Human resource (HR) strategy maximizes the potential of an organization’s human capital so it can achieve its broader business objectives. For some employers, however, transitioning HR from a purely transactional function to a strategic one can be challenging. But considering the competitive advantages enjoyed by talent-driven organizations, it’s an obstacle worth overcoming.

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.

HR Strategy

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.

How to create a human resource strategy

Creating an HR strategy means taking a hard look at an organization’s strengths, weakness, opportunities and threats – a process also known as a SWOT analysis. Every business is different, but most follow these steps:

  1. Understand the business and its objectives
    Talk to people throughout the organization to gain a full understanding of the business’s past achievements, the products or services that it offers today, and what it hopes to accomplish in the future.

  2. Evaluate employee skillsets
    Review employee performance, resumes, project history and continuing education to assess the collective workforce skill level.

  3. Conduct a gap analysis
    Determine if employees have what they need to maximize their productivity or if investments in additional resources are necessary.

  4. Assess talent strategy
    Regularly auditing compensation, benefits, work environments and employee engagement can help employers compete for new talent and retain valued workforce members.

  5. Develop existing employees
    If any employees appear ready for new challenges or have skills outside their current role, create a development plan that will allow them grow to with the business.

  6. Limit turnover
    Get to the root cause of why people leave an organization and create a comprehensive plan to address the problem and prevent labor shortages.

  7. Plan ahead for succession
    Knowing which employees can easily fill other positions, should they become vacant, helps lessen disruptions when someone abruptly leaves the organization.

  8. Rely on analytics
    Compensation history, turnover rates, employee engagement and other HR metrics can guide strategic decisions.

  9. Create a mission and vision statement
    Mission and vision statements summarize the HR strategy and serve as a litmus test for all policies and decisions thereafter.

What are the benefits of strategic human resources planning?

One of the primary benefits of syncing HR strategy with broader business initiatives is that it helps organizations allocate budgets in ways that will maximize their return on investment (ROI). Employers who take this approach to HR, may also be able to:

  • Reduce turnover
  • Improve employee engagement
  • Enhance productivity
  • Attract superior talent
  • Enact better policies
  • Minimize business disruptions

Best practices for implementing an HR strategy

Everyone has fires to put out, which is why being proactive rather than reactive in the workplace does not always come naturally. The good news, however, is that HR experts have perfected some tried and true methods for implementing strategy effectively. Best practices are to:

  • Involve key stakeholders
    Strategy requires collaboration. HR professionals should be involved from the beginning and managers and other senior leaders should sign-off on the plan.
  • Know the budget
    Without funds to support it, HR strategy quickly becomes pie in the sky. Focus on initiatives that realistically fit within the organization’s budget.
  • Remember the basics
    Do not overlook administrative responsibilities in favor of strategy. A compliance violation will derail any plan, no matter how grand it is.
  • Recognize transactional solutions
    The quickest answer to a problem may not always be optimal in the long run. Make it a habit of acting strategically in every endeavor.
  • Monitor and adjust the strategy
    Measure the strategy’s effectiveness over time with key performance indicators (KPIs). If something’s not achieving the desired results, revise it accordingly.

Frequently asked questions about HR strategy

What are strategic HR functions?

Examples of strategic HR functions include compensation planning, recruitment, succession planning and employee development.

What are four human resource strategies?

  1. Limit transactional problem solving
  2. Be proactive, rather than reactive
  3. Provide people-centric solutions to large-scale challenges
  4. 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.

This article offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.