SHRM UNIT II: HR STRATEGY

HR STRATEGY:

An HR strategy is a plan for aligning human capital investments with business needs. It shapes the character and
direction of HR management activities to focus on supporting what the company is trying to accomplish. The HR
strategy sets the direction for all the key areas of HR, including hiring, performance appraisal, development, and
compensation.

An HR strategy is always in response to what has been articulated in the business strategy. “The HR strategy clarifies
how HR will contribute to achieving the business objectives and helps to guide all HR activities.

An HR strategy is characterized by:

 Requiring an analysis of the organization and the external environment.

 An outlook of three to five years.
 Forming the base of Strategic Human Resources Management in an organization.
 Helping in the deployment and allocation of organizational resources (i.e., money, time, personnel
 Being revised on an annual basis.
 Resulting in a specific behavior.

Key components of an HR strategy:

1. HR Mission Statement: Create an HR mission statement to define what you’re trying to achieve. Ensure that
every HR team member is well acquainted with it.
2. Organizational Culture: When HR is in tune with the company’s goals, it can look for ways to promote the
desired behaviors and a culture that will help make them achievable.
3. Talent Acquisition and Recruitment: HR can target its talent acquisition tactics to reach and hire qualified talent
that can take the company where it’s headed.
4. Talent Management and Development: HR must stay on top of the capabilities required to get work done
efficiently and effectively. Then, it can design appropriate management and development practices to build
these up.
5. Compensation and Benefits: With buy-in from senior leadership, HR can ensure that compensation and benefits
are competitive to recruit and retain the kind of employees who can contribute to organizational success.

PURPOSE AND IMPORTANCE OF HR STRATEGY:

An organization’s success relies on how well its employees deliver its product or service. Since every HR decision
affects the workforce, there must be a thoughtful approach behind them.

Developing and executing an HR strategy has a positive impact on the business in the following ways:

 Alignment with business goals: HR can maximize its contribution to organizational goals by prioritizing its
initiatives and actions to support them. Then both time and money are invested where it matters most. Without
this focus, there is potential for misaligned efforts and wasted resources.
 Operational efficiency and performance: When HR can put the right people in the right roles, there is better
resource allocation and streamlined operations. Then, processes become more efficient and effective, which
enhances productivity and overall performance. In addition, relevant and timely workforce initiatives centered
around the HR strategy enable business growth.
 Organizational culture and employee engagement: A strong, healthy organizational culture and engaged
employees are the bases for achieving positive business outcomes. A people-centric HR strategy helps shape and
maintain a workplace culture that enhances the employee experience and promotes engagement and
productivity.
 Strategic workforce planning and development: Having an HR strategy means identifying current and future
workforce needs and establishing clear guidelines on recruitment, onboarding, training, and retention. As you
build a skilled, motivated workforce, you can also be looking ahead and preparing for future challenges.

TYPES OF HR STRATEGIES:

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.

1. Overarching Strategies:
 Definition: These strategies outline the organization's overall intentions for managing and developing its people.
They focus on attracting, retaining, and engaging employees to align with the organization's vision and goals.
 Characteristics: Overarching strategies are broad assertions of goals and objectives that serve as the foundation
for more detailed plans. They are communicated through straightforward and unambiguous statements that
guide actions and decisions.
 Purpose: They provide a roadmap for managing and developing employees, ensuring alignment with the
organization's strategic objectives. These strategies emphasize the importance of effective communication,
engagement, and commitment among employees.
 Examples: Overarching strategies may include statements such as "Foster a culture of innovation and
collaboration," "Promote diversity and inclusion in all aspects of the organization," or "Empower employees to
drive organizational growth and success."

2. Specific Strategies:
 Definition: Specific strategies focus on particular aspects or sectors of human resource management, such as
learning, development, reward, corporate social responsibility (CSR), knowledge management, resourcing, and
talent management.
 Characteristics: Specific strategies focus on particular aspects or sectors of human resource management, such
as learning, development, reward, corporate social responsibility (CSR), knowledge management, resourcing,
and talent management. They are tailored to address specific HR functions or areas of focus within the
organization.
 Purpose: These strategies define what the organization intends to achieve in specific areas of HR management.
They support the company's business objectives and outcomes proactively by addressing critical HR functions
and areas of focus.
 Examples: Specific HR strategies may include initiatives related to CSR, knowledge management, resourcing
(attraction and retention of high-quality employees), and talent management (ensuring the organization has
competent individuals to succeed).

STRATEGIC HRM V/S HR STRATEGY:

Aspect Strategic HRM (SHRM) HR Strategy
Integration of HR strategies with Specific plans and actions devised by
Definition overall organizational strategy HR to support organizational goals
Ensure effective management of
Ensure human capital contributes to human capital to achieve
Purpose organizational competitive advantage organizational goals
Talent acquisition, management, Recruitment strategies, talent
performance, training, development, development, compensation, benefits,
Key Components employee relations employee engagement
Tactical implementation of HR
Proactive role in aligning HR practices to support strategic
Focus practices with business strategy objectives
Strategic alignment of HR practices Tactical implementation of HR
Main Emphasis with organizational goals initiatives to address HR challenges
Strategic HRM (SHRM): SHRM involves the integration of HR strategies with the overall organizational strategy to
achieve strategic goals and objectives. It aligns HR practices with the company's mission, vision, and long-term
business objectives.

 Purpose: The purpose of SHRM is to ensure that human capital is effectively utilized to contribute to the
organization's competitive advantage. It focuses on developing HR initiatives that support the organization's
strategic direction.
 Key Components: SHRM encompasses various components such as talent acquisition, talent management,
performance management, training and development, and employee relations. These components are
strategically designed and implemented to meet organizational goals.
 Focus: SHRM emphasizes the proactive role of HR in driving organizational success by aligning HR practices with
business strategy. It involves continuous analysis of internal and external factors to adapt HR initiatives
accordingly.

HR Strategy: HR Strategy refers to the specific plans and actions devised by the HR department to support the
organization's strategic objectives. It involves the development of HR policies, programs, and practices tailored to
address specific HR challenges and opportunities.

 Purpose: The purpose of HR Strategy is to ensure that the organization's human capital is effectively managed to
achieve organizational goals. It focuses on addressing HR-related issues such as recruitment, retention, training,
and performance management.
 Key Components: HR Strategy may include components such as recruitment strategies, talent development
programs, compensation and benefits plans, employee engagement initiatives, and diversity and inclusion
strategies. These components are designed to address specific HR needs and challenges.
 Focus: HR Strategy focuses on the tactical implementation of HR practices to support organizational goals. It
involves aligning HR activities with the overall strategic direction set by the organization's leadership.

Key Difference:

The main difference between SHRM and HR Strategy lies in their scope and focus. SHRM encompasses the broader
integration of HR practices with organizational strategy, while HR Strategy focuses on the specific plans and actions
developed by HR to support strategic objectives.

SHRM emphasizes the strategic alignment of HR practices with organizational goals, whereas HR Strategy focuses on
the tactical implementation of HR initiatives to address specific HR challenges and opportunities.

FORMULATING HR STRATEGY:

Having a thorough grasp of your organization’s overall business strategy and reviewing an HR strategy framework is
the starting point for how to create an HR strategy. As you get deeper into the process, there are some best
practices for HR strategy formulation to keep in mind:

1. Understand how HR delivers value to the organization:

HR models are a tool for articulating the impact of your HR department. One example is the Standard Causal Model
of HRM:
This model displays that the HR strategy is a result of the broader business strategy. It shows that HR activities create
value when they align with what the organization is trying to achieve and can promote higher employee motivation
and job satisfaction.

This allows HR to contribute to the internal and financial performance of the organization. If you can demonstrate
this impact, there is a clear justification for the resources that must be invested to execute the HR strategy.

2. Consider Emerging HR Trends:

New developments and technological advancements are constant factors in the world of work. Emerging HR trends
include the boom of generative AI, flexible work arrangements, and an emphasis on employee wellbeing. As new
considerations transpire, expectations for HR and what it should deliver will continually change.

HR teams must be aware of external and internal dynamics that will require adaptation and how this influences the
strategic HR plan.

3. Conduct a SWOT Analysis:

A SWOT analysis is a method for mapping out an organization’s or department’s internal strengths and weaknesses
and its external threats and opportunities. Strengths include the company’s core know-how and know-what. These
are, for example, its production capacity, existing brand, marketing channels, sales capabilities, R&D expertise, and
other human capital factors.

Using this assessment, you can decide how these elements affect HR and also conduct your own SWOT analysis.
Then you can make plans for addressing the weaknesses and leveraging your human capital strengths to make the
most of opportunities.

4. Plan for Long Term with Adjustments:

A strategy is, by definition, long-term. This doesn’t mean it isn’t subject to change. You will need to address
limitations and shifting circumstances. Specific actions within a strategy can and sometimes should be adapted to
better fit the environment.

For example, if your commission and bonus structures are not producing the expected results, you may need to
alterthem to encourage and reward new behaviors that will improve business activity.

5. Get Management Buy-in:

An HR strategy cannot stand alone. Carrying it out requires an appropriate budget, technological resources, and
skilled staff. This is only possible when management backs the strategy and is willing to fund and advocate for it.

Being able to demonstrate how HR practices deliver value is the key to gaining this crucial support from business
leaders. It’s also a great opportunity to clarify what the leadership expects from you and what you, as HR, will and
will not be doing.
6. Upskill the HR Team:

Competent HR professionals equipped with HR knowledge, business acumen, and technology literacy are essential
for executing the HR strategy. Identifying skills gaps and providing relevant training ensures the team can navigate
the evolving work environment effectively.

7. Monitor Strategy Execution through KPIs:

A strategy will never be effective without consistent implementation and monitoring of results. This is done through
tracking HR Key Performance Indicators (KPIs) (metrics that measure strategic objectives) to quantify how successful
your HR strategy is. These metrics could include:

 Absence rate
 Turnover rates (voluntary and involuntary)
 Internal promotion rate
 Employee satisfaction index
 Employee engagement index
 Supervisor and employee feedback statistics

This will be an ongoing process, so determine a timeline for assessing the KPIs and key milestones to achieve your
goals. As you review the progress, identify the improvement areas and adjust the related components in your
strategy. Continue to evaluate the changes and whether the HR strategy is supporting the company’s growth.

CRITERIA FOR AN EFFECTIVE HR STRATEGY:

1. Alignment with Business Needs:

HR strategy should align closely with the overarching business strategy to mobilize the organization's people and
processes effectively towards achieving desired outcomes.

2. Identification of Success Metrics:

Defining what success looks like is crucial for HR strategy. It involves setting clear objectives and establishing key
performance indicators (KPIs) to measure progress towards those goals.

3. Focus on Collaboration:

Collaboration with key stakeholders and departments across the organization is essential for successful HR strategy
implementation. Stakeholder buy-in and active participation are crucial for achieving strategic goals.

4. Effective Communication:

Communication plays a vital role in garnering support for the HR strategy. Engaging with stakeholders, sharing the
strategic vision, and ensuring alignment across teams are essential for successful implementation.

5. Real-Time Measurement and Adaptation:

Continuous monitoring of progress through real-time measurement of KPIs allows for timely adjustments and fine-
tuning of the HR strategy. Agility and adaptability are key in responding to changing circumstances and challenges.

6. Integration with Organizational Goals:

HR strategy must be aligned with the broader objectives and purpose of the organization. It should support both
short-term and long-term organizational goals to drive success.

7. Employee Retention and Engagement:

HR strategy should address employee retention and engagement, especially during challenging times such as the
pandemic. Retaining talent and ensuring a positive employee experience are critical for organizational resilience.
8. Strategic Human Resource Management (SHRM):

Strategic human resource management involves evaluating workforce skills, identifying potential threats and
opportunities, and developing programs to meet organizational requirements effectively.

9. Senior Leadership Support:

HR strategy implementation requires support and funding from senior leadership and other business colleagues.
Their buy-in and cooperation are essential for successful execution.

10. Data-Driven Decision Making:

Data analytics enables HR to assess workforce trends, anticipate challenges, and plan effectively. Access to data
helps in identifying potential risks and opportunities, allowing for proactive decision-making.

Several companies worldwide have implemented unique and successful HR strategies:

 Google: Known for its engaging and competitive culture, Google prioritizes building a great working environment
to attract top talent. The company offers unique perks and amenities, fostering a desirable workplace that
promotes long-term employee happiness and success.
 Cadbury: With a commitment to putting its people first, Cadbury has cultivated a fiercely loyal workforce by
prioritizing employee well-being and offering a supportive work environment. The company's people-first
approach aligns seamlessly with its business goals, particularly in employee retention.
 Nissan: Nissan's HR strategy revolves around empowering employees to constantly improve and contribute to
the business through a culture centered on the concept of Kaizen. The company emphasizes transparency in
salary scales and grants leaders autonomy in recruiting and building teams, fostering a culture of innovation and
success.

Amidst the challenges posed by the COVID-19 pandemic, now is an opportune time to refine HR strategies. By
following key steps and leveraging expertise, organizations can elevate strategic human resources management,
strengthen company culture, enhance employee satisfaction, and drive broader business objectives.

 IMPLEMENTING HR STRATEGY:

1. Helping employees understand the strategy:

It is crucial for employees to not only understand the strategic direction but also the reasoning and driving forces
behind it. HR needs to ensure employees comprehend where the strategy is headed so they can contribute
effectively to its implementation.

2. Augmenting employee commitment to the strategy:

Changes in strategy often mean changes at the individual employee level, leading to frustration and challenges. HR
must work to get employees genuinely committed and believing that the end results will be worth the sacrifices
required for implementation.

3. Aligning local efforts with the strategy:

Beyond just understanding and commitment, successful strategy implementation demands actual changes in work
processes and production. HR must ensure all non-strategic work is terminated and strategic work is executed with
renewed urgency across work units.

4. Inducing cross-system cooperation:

Perhaps the most critical step is fostering collaboration across departmental boundaries. HR must facilitate deeper
relationships between interdependent units like sales-manufacturing or customer service-distribution to drive
strategic alignment.
Overcoming Barriers to Strategy Implementation

 The documents identify several common barriers HR faces in implementing strategies:

 Poor coordination among top management
 Employees not understanding or buying into the strategy
 Managers failing to align work units with the new strategy
 Weak inter-departmental collaboration processes
 Lack of progress measurement mechanisms

To overcome these, HR should proactively identify potential roadblocks and systematically remove internal
obstacles to change. Specific initiatives include:

 Assessing environmental/cultural factors impacting strategy acceptance

 Ensuring HR initiatives are aligned with true strategic business needs
 Establishing supporting processes like performance management
 Gaining active top management buy-in and support
 Building employee understanding and acceptance
 Continuously monitoring implementation and taking corrective action
 Ensuring availability of required resources (financial, human, time)
 Recognizing new skill/commitment demands on line managers

The documents emphasize that successfully implementing strategy is a social issue requiring HR to manage the
human aspects - cooperation, coordination, commitment across the workforce. Technology and business processes
matter, but people drive real organizational change.

HR is uniquely positioned to lead implementation efforts given its enterprise-wide purview and expertise in areas
like training, communication, employee relations, and organizational development. Forming strong partnerships
with executives and line managers is key.

In summary, HR strategy implementation requires a systematic approach to aligning the organizational culture and
social systems, removing barriers to change, and building understanding, commitment and cross-functional
collaboration among employees at all levels. With proper planning and execution, HR can play a vital role in bridging
the gap between strategic vision and operational reality.

ALIGNING HR WITH CORPORATE STRATEGY:

1. Strategic Alignment: HR strategy must closely align with the overarching corporate strategy to effectively
support the achievement of business objectives. This alignment ensures that HR initiatives and activities
contribute directly to the organization's success.
2. Understanding Business Strategy: HR professionals need a deep understanding of the business strategy,
including its goals, challenges, and priorities. This knowledge enables HR to tailor its strategies and initiatives to
meet the specific needs of the organization. Business strategies operate at three levels: corporate, business, and
functional. Corporate-level strategy sets the direction for the entire organization, while business-level strategy
focuses on specific business units or divisions. Functional-level strategy pertains to individual functions like HR,
marketing, and operations.
3. People Strategy: People strategy, also known as HR strategy, encompasses various aspects such as talent
management, organizational culture, and employee engagement. It is designed to support the organization's
goals by attracting, developing, and retaining top talent.
4. Aligning HR Practices and Policies: Aligning HR practices and policies with business priorities and requirements
involves reviewing and updating various HR practices such as recruitment, selection, training, development,
 performance management, compensation, benefits, recognition, retention, engagement, diversity, inclusion,
and wellness. Ensuring coherence with the business strategy and alignment with the organization's culture and
values empowers employees to contribute to business success.
5. Strategic Human Resource Planning (SHRP): SHRP involves forecasting HR needs and aligning them with the
organization's strategic objectives. This ensures that the organization has the right talent in place to support its
long-term goals.
6. Strategic Recruitment and Selection: Recruitment and selection processes should be aligned with the
organization's strategic priorities. This includes targeting key talent areas critical for business success and
ensuring a strong fit between candidates and the organization's culture and values.
7. Strategic Training and Development: Training and development initiatives should be designed to support the
organization's strategic objectives. This includes identifying skill gaps, providing targeted training programs, and
fostering a culture of continuous learning and development.
8. Strategic Performance Management: Performance management systems should be aligned with the
organization's goals and objectives. This involves setting clear performance expectations, providing regular
feedback and coaching, and linking individual performance to organizational success.
9. Leadership Alignment: It's crucial for HR leaders to align their strategies with the broader business goals and
objectives. This requires close collaboration with business leaders, effective communication, and a shared
understanding of organizational priorities.
10. Data-Driven Decision Making: HR professionals should leverage data analytics to inform their decision-making
process. By analyzing workforce trends and performance metrics, HR can identify areas for improvement and
make data-driven recommendations to support the corporate strategy.
11. Measure and Evaluate: Measuring and evaluating the outcomes and impacts of HR activities and initiatives is
essential. Establishing appropriate metrics and indicators allows organizations to track progress and results,
identify gaps for improvement, and refine the HR strategy accordingly. Demonstrating the value of the HR
function to the business strategy through measurement and evaluation is crucial.
12. Learn and Innovate: Continuous learning and innovation are vital for ensuring HR strategy remains agile,
adaptable, and responsive to changing business needs. Staying updated on HR trends and fostering a culture of
learning and innovation within the HR function and across the organization enables organizations to embrace
change, seek new opportunities, and drive long-term success.