Human resource strategy is designed to develop the skills, attitudes and behaviors among staff that will help the organization meet its goals. Human resource strategy consists of principles for managing the workforce through HR policies and practices. It covers the various areas of human resources functions such as recruitment, compensation, performance management, reward and recognition, employee relations and training.
HR strategy must be aligned with the organization’s vision, mission and goals. In developing an HR strategy, the company must analyze the characteristics of its industry, determine its competitive advantage, and identify key processes and key people. Creating different strategies for all groups of people in the organization may be necessary, depending on their skills, knowledge and responsibilities. The strategy must look at the organization's culture, structure, people and systems.
HR strategy affects what employees feel and do. It manifests in work-productivity outcomes such as customer satisfaction, product quality, errors, accidents, down time and employee retention. These outcomes, in turn, affect company finances. Poor customer service, for example, can reduce company sales. An effective HR strategy benefits the company's bottom line. It improves employee motivation and satisfaction. Employees also benefit by realizing their full potential and developing their own careers.
Large firms often focus on building systematic HR practices that improve employees’ motivation and skills. A Cornell University study of small and medium-sized enterprises showed that their HR practices are informal and reflect company values. Their HR strategy tends to focus more on selecting the right employees to do the job, managing their activities and motivating them to stay with the company. Smaller organizations often develop employee loyalty by creating a family-like culture.
The HR department must find ways to attract, select and retain employees in an increasingly competitive market. The globalization of the workforce requires more complex and diverse human resource strategies that will adapt to each country’s labor laws, economic structure and staff expectations. The HR professional must play a strategic role in adapting the company to diverse environments while keeping down costs and working with fewer resources. This involves proactively partnering and consulting with line managers.
Senior management often leads in defining the organization’s human resource strategy. The HR department plans and translates the strategy through HR policies and practices. This requires reviewing the organization’s current practices and analyzing critical issues such as high turnover, declining sales or production delays. HR can refer to best practices in successful organizations. For a successful human resource strategy, managers must be active partners with HR and HR staff must facilitate and coordinate the process.
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