What is strategic HRM?
Strategic human resource management, or HRM, is the practice of aligning HR functions with wider business goals and strategies. It encompasses workforce management, recruitment, talent management, people management, learning and development and more, laddering up to organisational aims and providing an effective framework to help achieve them.
Strategic HRM might also be referred to as “people strategy” or “SHRM”. Its role is to inform organisational decision making and planning while putting people at the very core of business strategy, focusing on talent to deliver commercial value.
What is the difference between HRM and strategic HRM?
Strategic HRM is fundamentally different to operational HR management because it takes a future-focused approach, providing solutions to support long-term goals. With a refined strategy, HR can be more proactive, helping to drive business growth. Without this, HR is generally more reactive, responding to immediate needs and concerns. Organisations with a more mature HR strategy often have the competitive advantage.
Until the 1990s and early 2000s when strategic HRM became popularised, HR was primarily considered a cost centre, responsible for administrative duties and recruitment as directed by other departments. HR has now taken on a more impactful role with wider responsibilities including contribution towards organisation growth and success. Now, forward-thinking organisations understand the role of HRM in strategic management.
The importance of strategic HR management
Strategic HR management is important for improving organisational efficiency, productivity and return on investment in people resources.
Mid-large organisations often feel the benefits of strategic human resource management as they make structural changes to prepare for growth while supporting their employees through the process.
Simple with access to HR data and by harnessing people analytics, any organisations of any size can devise and deliver a successful HR strategy. HR software with integrated analytics and reliable reporting functionality will underpin successful strategic HRM. It can be used to track and manage data whilst supporting strategic decision-making. The software will use datapoints from across the organisation, ensuring there is one “source of truth,” while processing it to specifically support HR needs.
What are the advantages of strategic human resource management?
When HR teams are given a seat at the table, powerful people-focused goals become achievable. These are some of the key advantages of having a refined HR strategy:
- Gaining a competitive advantage.
- Enhanced employee engagement.
- Talent retention.
- Cost efficiencies.
- Achieving company goals.
- Promotion of company values and culture.
- More cohesive leadership.
Explore these advantages in further detail and find out how strategic HRM benefits organisations.
Gaining a competitive advantage
Strategic HRM leads to long-term alignment between business and HR goals. This affords HR departments a more prominent role in the organisational structure, and they can become increasingly influential. For the organisation, benefits include a strategic approach to hiring, improved people management and the ability to be more flexible and plan effectively for the future, driving sustainable business growth, which in turn can ensure a competitive edge over others in the industry.
Enhanced employee engagement
An HR department that works strategically will be able to tailor the employee experience, resulting in improved employee engagement. From self service apps, to interactive digital learning, to focused and inclusive onboarding, there are many opportunities to strategically enhance and measure engagement.
Improved talent retention
A strategic approach to engagement can help improve talent retention, as well as optimising hiring to bring the best people on board. With one in three people planning to leave their jobs in the next 12 months, talent retention should be a key goal for HR, to avoid hiring costs mounting up or being spent on the wrong people in the wrong roles. A good HR strategy will focus on people and their importance to the organisation – smart HR departments with the right data at their fingertips will use this as an opportunity for engagement and development, improving their return on people investment.
Read our guide on how to upskill your employees.
Cost efficiencies
While new strategies may require budget to implement, they can result in significant cost efficiencies when successfully delivered. It generally costs around 20% of a midrange employee’s salary to replace them – this can rise to 213% for executive positions. Retaining talent will remove these costs, plus other cost efficiencies will result from increased productivity, better communication and more strategic leadership.
Achieving company goals
HR and other departments need to be aligned when working towards shared goals. Removing siloes and setting up workflows that promote collaboration is a good starting point, as well as setting “north star” goals that everyone supports. Through better alignment and strategic planning, future needs can be met in areas such as recruitment and resourcing, plus teams will have greater clarity on their long-term aims.
Setting company values and culture
A major role of HRM in strategic management is in setting and communicating organisational culture and values. HR departments can strategically disseminate company messaging to make the organisation a better place to work, supporting talent attraction and retention, as well as ensuring employees are the right fit for the organisation.
More cohesive leadership
A HR strategy can lay out expectations and initiatives which encourage leaders to put people first. By incorporating people strategy into company strategy, leaders can effectively plan ahead knowing they have a strong pool of talent, motivated teams and the necessary headcount to achieve their own goals.
What are the disadvantages of strategic human resource management?
Whilst there are no significant disadvantages to being more strategic, there can often be roadblocks when it comes to developing a new strategy. These include:
- Resistance to change, preventing full buy-in for new strategies.
- Uncertainty and risk, which are inherent to new processes.
- Time pressures for already busy departments.
- Departmental conflicts – opinions may not always be aligned, at least at first.
- The need for investment in additional resources.
Resistance to change
Change can be difficult to implement, especially when collaboration is needed more widely and multiple stakeholders are involved. Employees may also be underwhelmed by new plans if a strategy is not carefully rolled out. Communicating clear benefits, implementing solid workflows and giving everybody the chance to voice their concerns can help to make the process transparent and less intimidating.
Uncertainty and risk
Will your new strategy pay off? New ways of working often come with inherent risk, especially when budget is required. Careful planning and thorough documentation will help to reduce risk, as will using HR software to gain accurate and reliable data throughout.
Time pressures
People are already busy and may question how they will have time to change their processes. Day-to-day operations still need to be taken care of which will require forward planning, and maybe additional resources. Look for ways to automate existing processes wherever possible so managers can focus their attention on developing and driving new strategy and ensuring employees are engaged. Strategic HRM should involve ways to help save people time and reduce admin so if a new strategy involves people-resource, there should be measures in place to automate old processes or streamline workflows.
Departmental conflicts
Different departments have different priorities, which can make it difficult to arrive at unanimous decisions. This is where setting long-term, overarching goals will be helpful as will having robust data – find common ground and develop the business case to support strategic decision making.
Additional resources
A new strategy may require more headcount and additional resources for implementation. In the long run, strategic practices should save time and budget, but initial investment and stakeholder buy-in will be required.
HR software will be integral to the rollout of any new strategy, helping managers keep day-to-day tasks ticking over when implementing change. The right HR software can automate and improve talent management and recruitment as well as help increase employee engagement, making it an essential consideration for strategic HR. It can also produce reports to show plans are on track, or flag issues early so they can be dealt with.
Best practice in strategic human resource management
In summary, developing from an operational to a strategic HR function involves:
- Aligning HR functions with wider business goals and strategies. It can pave the way for future growth and benefit the whole organisation.
- Setting objectives; these could include enhanced engagement, cost savings, improved talent retention and competitive advantages over other businesses.
- Developing a business case for any new strategy, backed up with data to avoid any pushbacks that may be encountered due to resistance to change, differing priorities, lack of time or budget.
- Pushbacks can be overcome by using the right software to automate processes and free up time.
- Reporting on the effectiveness of new strategies is key, showing stakeholders where plans are working and informing decision making.
