An HR strategy is a plan for managing human capital in ways that enable an organization to meet strategic objectives. It brings together the HR and people initiatives that are necessary to deliver on an organization’s business strategy and directly informs how an organization approaches activities such as recruiting, developing, rewarding, engaging, and retaining employees.
Why Does HR Strategy Matter?
HR strategy matters because an effective HR strategy can provide a competitive advantage, improved financial outcomes, and superior shareholder returns.
Competitive advantage—Researchers believe that having human capital that is valuable, superior, scarce, and hard to copy provides a competitive advantage.
Financial results—Numerous studies have found associations between human capital management and operational as well as financial outcomes.
Shareholder returns—Companies on Fortune Magazine’s 100 Best Companies to Work For list have been shown to outperform the broad market on cumulative (longer-term) returns.
What Is an Example of an HR Strategy?
An example of an HR strategy, sometimes referred to as an HR strategic initiative, is: Modernize the employee experience by streamlining HR processes and updating HR technologies.
Other examples of HR strategies include:
- Reduce overall cost of the HR function by moving to a shared services HR delivery model
- Build a digitally literate, AI-ready workforce
- Boost workforce productivity
- Become an employer of choice in industry
What Makes an Effective HR Strategy?
A successful HR strategy summarizes an organization’s strategic business initiatives. It lists the strategic initiatives that HR will undertake to support these strategic business initiatives. For each HR strategic initiative, it details core actions and expected outcomes. Following are tips and tools that you can use to craft an effective HR strategy for your organization.
Tips for Crafting an Effective HR Strategy
Over the years, APQC research has identified a number of key practices for developing an effective HR strategy. Some of these key practices follow.
- Document the HR strategy. Create a single source of truth to guide consistent communication and coordinated action.
- Assign responsibility and accountability. Assign accountability for each initiative to only one individual.
- Secure the necessary resources. Ensure that those who are implementing the HR strategy have the needed funding, staff, time, and technologies.
- Build the required capabilities. Anticipate who in HR and the business will need to build what capabilities to do their part in HR strategy implementation. Identify ways to build these capabilities.
- Monitor and adjust. Establish a process for checking that implementation is happening on time and achieving the intended outcomes. Make changes to the strategy and related strategic initiatives as needed and when the business strategy changes.
- Communicate often. Communicate about the HR strategy and related strategic initiatives at regular intervals and when changes are made. Share consistent messages but tailor delivery to different stakeholders.
Tools for Crafting an Effective HR Strategy
The following APQC resources can help you craft an HR strategy that is fit for success.
- 12 Keys to Success: HCM Strategies that Get Business Results: This infographic lists HR strategy processes, related KPIs, and actions for improving HR strategy setting.
- Creating the HR Strategy: Essential Inputs: This article outlines steps for collecting the needed inputs for a strong HR strategy.
- Setting the HR Strategy Checklist: This checklist helps HR teams ensure they complete key tasks within the macro steps of HR strategy development.
- HR Strategy: Template: This template can be used to document the HR strategy for your organization, line of business and/or business unit.
- HR Strategy: Example: This is an example of a completed HR strategy document that can be used as a guide for documenting your organization’s HR strategy.