In its infancy, human resources was simply an administrative function that focused on an organization’s personnel-related and compliance needs: Hiring employees, managing benefits and putting out metaphorical fires.
Today, the best-in-class companies know that HR teams utilizing strategic human resource management frameworks are a crucial part of a successful business strategy.
When executed as a part of your overall business strategy, human resources can be a revolutionary force within your organization that aligns each department with your company’s goals, steering it towards success and growth. Let’s take a look at what exactly strategic HR entails, and how to implement it in your overall business development.
What Is Strategic Human Resource Management?
Strategic human resource management (Strategic HRM) is the incorporation of PeopleOps in the overall goals and long-term development of an organization. It involves making HR managers strategic business partners who design and implement comprehensive goals to facilitate the continued growth of the organization through human resource management.
The major difference between traditional HR and strategic HR is this: Strategic HR goes beyond the human resource requirements the company has today, and looks at the future need for expertise. Strategic HR teams recruit and upskill workers based on the projected growth and needs of the company, thereby creating a workforce that is partial to its progress, not reactive to it.
Why Is Strategic HRM Important?
A strategic approach to HR ensures the company’s talent pool grows and works as a whole together with its resources and market demand. This gives the organization a greater chance to succeed. It will have the skills and labor it needs to meet output goals, and no excess talent on the payroll diminishing profits. At its core, strategic HRM aims to:
- Improve flexibility and introduce innovation as the company needs it
- Leverage competitive advantages in talent acquisition
- Enhance business performance through anticipated skills requirements
- Develop the right fit-for-purpose organizational culture
- Grow a workforce in line with the needs and strategic goals of the organization
To achieve these goals, strategic HRM analyzes each department’s strengths, weaknesses, and anticipated growth. Based on this, the HR team identifies ways to increase each employee’s value to the company, or add recruits to the talent pool to address skills gaps.
Your business can continue functioning without a formal strategic human resource management plan. But taking the initiative to develop one has several significant advantages, including:
Increased Job Satisfaction
Hiring new talent as a strategic function to promote business growth includes selecting candidates who are well-suited to growing and developing their skillset along with the needs of the organization. With time, this encourages better performance through employee satisfaction and subsequently gives the company a competitive advantage.
The University of Oxford’s, Säid Business School conducted a study of 1,800 call center workers and found that happy employees:
- Worked faster and more efficiently
- Made more calls every hour
- Generated 13% more sales
Strategic HR practices aim to build a similarly productive and proactive workforce. After all, the more engaged your employees are, the more they care about your organization‘s well-being and work hard to contribute to its success.
Besides recruitment and selection, upskilling your current workforce according to company needs and goals is also an important part of SHRM that equips your employees with the tools and knowledge they need to promote sound decision-making. Your employees also better understand their role in your company’s big picture if they're trained to participate in various stages of growth.
Strategic HRM includes acknowledging your employees' hard work and making them feel valuable - a proven component of employee retention. This is because you’re hiring and upskilling based on a shared ideal of where the company is going, and making your workforce a part of your goals, not just the company’s current needs.
Hiring for the Long Haul
Strategic HRM focuses on filling roles with candidates who offer long-term value, not short-term gain. Employees have a bigger role than simply doing their jobs, they’re expected to grow and develop, and are also given the tools and resources they need to do so.
This also has a positive impact on company culture.
Strategic HR decreases the likelihood of layoffs or staff shortages because hiring is in line with the company's long-term goals. The knock-on effect of this is a better employer-brand image and improved appeal in the job market.
Sound Strategic Planning and Measurable Outcomes
Reporting and planning HR efforts according to data is a core strategic HRM element. In fact, 87% of executives and HR professionals agree HR reports influence their organization’s strategy to varying levels.
When you track and quantify the contribution HR efforts have to the company's overall success, you can make more strategic plans to accelerate business growth. You'll be in a better position to understand your organization's success barriers and whether your current HR efforts are aligned with overcoming them. This insight drives better hiring, performance management, succession planning, and internal mobility.
For example, if metrics show your HR managers are spending the majority of their time on repetitive tasks like appointment scheduling and payroll, you can put systems and technologies in place to automate these manual time-consuming tasks. This can optimize their time, allowing HR to focus on more critical aspects of the job, like reviewing performance, resolving disputes, and so on.
If you want to facilitate more informed decision-making within your company and maximize its incredible potential, implementing strategic human resource management practices clearly needs to be a piece of that puzzle.
The Difference Between HRM and Strategic HRM
Strategic HRM Has a Seat at the Executive Table
In the traditional sense, human resources management involves recruitment, compliance, and development of the organization's skills bank alongside its immediate needs. It acts as a support function to other departments that drive the company’s decisions. Effectively, traditional HR had no seat at the executive table, other than to execute hiring and firing based on what functions such as sales, production, and marketing needed. HRM (traditional human resource management) is therefore a reactive function.
SHRM (strategic human resource management) is a proactive function that involves creating HR strategies that align a skills bank with industry trends, and the companies’ development goals. Strategic HRM has a seat at the executive table, because the company sees its workforce (and the hiring thereof) as a driver of their success, not a reaction to it.
Strategic HRM Involves Big Picture Thinking
In strategic HRM, your people management strategy is aligned with your company’s overall business strategy. Your HR department understands where its KPIs fit in with those of other departments. As such, there’s a significant focus on goal planning and setting. Instead of taking care of a set of repetitive tasks, which is what traditional HR is all about, strategic HR involves a carefully developed, long-term plan of how it will make the company ever better.
While traditional HRM focuses on having a strict management hierarchy to get employees to do their jobs and conform to necessary employment laws, strategic HRM seeks to create an employer-worker partnership. By prioritizing engagement, wellbeing, and incentives over input management, employees feel motivated to help the organization succeed.
To put this more simply, strategic HRM doesn’t favor motivating employees with the carrot or the stick. It fosters employees who are motivated because they can see growth and purpose in their work.
Strategic HRM is Data Driven
Leveraging data reporting and analytics is another difference between traditional HRM and strategic HRM.
In traditional HRM, there’s limited reliance on key performance indicators and other employee-related metrics. This gives HR workers a vague understanding of what success looks like in terms of their recruitment, retention, and other HR-related efforts. The decisions here aren’t based on data. Instead, HR’s to-do list is guided by the HR management's discretion and experience, as well as the company’s visible employee churn.
This is in sharp contrast to strategic HRM’s ideology, where data-driven decision-making is a core element. The HR team reviews various HR metrics (such as employee engagement, turnover, satisfaction, and retention) in conjunction with the metrics other departments of an organization would measure, like profits, output, and projected growth. This leads to informed decisions regarding hiring and employee management.
Let's suppose you want to open a new branch in two years. Following strategic HRM, you'll be able to ensure the right managerial and support staff are ready and trained to be profitable from day one. In turn, the ROI of this business decision is partially a result of good HR management.
Because strategic HR is so data-driven, using advanced tools like HCM software and other HR technologies is a key component. These tools ensure the information you’re using to measure success and make decisions is factually accurate.
Key Components of Strategic Human Resource Management
The first step of any successful and thriving workplace is purposeful and aligned recruitment.
Once you set your company objectives, you’ll have a better idea of what employees you need. It also tells the interviewers and hiring managers what to look out for—the qualities the ideal candidate should have to aid the overall business growth.
For example, if your company plans to leverage AI tools in the next two to three quarters, you should start hiring tech-savvy people who have previous experience working with similar tools. The idea here is to hire for strategy, and not just immediate need.
Having a successful HR strategy and delivering a good onboarding experience go hand in hand. Hiring new employees is already an expensive affair. If you don't take the initiative to familiarize them with your company's long-term goals and objectives, you’re withholding a key motivator for them to stick around.
Considering employees who had a negative onboarding experience are twice as likely to seek a new job in the immediate future, putting the time and effort into employee orientation is one of the best things you can do for your company.
Mailchimp is one company that takes onboarding seriously. They onboard over 200 new employees every year, and have created an ‘Employee Integration Associates‘ program. Under this, associates take on the responsibility of giving new hires everything they need to feel welcomed and work with minimal interruptions, plus fill them in on what's expected of them to ensure they're performing as per company standards from day one.
The idea here is to get your new hires productive faster and keep them aligned with the organizational and HR strategy from the very beginning.
Creating and Providing Growth Opportunities
Investing in your human resource development and growth is a proven way to retain employees in the long run.
54% of employees fear they lack the required skillsets to thrive in a workforce that emphasizes collaboration using technology. While 49% of them expect their employer to support career growth, 80% of professionals think their current employer doesn’t provide them with enough growth opportunities.
Promotion opportunities and pay rises can’t be created overnight. What you can action immediately is to provide your employees with ‘soft‘ progression. This means giving them more responsibilities, greater control over project-related decisions, an increased role scope, and getting them to sign up for upskilling courses.
Strategic HRM also includes upskilling employees to grow the internal knowledge pool with the needs of the company.
AT&T understands the importance of creating a learning and development (L&D) environment.
The company has built an executive-led leadership and management development program known as AT&T University. It has partnered with Georgia Tech and Udacity, Inc. to create the Online Master of Science in Computer Science (OMSCS) degree and has since launched many self-paced technical credentials known as Nanodegrees across fields like web and mobile development, tech entrepreneurship, and data analytics, among others.
Corporate Communications Manager Marty Richter explained AT&T‘s vision to Monster.com.
“We can’t depend on just hiring and the traditional educational system as sources for retooling or finding new talent. We need employees who are ready to work in a competitive and more digital world. We’re focused on aligning company leaders to strategic business innovation and results, skilling and reskilling our 280,000 employees, and inspiring a culture of continuous learning.”
How To Implement Strategic HRM in a Workplace
Before we break down the steps to incorporate strategic HRM across your organization, there’s something you need to keep in mind: you cannot take a cookie-cutter approach.
Every company has different strategic objectives, which also means it’ll have different goals. The following are general best practices, but only you can determine the strategic HRM needs for your company in a granular sense:
Step 1: Identify the Company’s Strategic Objectives and HR’s Place in Meeting Them
You need to set strategic objectives to kickstart strategic HRM planning. These objectives must align with your organization’s mission, overall purpose, and goals
Consider the following questions as you set strategic HRM objectives:
- Are the strategic objectives relevant to your organization‘s position in the external market? For example, do you have the financial strength or organizational support to achieve them?
- Have you outlined the benefits of meeting the defined objectives and communicated these to team members and other departments?
- Are the strategic objectives realistic and feasible given your organization‘s strengths and weaknesses?
- Have you set timelines to meet progress benchmarks and targets for completed HR objectives?
- Will you be able to identify whether the team has been successful in accomplishing the strategic objectives through quantitative means?
- Are the strategic objectives linking back to your organization's overall strategy?
Step 2: Assess Your Company’s Current Situation to Create a Baseline
Assess Current HR Capacity
Create an employee catalog, noting their degrees, certifications, work experience, skills, and volunteer activities. Talk to your employees to learn which field they are interested in being trained in.
Analyze Available HR Data
Study turnover causes and rates, diversity statistics, future workforce gaps and surpluses, and health and safety status.
You can run an employee survey to better understand current and foreseen workplace circumstances. Determine what the engagement and productivity barriers are so you can better address them.
Do a SWOT Analysis
SWOT analyses (Strengths, Weaknesses, Opportunities, and Threats) are reliable indicators of your company’s current situation. It presents a clear picture of customers, markets, and competitors, enabling you to make more strategic decisions.
Strengths and Weaknesses highlight your company’s competitive advantages (such as a committed workforce, or high product quality) and limitations (like a slow production line). These are factors you can control and change to lead to favorable outcomes.
Opportunities and Threats are the external factors affecting the market that are beyond your control. Strategic decisions here are how you take advantage of opportunities, and protect your company from threats. Examples include customer buying habits and legal restrictions.
Step 3: Set Goals for the HR Department
Once your objectives are set, outline specific steps and goals that your HR department will follow to achieve the company’s strategic goals.
Identify important actions and activities that answer the “How do we get there?“ question. Attaining each objective involves carrying out a specific set of steps.
For instance, your business continuity plan may require cross-training employees to ensure uninterrupted business operations, even when a key employee calls in sick, is fired, or leaves. How will you get to a point where this goal is the reality?
Determine success metrics to know whether you’re achieving your target objectives. Choose key indicators and HR metrics you think would align best with your company’s strategic objectives.
Step 4: Estimate Future Needs
Consider external factors that impact your ability to achieve strategic objectives, such as technological advancements and the existing competition in the job market. You’ll also need to do a gap analysis to compare your current HR state to the envisioned future state and identify your company’s strengths and anticipated shortcomings.
Once you predict your company‘s future HR needs, you can align hiring it with your company’s overall strategic direction. You’ll identify:
- The jobs and roles to fill to meet future business requirements.
- The skills and qualifications your current employees need to undertake new roles.
- The recruitment processes and KPIs that will get you where you need to be.
Remember, this is a continuous and comprehensive process that takes into account various dynamic factors. We recommend using advanced tools like HR demand forecasting and HR analytics software for more accurate estimates.
Step 5: Regularly Monitor, Evaluate, and Amend
At this stage, you have all the components of a strong strategic HR plan. The only thing left is to put it into motion, and then, after a period of time, measure whether you’re successfully achieving your intended goals.
By measuring your results you’ll identify what’s working and what isn’t, and then make adjustments accordingly.
Here’s how you can monitor and evaluate your strategic HR efforts:
- Review whether HR’s goals are still in line with the company’s overall strategy and goals, and realign if they are not.
- Do yearly and quarterly reviews for effective performance management and evaluation.
- Consider the internal and external factors affecting your action plan. For instance, your competitor’s newly-launched product may be stopping your company from reaching sales goals, so your hiring in that department must adapt accordingly.
Align Your HR Efforts With Company Objectives
Achieving business goals will always involve a human component.
Strategic HRM allows you to make your human capital a key driver in how successful the company is. With it, you can streamline employee management and build a team of highly motivated and productive employees.
If you want to further facilitate your company‘s future growth, consider whether you’re using the best HR software and tools to achieve your strategic goals. We also recommend you read books that help you optimize your HR professionals' time and skills.
With a strategic approach to HRM, your workforce will be the most effective component of achieving business success.