What is Strategic Human Resource Management?

Every organization needs a great team to carry out its growth plans. But crafting and implementing strategies to build and support such a team falls beyond the scope of day-to-day firefighting tactics. Strategic human resource management is an executive function, but what exactly does it entail?

In the following post, I will explain what strategic HR management means, how it can benefit your company, and the process you can expect when working with an HR leader.

Strategic Human Resource Management Defined

Strategic Human Resource Management, or planning and management, is a process that allows for the diagnosis and alignment of your organization’s strategy, structure, systems, and skills. Planning is the difference between tactics and strategy. So, this is a holistic, long-term approach to developing and executing initiatives designed to build and nurture the most engaged and productive team possible, given your available resources, overall business strategy, and goals.

It is about envisioning your company’s future and what it will take to support it from a human capital perspective. Then you prioritize your plans based on their feasibility and expected impact.

One point to remember is that this is an iterative process in that you develop and roll out strategic initiatives, measure the results, and adjust as the future unfolds. As businesses grow and scale, they typically become more complex. So, you must refine your human resources strategy as you evolve, investing in new products, services, or regions or changing existing ones.

Why is Strategic HR Management Important?

In contrast to the day-to-day tactical responsibilities of hiring and managing employees, running payroll, and setting up benefits, strategic human resource planning and management is about being thoughtful about how you hire, structure, and energize your team. The goal is to support your business as it grows and scales by building the protective, repeatable, and efficient HR practices and programs necessary to thrive.

Strategic HR takes a big-picture view of your business strategy and the current and anticipated environment that will affect it. Then you craft forward-thinking programs for attracting, training, nurturing, and retaining a motivated workforce given that reality. In doing so, you build out the human resources component of your financial infrastructure, strengthening your business. That will give you a competitive advantage and make you more resilient and capable of adjusting to the inevitable challenges and opportunities that arise.

What to Expect During the Strategic Human Resource Planning Process

Like any strategic planning process, you cannot develop an HR strategy in a vacuum. First, the department’s leader (your Chief Human Resource Officer (CHRO) or equivalent) will work with your executive team to clarify your business strategy and goals. Then, they will assess your situation and craft a plan to help you achieve them, documenting the following:

1. Where do things stand today (current state)?
2. What do we envision for the future?
3. How will the HR department help the company meet its goals?
4. When will this plan roll out, and how will we track and measure progress?

Ultimately, the strategy will consist of a summary document (the recommended plan and KPIs) and the supporting research and data that led to the recommendations. So, let’s dive into each point above so you know what to expect:

1.     Where Do Things Stand Today (Current State)?

Before you embark on a plan, it is vital to document your starting point. For instance, at a minimum, you will capture the following:

• What is the state of your business today? For example, what is your business model? How does your organization compare to the competition, and what are your strengths and weaknesses?
• How much revenue do you generate, and how?
• How many employees do you have, and what is the current structure of your workforce?
• What Key Performance Indicators (KPIs) do you use to measure success?

Then, since we are focusing on your HR function, you can expect some insights into your HR capacity. For example:

• What is the state of the human resources department?
• What is HR doing to support the broader team? What programs are in place, why, and what are you missing?
• What feedback mechanisms do you use to measure progress, and what metrics show your effectiveness?
• What are the strengths and weaknesses of the organization from an HR perspective? For example, if HR management believes the company has a problem with employee performance, this would be an excellent time to bring it up, along with any supportive data.

2.     What Do We Envision for the Future (Desired Future State)?

A strategic approach to HR looks well into the future to support the company’s goals for the next 3 to 5 years. To keep it simple, here are just a few things you might wish to do:

• Double your revenue annually for the next three years while keeping costs comparatively stable.
• Sell the company in 5 years.
• Establish operations in other states or countries, with two new locations yearly, starting in 12 months.
• Launch a new product in two years that will address the needs of a related but different market.

You might notice that these examples are concrete, with timeframes. That is intentional because those details provide vital information for your HR team.

For instance, if you wish to sell the company in 5 years, that will affect the human resource team’s focus and how they communicate and compensate current and prospective employees. They would need to develop plans to maximize the company’s value from the perspective of a future investor by getting the right people, processes, and systems in place.

3.     How Will the HR Department Help Meet Your Goals

Most companies work on many initiatives at once. But, again, for simplicity, let’s imagine you want to sell the company in 5 years.

Improving your marketability and value is critical if you are planning an exit. So, with that in mind, below are some strategies your Chief Human Resources Officer might explore to help you prepare.

Create or Refine the Company’s Vision, Mission, and Values Statements

To ease the transition, your HR leader might suggest you work with your employees to develop a shared vision for the future. For example, why do you do what you do? What are your expectations for the company’s future, and what values represent your organization?

This exercise will help you rally your workforce behind a common goal (creating engagement) while clarifying the types of employees you must attract going forward. It will also help you mold the company into an asset with a clear purpose, so you can eventually identify and pursue the right investors.

Strengthen the Leadership Team

When seeking an acquisition, you must assess the strengths and weaknesses of your leadership team and address any issues.

For example, if you discover that you need better financial processes and controls but lack a CFO, your CHRO might suggest you prioritize that hire. Then they would support that person’s efforts as they build the finance team. Or, if you learn that a couple of your leaders will leave the business when it sells. That might prompt your CHRO to recommend that you identify and train successors and invest in leadership training and development.

Select and Implement a Performance Management Structure

Periodically assessing and adjusting the organizational structure for optimal performance is important as the business evolves. For example, if your business is not hitting its targets, it could be because you have the wrong people in place. But it could also be due to unclear roles and responsibilities or a lack of actionable data made worse by poor communication.

Whatever the issue, getting to the root cause quickly and course correcting is key. Of course, investors won’t expect you to be perfect, but showing that you are taking steps to address problem areas is vital. Implementing a sound performance management system will make gathering data, creating improvement plans, and showing progress easier.

Build Talent Acquisition and Development Strategies to Support Expansion Plans

If you believe your business will be more desirable if you launch a new product or expand into a new region (demonstrating growth potential), what will be necessary to support that effort from a people perspective? Exploring these plans as soon as possible is best because what you learn may affect your decisions. For example:

• Who will do the work? Can you deploy existing resources, or do you need to hire people?
• What will the team look like? For example, do you need full-time, part-time, or contract talent? Will they be on-site, or can people work remotely? Will you need hard-to-find talent? If so, how will you entice them to join your company?
• What compensation strategies will you use?
• Given the team’s structure, who will manage it, and what tools and infrastructure will they need?
• How much will the necessary talent cost? How much can you afford?
• What are the tax laws, local holidays, and talent expectations if this expansion involves a new region?

These are a few examples to give you an idea of how strategic human resource management could come into play when selling your company. Your HR leader will explore options and make recommendations after weighing cost, implementation time, expected benefits, and any roadblocks.

4.     When Will This Plan Roll Out, and How Will We Track and Measure Progress?

Once you have agreed on the course of action, your HR leader will create the timeline and go-forward plan, including milestones. They will also develop methodologies for measuring progress so you can get the necessary systems in place ahead of time.

For example, if you wish to collect data on your talent acquisition and development process, you must consider the questions you might have. For instance:

• How long does it take to hire – from when you post the position to when you get a new employee in the door?
• How long does it take to get a new employee up to speed?
• What is the typical level of employee engagement?
• How long do employees stay with the company?
• Why do employees leave?
• Are you happy with the people you hire? If not, there may be a problem with your job descriptions or interview process.
• Are managers satisfied with the hiring process? If it takes too long and requires too many approvals, that could be a problem.

There are many ways to capture this information, from packaged HR solutions to customized feedback mechanisms, such as engagement surveys and exit interviews. Thinking this through ahead of time will empower you with vital information for spotting trends and identifying initiatives that are not working.

Strategic Human Resource Management: The Bottom Line

Strategic HR Management is a long-term approach to human resources that allows you to craft plans for building the team you need to achieve your business goals while being mindful of your resource constraints. It is an essential process best managed by a Chief Human Resources Officer or comparable HR leader, who can work side-by-side with your executive team and contribute recommendations developed from years of training and experience.

If you do not have (or cannot afford) a full-time CHRO, consider hiring a fractional HR professional who can do this work on a contract basis. Contact us to discuss whether The CEO’s Right Hand might have the right professional for you.