should always be mapped back to your organizational strategies. Likewise, your HR KPIs should be able to articulate how HR professionals are providing real value realization against those same strategies.
  • Gather feedback from employees. Great ideas can come from anywhere and employee listening should inform any HR strategic planning process.
  • Create a skills library. Many organizations are now moving from a roles-based approach to talent management to a skills-based one. Part of this is building out skills libraries that define what skills mean in an organization and make it easier to track them.

Deconstruct complex processes. As part of your strategic planning efforts, segment complex HR challenges into simpler, easier-to-implement components. Each component should stack back to the big picture/end goal of what you are trying to accomplish.

4 Strategic Human Resource Examples From Top Companies

Today, too few companies are truly dedicated to improving their HR practices for better business performance. As we've touched upon, it requires getting HR professionals out of a silo and closely integrating their work with business strategy.

Here are four top companies that demonstrate exemplary strategic human resource management.

Infographic showing how Google, Cisco, Hilton, and American Express's successful people strategies.

Use Data to Drive Learning and Development Like Google

Google being Google, it's no surprise that their approach to HR broke away from tradition.

We all know about the tons of employee perks and amazing "Googlified" facilities that set a new trend in office design. But Google's strategic approach to human resources goes beyond that.

Like most tech companies they're obsessed with data and the HR function is no exception.

In 2006, co-founders Sergey Brin and Larry Page decided to take an empirical approach to HR founded on feedback and employee data.

A manifestation of this is Project Oxygen, an ongoing study into management practices that identifies and measures key management behaviors and helps nurture them.

It all gets quite technical, but essentially Google hired some smart people to perform an in-depth statistical analysis of what their employees consider to be good managers.

They discovered ten common traits exhibited by the top-performing managers and then trained the rest in them. Those traits include:

  • Collaborative
  • A desire to coach
  • Firm decision maker
  • Possess a technical skill set
  • Supportive of career development
  • Good communicators
  • Understand vision and strategy
  • Focus on productive behavior and results
  • Embody inclusivity
  • Empower teams by avoiding micromanagement

As a result, Google saw an overall improvement in people management and team metrics such as turnover, satisfaction, and performance over time.

By examining your current workforce composition, identifying skills gaps and digging into historical data, HR can effectively start to forecast the organization's future needs.

Choose Your Analytics Tools Wisely

Choose Your Analytics Tools Wisely

Use predictive analytics tools to forecast future workforce trends. These tools can analyze current data and historical patterns to predict future staffing needs, skill requirements, and potential turnover rates.

Put Development Pathways in Manager's Hands like Cisco

True to their industry, CISCO developed their own HRM technology to guide strategy and better serve the needs of the business.

The CISCO Talent Cloud is essentially an internal CRM that gives managers transparency into the competencies and experiences of the company’s 70,000+ employees.

It also gives employees themselves the tools and insights they need to take the initiative and advance their careers (like an internal LinkedIn!).

This approach allows managers to:

  • Put together the best team to complete a particular project
  • Give employees the opportunity to learn by working on a project that helps them meet a particular goal
  • Access real-time intelligence on team performance, such as how they produce results, execute priorities and levels of engagement.

Cisco calls this a ‘one-size-fits-one’ employee experience and it seems to be working. The company is ranked number one in Fortune’s Best 100 Companies To Work For and is able to attract top talent to help meet company goals.

By developing tools that help managers see a more holistic view of the talent at their disposal, organizations empower team leaders to make better personnel decisions when big projects and key initiatives come around.

Personalize Development Plans

Personalize Development Plans

Empower managers to work with each employee to create personalized training and development plan. The planning process should align the individual’s career goals, strengths and areas for improvement with the organization’s objectives.

Create Clarity with Performance Scorecards like Hilton

Hilton is regularly recognized as one of the best global companies to work for (just behind Cisco in the rankings)—quite a feat for a service industry company.

The secret to Hilton's success, on both fronts, is in no small part down to a highly strategic approach to managing their organizational culture. 

Hilton's approach was to introduce a method of quantitative analysis into its talent management practices. One is 'the balanced scorecard' and the other is 'the team member survey'.

The balanced scorecard seeks to:

  • Intertwine corporate vision, strategy and goals with team member performance
  • Track KPIs such as revenue maximization, customer loyalty, employee satisfaction, skills training and diversity.

Employees and teams are able to see how their roles and performance impacts the company. Discoveries and best practices are regularly shared across the company (this is a highly simplified version, you can read more here).

The team member survey compliments the balanced scorecard. It's conducted globally once a year and measures factors such as morale, leadership effectiveness, employee engagement and development.

The purpose of any scorecard should be to create a level of transparency in performance management.

Align the goal of the scorecard with organizational values, and design it to foster a positive and constructive feedback environment.

This approach helps in setting clear expectations and benchmarks for performance while promoting a company culture of continuous improvement and open communication.

Employee Involvement = Engagement

Employee Involvement = Engagement

Make employees a stakeholder in the development of their own scorecard template. This collaborative approach increases buy-in, ensures that the objectives are realistic and attainable and gives employees a sense of ownership over metrics and performance.

Create the Right Level of Flexibility for Your People like American Express

Number three on top places to work list, and the only financial institution in the top ten, is Amex. 

So how have they done it?

The company's approach to flexible working called the ‘Amex Flex work model’ has been in place since before the pandemic.

The company had started investing in collaboration tools, hardware and security protocols to streamline remote working, so that ~20% of staff were already virtual.  

This investment was accelerated by the pandemic but, after listening to employees through surveys, Amex discovered that, while most liked the flexibility to work from home, many missed the in-person collaboration.

Taking onboard the feedback, Amex launched a hybrid model encouraging employees to ‘come into the office with a purpose’, i.e. make use of office time to collaborate and network.

Under the new model, Amex colleagues can “work form anywhere” for 30 days of the year, 80% can work remotely day-to-day, and 99% are eligible for hybrid work.

Recent feedback found that:

  • 90% of respondents were either very satisfied or satisfied with Amex Flex
  • 87% felt supported in their career development.

The success of the new model is in no doubt predicated on the company continuously listening to its employees and using the feedback to shape strategy.

In order for any flexible working arrangement to succeed, one key ingredient must be in place; trust.

Cultivate a culture of trust where management believes in the employees' ability to complete their work effectively, regardless of how many hours they are at their desk or their location.

This will have a positive impact on employee retention and create a work culture that is attractive to new hires.

Focus on Results

Focus on Results

In creating a flexible work model, focus on results rather than time spent working. This approach, often referred to as a “Results-Only Work Environment” (ROWE), shifts the emphasis from the traditional 9-to-5 work schedule to the actual outcomes and achievements of employees.

Key Takeaways

  1. Data-Driven Decisions: Google's approach, epitomized by Project Oxygen, shows the power of data in transforming HR practices. The lesson here is clear: leverage data to understand and enhance management practices, leading to improved performance across the board.
  2. Technological Integration: Cisco's Talent Cloud demonstrates how technology can revolutionize HR, offering transparency and development opportunities for employees. This highlights the importance of using technology to align HR practices with organizational needs and employee aspirations.
  3. Balanced Metrics: Hilton's balanced scorecard approach exemplifies how aligning employee performance with corporate goals can drive success. It underscores the need for organizations to create clear, measurable objectives that resonate with both the company's vision and employee roles.
  4. Flexibility and Adaptability: American Express's hybrid work model, especially in response to the pandemic, illustrates the significance of flexibility in the workplace. Listening to employee needs and adapting strategies accordingly is crucial for maintaining a motivated and productive workforce.
  5. Trust and Empowerment: Across all these examples, one common thread is the trust in and empowerment of employees. Whether it's through personalized development plans, flexible work arrangements, or data-driven management, these companies show that valuing and trusting employees leads to a positive work culture and business success.
  6. Continuous Improvement: The ongoing efforts of these companies to refine their HR strategies highlight the necessity of continuous improvement. It's not about finding a one-size-fits-all solution but evolving and adapting practices to meet changing needs and challenges.

In conclusion, the examples from these top companies provide a roadmap for us as we seek to integrate human resources management with strategic business objectives effectively.

The key is in recognizing the value of human capital, leveraging technology and data, and maintaining a culture of trust, flexibility and continuous improvement.

By doing so, our organizations can not only attract and retain top talent but also enhance overall performance and our competitive edge.

A couple of relates articles to help you on your journey:

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Finn Bartram
By Finn Bartram

Finn is an editor at People Managing People. He's passionate about growing organizations where people are empowered to continuously improve and genuinely enjoy coming to work. If not at his desk, you can find him playing sports or enjoying the great outdoors.