Strategic HRM aligns HR practices with business goals, driving success through proactive talent management. Explore strategies for impactful HR implementation.
By Brad Nakase, Attorney
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Strategic human resource management connects the goals of an organization with its employees, who are the key to achieving those objectives. In this critical role, HR is responsible for more things and needs to change how it does its job. Making sure employees have the tools they need to back the company’s strategic goals becomes priority number one.
This article will define Strategic HRM, discuss its effects on HR professionals, and provide five suggestions for making the most of this approach.
The goal of strategic human resource management is to align the focus of human resource management with business goals so that goals can be met by strategically deploying a highly committed and skilled workforce. This is done by using a variety of structural, cultural, and personnel methods (Storey, 1995).
Some of these methods include designing the company to generate value and gain an advantage over competitors, as well as recruiting, promoting, and compensating employees.
Human resource management with an eye toward the future focuses on building a talent management system that motivates employees to act in a way that advances the company’s strategic objectives.
Developed in the 1990s and popularized in the 2000s, Strategic Human Resource Management was largely the brainchild of Storey, Schuler, Wright and McMahan, and Boxall and Purcell. It all started with Dave Ulrich’s challenge to the HR profession. Human resources was “value sapping,” meaning it was “frequently ineffective, incompetent, and pricey.”
Particularly for big and quickly expanding companies, Strategic HRM is becoming an integral aspect of HR. Strategic human resource management is dynamic, and no one approach ensures success. That’s why every company needs a unique strategy that works for their situation, values, and goals. They can then build upon and enhance it through continuous monitoring.
Most people think of human resource management as an administrative role focused on getting things done. As a whole, it was reactive and disconnected from the actions of companies’ top executives. It solved the problems that came up for workers as they happened. Nevertheless, it failed to foresee potential developments and was out of sync with the company’s direction.
Traditional HRM, for instance, would answer questions from employees about HR procedures, but it wouldn’t make policies based on the company’s long-term goals or find ways to get employees involved with those goals.
As a result of being more connected with company strategies, HR teams are able to work more proactively when an HRM plan is in place. The company’s objectives are clear to them, and they strive to achieve them. To do this, the company must take the necessary steps to plan for and secure the workforce it will need to accomplish its goals.
For instance, HR will take into account both current and future needs while recruiting, rather than only hiring for the here and now. This is feasible because human resources is an integral element of the executive team and is familiar with the company’s near-term and far-term objectives.
To align HRM with general business strategy, Caitlin Weiser, Consultant at Red Clover HR, says you need to know what behaviors from employees will help the company reach its long-term goals. Human resources may enhance strategic processes, design incentive programs, establish key performance indicators, and provide development opportunities by identifying these behaviors.
When businesses use strategic HRM, they improve their HR procedures to help the company perform better. Let’s see how this works in practice.
The following are three instances of how various organizations have implemented SHRM:
Example 1: Nissan
The Japanese carmaker Nissan Motor Corporation wants to stand out from the competition, so it encourages its staff to think outside the box and come up with new ways to make cars.
Nissan uses a framework for continuous growth known as Kakushin. The guiding principles of this philosophy include an openness to new ideas and analysis, as well as a rejection of fixed ways of doing things. The company values its employees’ ability to think creatively and problem solve in order to get better results.
Human resources managers can direct HR efforts where they will have the greatest impact by keeping company goals and the Kakushin technique in mind:
Finding and attracting top personnel
The establishment of a safe working environment that encourages employees to take initiative and contribute innovative ideas in order to achieve organizational goals.
Example 2: Brigham and Women’s Hospital
One of Harvard Medical School’s teaching affiliates is Brigham and Women’s Hospital. They know that great people lead to great patient care. The primary goal of the organization’s strategic human resource management initiatives is to help employees achieve a good work-life balance.
HR helps workers who are taking care of kids or the elderly find child care, as well as backup child care in case of an emergency. Additionally, the hospital can help with finding a nursing home, home health services, and stress-reduction support groups. Plus, there are tuition subsidies for those whose income is below a specific level.
All things considered, the medical center stresses the need of workers taking care of themselves and striking a healthy work-life balance.
Example 3: Sainsbury’s
Among the many grocery stores in the United Kingdom, Sainsbury’s stands out. In every facet of its operations, the organization has been ahead of the curve. Nearly a century ago, they established their first “worker academy.” They were also the first to offer self-service checkout. More recently, they invested in increasing the wages of all its retail employees to £11/hour.
The store goes to great lengths to provide its staff the authority they need to provide outstanding service to consumers.
Sainsbury’s training academies equip team leaders and retail managers with the behavioral and technical skills they need to excel in their roles, inspire their teams, and provide superior service to customers and employees. Within nine months of finishing the Leading@Sainsbury’s program, 58% of participating colleagues will have received a promotion.
Additionally, the company no longer asks for a resume when applying for retail colleague positions, which opens the door for candidates who may not have the credentials or work experience normally sought after by other companies.
When everyone in the firm is pulling in the same direction, success is more likely to happen. With HR in the loop on leadership’s long-term goals, the department can put systems in place to rally the troops and help bring the plan to fruition.
Strategic human resource management is beneficial because it does the following:
Establishing a connection between HR practices, rules, and strategies and the company’s larger strategic objectives is an important part of Strategic Human Resource Management.
Human resources can better equip employees with the knowledge, skills, and attitudes they need to achieve organizational goals when they get a clear picture of those goals from upper management. A more capable and skilled workforce can give an organization a leg up in the competition, and SHRM can help make that happen through training and development programs.
The ability to swiftly adjust to new circumstances is a key component of human resource management strategies that focus on the future. Plans can be modified to reflect changes in technology, market conditions, or labor composition. As the changes are taking place, HR is there to encourage, support, and communicate with staff.
Given that no one can predict the future and that change is the only constant, Gap Inc.’s Head of Organization Effectiveness Simon A. Taylor argues that the greatest way for a company to be future-ready is to develop the ability to change rapidly, focus on what’s important, and adapt to new circumstances.
In practice, this entails two things: 1) fostering an organizational culture that can identify and respond quickly to change, and 2) planning human resource management practices with the knowledge that they can—and perhaps should—change in the near future in line with the changes in the business strategy, explains Taylor.
Strategic human resource management (HRM) aims to improve performance by identifying employees’ value contributions and facilitating performance management systems to keep them motivated, trained, and assessed appropriately. In order to maximize performance and productivity on the job, HR can put measures in place to help employees improve their areas of weakness while building on their areas of strength. It can also work toward its goal of better performance by enhancing the health and happiness of its employees.
Supporting expansion of businesses: Strategic human resource management, with its focus on preventative planning, finds holes in existing resources and predicts future demands for human resources. Consequently, the company has the people resources it needs to start projects, expand into new areas, and fuel sales.
Streamlining operations: A strategic approach to human resources involves carefully crafting tasks, duties, and workflows to meet the unique requirements of the company’s human capital. This transparency improves company performance by streamlining processes to cut down on waste and increase efficiency.
Now that you know what strategic human resource management is and why it’s important, we can talk about how to make a strategy for your company and put it into action.
There isn’t a single, definitive model for strategic human resource management, but there are guidelines to keep in mind.
If you want to implement Strategic HRM, here are five things you need do:
In order to make a significant impact with Strategic HRM, it is necessary to first develop an HR strategic plan that is connected to the overall goals of the organization.
The core components of an HR strategic strategy are:
To have a better grasp of the company, consider the following questions:
You may, for instance, have to put money into recruitment campaigns across departments if your company intends to expand at an exponential rate over the next five years. Before you consider entering new markets or releasing a new product, take stock of the talents and abilities you’ll require.
To accomplish business results, it is essential that all HR activities are in sync with the HR strategy and work together. These encompass a wide range of activities, including as hiring, evaluating, compensating, designing functions and organizations, and more.
As an example, the traits you seek in a potential employee should also be part of your performance evaluation criteria. You should also make it a priority to foster these characteristics in all employees. As a result, your company’s hiring practices, performance reviews, compensation, and training and development programs can all mesh with its overarching goals.
Researchers call these sets of HR practices “bundles.” Good job design, employee engagement, and equal opportunity are all parts of the human resources practice package that contributes to employee retention.
Innovation is another bundle. Performance reviews, collaboration, information sharing, training and development, and job design are all aspects of innovation.
Prioritizing HR activities that support the implementation of HR strategy—which in turn supports the organization’s overall strategy—is the essence of strategic human resource management.
The ability to demonstrate the results of strategic human resource management hinges on data. By compiling evidence from various workforce data sources, HR policies can be influenced to maintain improved outcomes. Human resources key performance indicators (KPIs) that mesh with the company’s overall plan allow you to monitor progress.
Utilizing people analytics allows you to not only monitor advancement, but also gauge the impact of your people policies on organizational objectives. This helps to make HR’s impact clear and provides a foundation for a solid business case for HR spending.
Take Best Buy, an American consumer electronics shop. They discovered that for every one store, a just 0.1% boost in engagement results in $100,000 more in revenue.
Additionally, moving top people to where the company plan calls for it pays well, according to a McKinsey study. Companies have over a twofold better chance of beating the competition if they quickly reassign workers to high-priority projects.
Human Resources cannot shirk its other duties in pursuit of Strategic HRM. Dave Ulrich outlined three more functions of human resources, including HR strategy, effective administration, and employee development and engagement.
Once a plan is in place, the real work begins. Human resources must maintain a laser-like focus on employee engagement and impeccable people operations. Beyond the big picture, there are more immediate concerns, such as managing employee data and perks and ensuring an engaging and compliant onboarding experience.
Taking an outside-in HR approach is a vital step in being strategic since it gives a more holistic understanding of HR’s mission. Who exactly are HR’s target audiences? In this case, workers and management are the most apparent stakeholders, but shareholders, investors, and consumers also play a role.
HR policies and procedures should be in sync with the company’s overall goals, which should be in sync with the needs of these external stakeholders. HR has to measure the value it adds to each entity, not just what it does.
A healthy company ecosystem, strong trust, and a positive public perception of the brand are all outcomes of human resources policies and procedures that are in harmony with these stakeholders’ expectations and demands.
Human resources may help an organization expand sustainably and achieve greatness by highlighting the effect HR practices have on all stakeholders.
In order to ensure that HR initiatives connect employees with the company’s goals, a Strategic Human Resource Management plan is essential. When it comes down to it, the point of programs like performance management, salary and benefits, and recruitment is to equip the staff to accomplish the company’s goals.
With a well-defined strategic framework in place, all members of the organization are pulling in the same direction, increasing the likelihood of success. HR has the potential to become an invaluable strategic partner to the company and offer enormous value via the effective implementation of SHRM.
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