Strategic human resource management: The ultimate guide

Strategic human resource (HR) management treats human capital — or employees — as another financial asset of the company. Just like you’d consider real estate or raw materials as an asset to be optimized, strategic HR does the same for the company’s labor force. The more effective your strategic human resources plan is, the stronger the company will be both financially and culturally. 

Considering a strategic approach to HR management is increasingly important in our changing world. Creating a strategic human resource management plan can ensure you have a pipeline to qualified employees as time goes on, ensuring the sustainability of the business.

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What is strategic human resource management?

A good way to think of human resources is on an input/output paradigm. Traditional human resources weigh inputs more heavily. You’re focused on following compliance standards, regulations and processes. You’re managing benefits packages, running payroll, hiring and managing talent as well as day-to-day employee relations.

“Strategic HR focuses on supporting organizational goals,” said Anette Harris, owner and senior director of human resources at Harris Financial Coaching. “It plays a crucial role in analyzing employee life-cycle trends that can help an organization achieve its objectives.”

In other words, you’re much more focused on output. You’re looking at metrics like employee engagement and profit per employee. You still have to consider employment law, but you’re also aligning the company’s missions and objectives with what’s happening in the HR office and the company’s long-term goals. 

Benefits of strategic human resource management

There are a number of benefits to implementing strategic human resource management. They include: 

• More quantifiable data. You can’t measure the impact of strategic HR unless you actually implement it. Once you start implementing it, you can gather the data that will help you measure the tangible benefits of the company’s strategies in terms of real dollars. As more time goes on and more data is gathered, you’ll gain even deeper insights.
• Better the company’s finances. “Any financial measure that you can think of is greatly impacted to the positive when there’s a strong employee experience in place,” said Jim Link, chief human resource officer at SHRM. That means implementing strategic HR can help your company’s bottom line. 
• Less turnover. If you have good strategic HR, your employees are likely to be happier. Happier employees are more likely to stick with you, saving you the costs of having to hire and train new employees. 
• Prepare for future skill gaps. If you’re approaching HR strategically, you’ll be able to project future skill gaps that may pop up in the labor market. When you anticipate these shortages, you can draft policies that create a clear pipeline to get skilled applicants trained for the work you’ll need done.

Creating an effective HR strategy

Align HR and company goals

The first step in creating an effective HR strategy is aligning HR’s goals with the larger company’s goals. If management and HR don’t interact a lot currently, it’s the strategic human resource manager’s job to bridge that gap. You’ll need your HR skills to mediate the two departments at first, but you’ll also need to break out your math skills. 

“The first thing you should do is learn the numbers of the business,” said Link. “But that doesn’t mean you just learn the numbers. You also learn the mission, values, goals and guiding principles of the organization.” 

Having this data will help you identify the most important metrics to measure as you create the best employee experience possible within the company’s budget. 

Define and assess company culture

It takes time to build company culture. Before you can start on the journey, you need to understand where company culture currently stands. The four key cultures you should assess are:

• Innovation
• Learning
• Collaboration
• Inclusion

Link conveys these four cultures as individual legs on a four-legged stool. When one leg is longer or shorter than the others, everything is thrown off balance. The goal, then, is to grow each culture symbiotically with the other. As you build your stool, you’ll also want to consider cultures employees are likely to value in the future.

“When we look at the world and what employees are really seeking from their employer moving forward, they’re seeking a culture of care,” said Link.

Track important HR metrics

When you’re building out your company’s strategic human resource plan, you’ll want to start measuring metrics like: 

• Cost per employee.
• Revenue per employee. 
• Employee productivity.
• Employee engagement.
• Retention rate.
• Voluntary turnover rate. 

Some of these metrics can be measured by numerical data input, but others will require different approaches. For example, you might use employee surveys to gather data for a final SWOT analysis. This data can then help you present information to management or the board as you attempt to implement new policies.

Identify key areas of improvement

Once you have the data from current performance, hold it up against the company’s mission statement, stated values and – of course – its bottom line. First, evaluate company culture based on the four-legged stool model. If there are any areas where the culture could be performing better, that’s something you’ll want to address. 

Whether or not the culture is on course, you’ll need to also consider the financials before presenting any information across departments. Let’s say your employees are beyond happy and productive, but profit per employee is still low. You’d then use that data to find innovative ways to maintain company culture while also increasing revenue per employee. 

Set a plan to reach HR goals

After you’ve identified areas for improvement, you’ll need to get together a plan to work towards your new goals. That may mean implementing new initiatives within HR, but in most situations, it requires the involvement of other departments — most notably leadership. 

Get leadership buy-in and support

Improving employee experience and performance often requires policies from the top. That means strategic human resource managers need to engage leadership. You may need their stamp of approval to do something like changing the employee benefit package or streamlining processes in a particular department to enable employees to do their work more efficiently. 

If you’ve done your work on the numbers side of things, Link doesn’t see any reason for leadership to stand in opposition: “Companies that make a purposeful strategic investment in their employees have a much greater likelihood of generating short- and long-term success for the business. Full stop.”

Execute, monitor and adjust your plan

Once you’ve created buy-in with the necessary parties, execute your plan. Gather data as you go so you can monitor your progress, making any adjustments as necessary. 

Remember that as you grow one leg of your strategic HR stool, you’ll inherently need to work on the others. Being prepared to make adjustments along the way is a necessary part of the job.

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OnPay

Learn More

Via OnPay’s website

Monthly fee

$40 per month plus $6 per employee

Direct deposit

Yes

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Learn More

Via Rippling’s website

Monthly fee

$35 per month + $8 per user

Direct deposit

Yes

Gusto

Learn More

Via Gusto’s website

Monthly fee

Starting at $40 plus $6 per month per employee

Direct deposit

Yes

SurePayroll

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Via SurePayroll’s website

Monthly fee

$29.99 per month plus $5 per employee

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