The significance of strategic human resource management for organizations

Strategic human resource management and planning, also known as ‘people strategy,’ is an approach that addresses organizational growth and challenges. Strategic human resource management contributes directly to the long-term objectives of the organization. The primary focus is improving the overall effectiveness of the organization, building and sustaining a culture of innovation, and continuously maintaining a competitive advantage. The approach revolves around creating a sound framework for hiring, managing, and developing employees in a way that supports the organization’s long-term goals.

· Increased workforce agility

Today, agility has become one of the most important skills for individuals and organizations. The long-term goals of an organization change continuously based on external factors, like market trends, competition, supply and demand, political scenarios, etc. The workforce must also adjust its strategies in accordance with the changing organizational goals. With strategic human resource management, organizations can build agile workforces that are able to quickly adapt to changing situations.

· Improved workforce alignment

Strategic human resource management affects all aspects of HR management, optimizing them for better results. The processes can help HR managers predict how the organization will grow in the future so they can manage the current workforce accordingly. Instead of basing internal moves and promotions on the present situation alone, they can be based on the direction in which the organization is headed in the coming times. This strategy also helps retain the right talent that can lead the organization to achieve its goals.

· Increased employee engagement

Employees who do not feel engaged in their job role can end up costing the organization significantly, with the break in productivity and hiring and training costs involved. Strategic human resource management can help in improving employee engagement and productivity in the workplace. It provides employees with a clear sense of direction and helps them understand the needs of the organization so they can act accordingly. This strategy also promotes open and transparent communication and ensures recognition and rewards for the employees.

· Improved employee training and development

Training and development form essential parts of proper workforce management. With the constant advancements in technology, it is possible for the skills of the workforce to become redundant if they are not improved and upgraded. Strategic human resource management is critical for understanding the current level of skills and the workforce’s training and development needs. An example of strategic human resource management in action would be strategically allocating learning and development budgets for preparing the employees for the organization’s transition of its operations to the cloud, almost a year before the shift is scheduled to happen.

· Optimized human resources

Strategic human resource management allows organizations to have a smart strategy in place for managing the workforce. It helps bring the management and the employees closer, allows employees to gain a better understanding of organizational goals, and ensures that the management invests in the right solutions and strategies for human resource management. The approach also helps the organization maximize the productivity of their existing workforce, build a culture that supports employee retention, address critical problems before they blow up, and improve the efficiency of recruitment processes, helping identify and hire top talent that can contribute towards organizational growth.

Resource-based strategy:

Lays emphasis on the need to reinforce the organization’s strategic strengths.

Strategic fit:

A strategic alignment of the human resource management plan and corporate strategy is fundamental for employee motivation and retention.

High-involvement management:

There are five basic categories of high-involvement management, which include decision power, selective hiring, thorough training, information sharing, and incentive compensation.

High-performance management:

Strategic human resource management can help organizations develop innovative mechanisms that can monitor and enhance performance and help increase employee productivity.

Manpower planning:

Also known as human resource planning, this involves assigning the right amount and type of workforce to applicable tasks at the right time.

Technology training:

Technology is being used everywhere, and for any organization that is integrating new employee-facing technology, providing proper training is crucial.

Introducing best practices:

Ensuring transparency regarding existing HR policies can help establish industry best practices within the organization.

Ensuring engagement:

Strong employee engagement is one of the top examples of strategic human resource management functions. It is important to have standard practices in place to retain talent.

Improving process efficiencies:

Strategic human resource management practices can help HR streamline business processes. It can include building employee bonds, designing teams, ensuring a smooth workflow, etc.

Integrating HR tools:

Tools and software that can help in the effective management of HR functions should be employed. Perform needs assessment and consider external factors, like industry trends, labor market, etc., to select the right solutions.

Publishing reports:

Publishing reports on strategic human resource management is extremely important to evaluate process efficiency and take appropriate action.

Traditional HRM

Traditional human resource management primarily focuses on managing the organization’s existing workforce. Traditional HRM involves coming up with initiatives that can bring the current employees together as a team and addressing any existing skills gaps through recruitment. It is more operational in nature and helps ensure productivity in employees working in their respective teams to achieve team goals.

Strategic HRM

Strategic human resource management takes the overall vision and goals of the organization into consideration. Strategic HRM also addresses the skills gaps that may be present by recruiting the right talent. It considers how teams should be designed and built for improved employee productivity that drives business growth. Strategic HRM takes into account how to recruit, manage, and develop the employees within the organization in the long term, in the context of the organization’s goals.

The differences

• Focus: Traditional HRM focuses on short-term outcomes, while the focus of strategic HRM is on long-term outcomes.
• Goals: Traditional HRM is about managing in-house resources better and addressing skills gaps through recruitment. Strategic HRM goes beyond and involves resource planning done in the context of organizational goals.
• Stakeholders: In traditional HRM, the activities are managed by an HR team. In strategic HRM, there are other senior management stakeholders who will contribute to its function.
• Advanced analytics: Advanced analytics play a crucial role in strategic HRM as opposed to traditional HRM.

1. Build a strategic plan aligned with business goals

The first step towards implementing strategic HRM is building a strategic plan aligned with the organizational goals. At its core, a strategic human resource management plan includes understanding the broader organizational strategy to define success and measure it, assessing the strengths and weaknesses to determine areas of improvement, and aligning HR initiatives with organizational strategies to build the skills and capabilities required to see it through.

2. Align HR activities and strategies

Any HR activities being planned and implemented should be in line with the strategic human resource management strategy to maximize impact and achieve the desired business outcomes. This should cover recruitment, hiring, performance management, benefits, organization and function design, and more. For instance, the criteria for performance management should be the same as the criteria for hiring.

3. Harness data

Today, data is key for showcasing the impact of strategic human resource management. Findings from multiple sources of employee data can be used to influence HR practices to ensure better outcomes. The success of strategic human resource management plans can also be tracked and compared based on key performance indicators (KPIs) that are in alignment with the organization’s strategies.

4. Go outside-in

Following an outside-in approach to strategic human resource management offers a more comprehensive overview of the purpose of HR. The employees, leadership, and other stakeholders, like investors, customers, and shareholders should be taken into account. HR practices should align with business strategies, and business strategies should align with internal and external stakeholders.

Strategic human resource management is becoming more and more important for organizations across industries. The approach to human resource management involves a lot of factors, including having skilled HR within the organization, performing needs assessments, evaluating the skills and competencies of employees and candidates, performing training needs assessments, and evaluating the effectiveness of the strategies and plans. Mercer | Mettl offers a range of assessment tools and solutions that can be utilized to perfect strategic human resource management plans.

By managing their workforce effectively, organizations can achieve their goals through strategic human resource management. Organizations should ensure that they have the right talent in place to drive organizational success. Apart from helping organizations achieve their objectives, strategic human resource management also helps improve employee engagement and satisfaction, which assists them in attracting and retaining top talent.