9/28/21, 5:42 AM How to Create a Human Resource Strategy - AIHR 9/28/21, 5:42 AM How to Create a Human Resource Strategy

/28/21, 5:42 AM How to Create a Human Resource Strategy - AIHR

What is a Human Resource strategy?

How to create an HR strategy
The Human Resource mission statement
7 HR strategy best practices
How to Create a Human An example of a Human Resource strategy

Resource Strategy HR strategy framework

Conclusion
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FAQ
Posted by Erik van Vulpen

What is a Human Resource Strategy?

A Human Resource strategy is a business’s overall plan for managing its human
capital to align it with its business activities. The Human Resource strategy sets the
direction for all the key areas of HR, including hiring, performance appraisal,
development, and compensation.

The HR strategy is thus a long-term plan that dictates HR practices throughout the
organization.

An HR strategy has a set of characteristics:

It requires an analysis of the organization and the external environment.

Whether you’re working in a large corporate or a smaller enterprise, a Human It takes longer than one year to implement.
Resource strategy forms the basis of everything you do in HR. In this article, we
It shapes the character and direction of Human Resources Management
will give a definition of the HR strategy, explain how the HR strategy impacts
activities
daily HR practices, and we will end with a Human Resource strategy example.
Helps in the deployment and allocation of organizational resources (i.e.
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Is revised on a yearly basis. organization tries to achieve. When there is alignment (fit) between the two, HR will
contribute to the performance of the organization.
It incorporates the expert judgment of senior (HR) management.

It is number-driven. The overall business strategy is formulated based on the past and the present. It is
a result of what the company has been doing in the past and its current internal
It results in a specific behavior.
capabilities. An often used tool to arrive at this strategy is the SWOT analysis.
These characteristics give a good overview of what an HR strategy consists of.
In the SWOT analysis, the organization’s internal Strength and Weaknesses, and its

Related (free) resource ahead! Continue reading below ↓ external Threats and Opportunities are mapped. Strengths include the company’s
core know-how and know-what. These are its production capacity, existing brand,
marketing channels, sales capabilities, R&D expertise, and other human capital
HR Analytics Resource Library factors.
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The next question is: how do we create a Human Resource strategy?
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A very useful model here is the standard causal model of HRM, one of the key HR in just 10 weeks with 4 hours of studying a week.

models. This model shows where HR strategy originates from and how it influences
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HR execution and business performance.

The model shows that the HR strategy is a result of the broader (business) strategy.
kIt shows that HRaactivities create*value when theyJare aligned withdwhat the v k a * J d v
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The HR strategy is based on the organizational strategy. The HR strategy touches

on all the key areas in HR. These include recruitment, learning & development,
performance appraisal, compensation, and succession planning.

An example of an HR strategy is an HR mission statement and HR vision, with

concrete, high-level actions about how to execute on this mission and vision. We
will give an example later on.

The Human Resources mission

statement
The result of an HR strategy is often an HR mission statement. The HR mission
statement helps to clearly define where the organization wants to go. All Human
Resource Management practices and decisions can be judged based on that
statement.

An example is the HR mission statement of the University of Marquette in

Milwaukee, Wisconsin: “The Human Resources Department creates, encourages,
The company’s strategy leverages its Strengths to capitalize on the Opportunities in and maintains an environment that supports, develops and sustains the well-being
the market. At the same time, it tries to circumvent Threats and minimize the of Marquette University’s employees, students, and the broader community.”
impact of Weaknesses.
This mission statement clearly focuses on the creation of an environment for
The result of this strategy-setting is the company’s value proposition. For example, different groups. This makes it easier to make decisions and start initiatives
the value proposition of Walmart, a discount retailer, is “every day low prices”. This regarding HR’s involvement in different projects. For example, I would be very
explains a number of internal HR practices, especially the ones related to worker surprised if this HR department is not actively involved in (student) community-
compensation. For more unique value propositions, check this article. building projects.

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3. HR initiatives should be aligned with the HR strategy – The strategy is

HR 2025 there for a reason: it should be followed. HR practices and initiatives should

Competency follow the strategy.

Assessment 4. Performance incentives should be directly connected with the execution

Do you have the competencies needed to of the strategy – The idea of contingent compensation is as old as HR itself.
remain relevant? Take the 5 minute People will work harder if their goals and incentives are aligned.
assessment to find out!
5. Strategies should be monitored and execution measured through KPIs –
Start Free Assessment Strategy will never be effective without consistent implementation and
monitoring of results. This is done through KPIs (metrics that measure
strategic goals)
Digital HR plays a pivotal role in enabling the HR strategy. In the final section of this 6. Strategy is a long-term plan – A strategy is, by definition, long-term. This
article, we will explore the role of digital in more depth. doesn’t mean it isn’t subject to change. A strategy can be – and sometimes
should be – adapted to better fit the external environment.

6 HR strategy best practices These best practices help to create, implement, and execute the Human Resource
strategy.
When creating and implementing an HR strategy, there are a number of best
practices to keep in mind.

1. HR professionals should know the strategy and (at least to some extent) Human Resource strategy example
be involved in its creation – A strategy will only be effective if it is clearly A good example of a Human Resource strategy that worked was how Netflix
communicated. Involvement in the creation of the strategy will help in the managed its people. After the dot-com bubble burst and the 9/11 attacks, Netflix
communication and create buy-in. had to lay off a third of its employees.

2. Management buy-in and HR budget are critical enablers of strategy It had always been Netflix’s strategy to hire only A players. This was an opportunity.
execution – An HR strategy can never be realized in isolation. Conditions are By letting go of the B-players, the remaining employees were happier and more
management buy-in, budget, skilled HR professionals, and appropriate digital
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productive. To quote one of the engineers: “I’ve learned that I’d rather work by 2. Define HR strategy – in this second step, you create a roadmap about how
myself than with subpar performers.” HR aligns its strategy and how it helps to build a competitive advantage for the
organization.
This also had consequences for people who once were invaluable but had become
redundant as the company grew. According to Patty McCord, Netflix’s chief talent Second, HR products and services need to be aligned.
officer from 1998 to 2012, “if we wanted only “A” players on our team, we had to be
3. Segment HR customers – not all HR customers are equal. In the third step,
willing to let go of people whose skills no longer fit, no matter how valuable their
you segment your different (internal) customer groups and identify the most
contributions had once been.”
crucial ones. Different customer groups require different policies and
Working with only A players also impacted Netflix’s holiday policies. After Netflix approaches.
went public, there was some pressure to formalize the paid-off-time policy. After
4. Prioritize HR investments – your HR budget and other resources are
some research, McCord decided to use a system in which employees could take as
limited. Prioritize the investments that benefit your key customers and that
much time off as they felt was appropriate – in dialogue with their boss.
provide the best ROI. A good technique to prioritizing these investments is
For a full overview of Netflix’s unique definition of company culture, check out their calculating an ROI through HR costing.
culture guidelines.
5, Design HR services – in this phase, you will go through all the HR focus
areas and analyze and identify all the processes that should be streamlined or

HR strategy framework re-engineered.

A very useful tool I discovered while doing research for this article, is the Deloitte Third, HR practices need to deliver value. This is the right side of the standard

HR Strategy Framework. This framework follows a 10-step approach towards causal model for HRM.

defining strategy and delivering value.

6. Ensure the right HR service delivery model – in this step, you will assess

The first phase is about defining human capital value. This happens in two steps: the current HR service delivery model and assess how effectively it helps to
meet the organization’s goals. You should also analyze the key HR enablers
1. Understand the business strategy – this is about understanding the
such as HR systems, processes, and infrastructure. Optimizing these will help
market forces and identifying how they impact HR strategy and priorities.
in delivering HR services that add value to the organizational strategy.

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7. Establish the right HR capabilities – another HR enabler that requires

special attention are the HR capabilities. By identifying the current skills and
FAQ
competencies and the ones required to deliver HR strategy, a skill gap can be
What is a Human Resource Strategy?
identified and filled.
A Human Resource strategy is a business’s overall plan for managing its human

8. Improve HR operational excellence continuously – this step is about the capital to align it with its business activities. It sets the direction for all the key areas

optimization of what we do in HR. By assessing the efficiency of our HR of HR.

processes, we can continuously improve them.

9. Build an HR brand – establish the HR department in the wider organization

How to create an HR Strategy?
and obtain information on how HR is and should be performing.
A very useful model is the standard causal model of HRM, one of the key HR
10. Measure the impact of HR products and services – in step 8 we looked models. It shows where HR strategy originates from and how it influences HR
at the efficiency of HR processes. In the end, we want HR processes to be execution and business performance.
effective. Measuring the impact of our products and services on the relevant
business outcomes through analytics helps to adapt and improve what we do
in HR. This is done through HR analytics. What is a Human Resources mission statement?
The result of an HR strategy is often an HR mission statement. The HR mission
statement helps to clearly define where the organization wants to go.
Conclusion
There is only very little information about how to build an HR strategy on the
internet. Although this medium mostly covers digital HR and HR transformations, To learn more about translating strategy into measurable goals, check out our
for both the HR strategy is the starting point. I hope this article has taught you Strategic HR Metrics course on the AIHR Academy!
where you should start when you want to define and implement an HR strategy.
Creating an HR strategy takes time. Just as executing on the strategy takes time.
But when your strategy is well-defined, it can create a tremendous benefit by
aligning HR’s activities with the goals of the organization.
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Erik van Vulpen

Erik van Vulpen is an expert in shaping modern HR practices by
bringing technological innovations into the HR context. He
receives global recognition as an HR thought leader and regularly
speaks on topics like HR Analytics, Digital HR, and the Future of
Are you ready for the future of HR?
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