A systematic HR strategy helps a company to secure its core competencies, avoid staff shortages and set a targeted framework for human resources management. Only those who have the right specialists in the right place at the right time can achieve their corporate goals in the long term and remain competitive. In this article, you will learn how to develop a suitable personnel strategy for your company and what needs to be considered.
Definition: What does the HR Strategy Include?
An HR strategy is derived from the strategy of the entire company, the needs of managers and employees, as well as market developments and social trends. It is the master plan for human resources management and sets the medium and long-term direction for all HR activities, such as recruiting, compensation and employee development. The HR strategy is a guideline for management, executives and the entire HR department. It is a signpost for all HR measures.
The HR strategy determines,
- which employees and with what kind of competencies are required for the implementation of the corporate strategy.
- how the required specialist staff can be recruited and tied to the company.
- what the cooperation should look like and under what conditions it can be successful.
HR Strategy: Functions and Goals
Employees are a company’s most important asset. This applies equally to corporations and large companies as well as to small and medium-sized businesses. An HR strategy helps a personnel department to plan personnel with foresight and to react in good time to innovations in the working world. Because digitization in the workplace, demographic change and globalization are not only changing the way we work, they are also shifting the importance of jobs and activities. It is important to recognize and react to it in good time as part of a personnel strategy.
HR Strategy Functions
An HR strategy supports the company’s overall strategy in terms of human resources and helps the company to achieve its business goals. The most important task of the HR strategy is to provide each department with sufficiently qualified personnel in order to be able to meet current and upcoming requirements. In addition, it determines which employees are used for which tasks and how the staff work together. A systematic HR strategy binds the workforce in the long term and increases employee satisfaction. It thus makes an important contribution to the company’s success.
An HR strategy takes on the following important functions:
The HR strategy enables medium- and long-term personnel planning and allows forecasts as to which employees with which qualifications are likely to be needed. Personnel bottlenecks and overstaffing can be avoided with the help of proactive recruiting.
The HR strategy serves as a guideline for all personnel-related decisions, which HR managers can use as a guide. It gives them the security that their decisions contribute to the implementation of the long-term HR strategy and the company’s goals.
A human resources strategy can ensure that the company can retain the right specialists and that the workforce remains efficient, because the employees make the difference and contribute significantly to the competitiveness of the company.
With the help of a concrete HR strategy, recruiting measures can be planned for the long term. With long-term planning, the effort and costs of recruiting new employees are usually lower than when application processes have to be carried out ad hoc. A personnel strategy can therefore help to save personnel costs.
HR Strategy Goals
The goals of an HR strategy can be very different depending on the core question and focus. If an HR strategy aims to attract and retain specialists and talents, issues such as employee retention and recruiting are paramount. The following topics can be in focus:
- Recruiting
- Human Resource Development
- Employee Retention
- Digitalization
- Initial and Continuing Education
- Compensation Management
- Success Control
- Personnel Control
- Leadership Training
- Corporate Culture
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Developing a Successful HR Strategy – this is how It Works
An HR strategy basically includes the analysis of the current company and personnel situation, a definition of the strategy goal, a concept and the planning of the implementation. It has to fit the company and its situation and always contains a change concept. You should be aware of this before you develop an HR strategy. Many people cannot deal with change. It only makes sense to develop a structured HR strategy if HR management is willing to leave the beaten track and deal intensively with the strategy, the business model, the markets and the value-added process of your own company.
Developing an HR strategy takes time and resources. In principle, in addition to HR, you should also involve management and executives in the development process. This can take the form of workshops or feedback loops. At the same time, this approach strengthens the acceptance of the HR strategy in management and underlines the role of HR as a competent strategic partner.
A people strategy can also contain conflicting guiding principles, for example, consolidate the core business and drive innovation, or reduce staff in one business area and increase in another. At the same time, an HR strategy must be flexible in order to be able to react quickly when there are changes in corporate strategy, on the job market or in the industry. Digitization in particular is accelerating change in markets and in the world of work. It is all the more important for HR to dynamically adapt strategic planning to the changes and to undergo a permanent adjustment and transformation process.
As a result, the way companies develop an HR strategy has changed. Just as there is no standardized HR strategy, there is no patent recipe for the development process. This must be adapted to the company. A sensible approach should include the following steps:
- Analyze the initial situation
- Define goals
- Develop and evaluate options for action and derive measures
- Communicate strategy
- Implement and evaluate measures
1. Analyze the Starting Position
At the beginning of every strategy there is an inventory. Where is the company right now? What is the competitive situation and how is the market and job market developing? Various factors play a role in it.
- Business model
- Corporate Strategy
- Corporate and Leadership Culture
- Company Size and Age Distribution
- Working Time Models and Pay Structures
- Employee Development
- Employee Retention
- Etc.
- Industry Development
- Technological Development
- Contest
- Demographic Development
- Availability of Professionals
- Applicant Requirements
- Employer Branding Perception
2. Define Goals
Your HR strategy should now answer the question: What contribution does the HR department have to make so that the company’s goals are actually achieved? These can be goals related to potential candidates, such as, for example, the establishment of a positive employer image. However, HR goals can also focus on the existing workforce, e.g., by reducing the turnover rate. You should formulate the goals as specifically as possible using the SMART formula:
- Specific: clearly defined
- Measurable: according to
- Appealing: accepted or desirable
- Realistic and achievable
- Terminable
3. Develop and evaluate options for action and derive measures
If you compare the current situation with the goals of the HR strategy, there are options for action to close the gaps that appear. First, consider all the options. The spectrum can be very broad and varied. The next step is to evaluate, prioritize and select the options for action. You should take into account the benefits, costs and risks, as well as the feasibility of the measures. The planned HR activities can be aimed at potential applicants. This can include for example, employer branding measures, e-recruiting or applicant management. However, internal HR measures can also be involved, such as further education and training opportunities, attractive remuneration and social benefits, employee management, attractive design of the working environment or flexible working models.
4. Communicate, Implement and Evaluate Strategy
As soon as the HR strategy has been formulated, implementation begins. That’s the hardest part. Above all, when drastic changes are coming to the employees, it is important to do some convincing. The entire workforce must understand and believe in the HR strategy in order to adopt it. The communication of the new strategy therefore needs to be well planned. Involve everyone involved, such as management and employees. Transparency and openness are the be-all and end-all for the acceptance of the HR strategy.
You can inform the employees about the new HR measures not only in working meetings, but also via the intranet, newsletter or employee magazines. There have been good experiences with road shows, where managers and HR managers enter into dialogue on site. Storytelling is also a good tool for making strategy topics understandable. Communicating HR strategy is an ongoing process, as HR strategy is not a one-off affair. It forms the future foundation for the work of the HR department. It has to be continuously developed and adapted to the changing framework conditions.
In order to drive the implementation of the HR strategy, it makes sense to create a plan. In it you determine who has to do what, when, which goal is being pursued and how success is measured. Some measures, such as the introduction of HR software, have to be planned well in advance. Changes in the company can only be brought about if the necessary capacities, resources and support are available. For a successful implementation of an HR strategy, it is therefore crucial to involve all relevant stakeholders in a timely manner, assign responsibilities and provide budget, required tools and skills.
In order to be successful with your HR strategy in the long term, it is essential to regularly monitor the progress of implementation and to check whether the measures taken are effective. Are the HR activities carried out suitable for achieving milestones or the set personnel goals? Or do you have to correct and adapt strategy and measures if necessary? For strategic controlling, use HR key figures or external benchmarks in which you compare your company with competitors.
HR Strategy Consulting as a Helping Hand for Your Company
Sometimes there is a lack of capacity or know-how – or both – in your own company to develop and implement a successful HR strategy. Then it makes sense to involve an HR strategy consultant. It helps the company to find, define and establish a suitable strategy for its staff. Together with the internal strategy team, the HR strategy consultancy develops HR measures based on the personnel goals that fit the company, the business model and the future, specific challenges it involves.
Basically, HR strategy consultants support companies with the following questions:
- Which employees are required with which qualifications to carry out tasks in such a way that the corporate strategy is successfully implemented and the company remains competitive?
- Which HR task areas and tools are in focus?
- How does HR manage to convince the job market with a clear profile, to attract the necessary talent and to strengthen motivation and employee loyalty in the long term?
- What contribution does human resource management make in the company to maintain and consolidate the corporate culture and to promote the social and professional skills of managers?
CLEVIS Consult has specialized in HR consulting for companies and organizations for ten years. The key competencies of the consultants lie in HR Digitization, HR Transformation and HR strategy. With experience from over 1,000 projects, CLEVIS Consult is one of Germany’s top HR consultancies. Together with your strategy team, we develop an HR strategy that suits your company and support you in communicating, implementing and controlling your HR strategy. It is our goal to make your HR work effective and successful by providing your HR managers and employees with the right tools.
Why is HR Strategy so Important?
The world of labor has changed extensively in recent years. These developments have an impact on almost all areas of HR work. The demands on human resources management have increased enormously. Instead of managing personnel, human resource management is now more concerned than ever with making a contribution to the achievement of corporate goals as a strategic partner.
In order to be able to cope with the changed situation on the labor market, every company should place its human resources on a strategically stable footing. Because digitization has changed the way we work enormously. Digital teams and home office require a new kind of leadership style. Employees must be trained to use digital technologies. New qualifications and skills are needed in the company. In addition, a shortage of skilled workers and demographic change have led to a war for talent. More and more often, companies find themselves in the “applicant role” when it comes to recruiting and retaining qualified personnel.
But the needs of employees have also changed. Young people in particular, who are entering the job market, want meaningful work, a work-life balance and more autonomy and independence.
In short, every company benefits from a modern HR strategy and the use of suitable HR instruments. It helps to align all forces and resources of HR work to the business goal and to be able to structure all HR activities effectively and clearly. A personnel strategy requires that HR managers regularly deal with the change plans of the company management, the business model, the industry and the company’s markets in order to take these developments into account in HR work and to be able to contribute as a strategic partner to the added value of the company. An HR strategy is therefore an indispensable part of the company.
Application examples for the HR strategy in the company
The HR strategy and its goals are always derived from the corporate goals. For example, if a company wants to increase its productivity, one goal of the HR strategy could be to make the onboarding processes more efficient and faster. The strategy team would have to analyze how long it takes for a new employee to be on board. What information is missing at the beginning that could possibly speed up the process? Another HR goal could be to save time on HR administration. One option for action would be to automate administrative tasks using HR software.
In another example, a company wants to double its sales in the next two years. A new product is being developed for this purpose. Driving it away requires employees with special skills that are hard to find on the labor market. One goal of the HR strategy could be to strengthen your employer brand in order to position yourself as an attractive employer for the skilled workers you need. If the company goal is to reduce costs, a possible HR goal would be to strengthen employee loyalty and thereby reduce the turnover rate. Because the termination of an employee is usually associated with high costs.
The examples show that the HR strategy can make an important contribution to achieving company goals. The corporate goals can only be achieved if the employee structure and the attitude of the workforce are right. In its role as a strategic partner of management, HR bridges the gap between management expectations and employee satisfaction.
Excursus/Future Outlook: What does a Possible HR Strategy Look Like in 2023?
The strategic work of the HR department will – if it hasn’t already happened – change significantly for many companies. Innovation and data will play a major role in this. Digitization will inevitably find its way into the HR department. Those who are not yet working with HR software will switch to it in the future. This eliminates numerous administrative, repetitive tasks related to human resource management. HR managers will have more time to strategically advise managers on HR matters. Numerous functions such as data and technology management, talent management, employee qualification and competency management of human resource management will play a more important role in the future.
Above all, the acquisition and development of new employees will become a core task of HR work and will increasingly become the focus of HR strategy. Because the need for specialists, managers and junior staff is great and will continue to increase. Recruiting and talent management have become significantly more relevant in recent years. More and more HR managers are using e-recruiting, for example, to address their target groups and simplify the selection process and make it more efficient. It is to be expected that covering personnel requirements will continue to be one of the strategic focal points of human resources work.
Employer branding is closely related to it. If you want to recruit qualified specialists for your company, you have to be perceived as an attractive employer in the job market. HR marketing and a clear positioning of the employer brand will gain in importance in many HR departments in the coming years.
HR Strategy FAQ
What is an HR Strategy?
An HR strategy defines the goals and measures that human resources need to achieve the company’s goals. It ensures that the right people are in the right place at the right time, making them an indispensable tool in achieving corporate goals. In addition, the HR strategy defines the medium to long-term orientation of a company’s HR work and offers planning and orientation assistance to achieve HR-related business goals, to master future challenges and to remain competitive.
How is an HR Strategy Developed?
The design of an HR strategy depends on many factors. Company goals and strategies, workforce structure, the importance of HR work in the company and the corporate culture play an important role. Basically, the following steps are carried out in the development and implementation of a personnel strategy:
- Analysis
- Evaluation and Selection
- Formulation
- Communication and Implementation
What are the Functions of an HR Strategy?
The most important task of the HR strategy is to recruit qualified personnel in good time in order to be able to react to current and future tasks. It formulates which employees are to be deployed and how, or what the collaboration should look like. Other aspects of the personnel strategy are long-term employee loyalty, increasing employee satisfaction, employee training and further education, adjusting personnel structures and reducing personnel costs.
Why is HR Strategy so Important?
If you want to continue to run your company successfully in the future, you need a good HR strategy. Digitization is changing markets and processes. Products and services adapt to changing needs. This places new demands on the workforce. The labor market needs skilled workers who are flexible and dynamic and who can respond optimally to changing conditions at any time.
What are the Goals of the HR Strategy?
The aim of the HR strategy is the competent management of all current and future tasks of the company. The HR strategy should ensure that the HR department of the company
- is flexible in order to react to changing operational and environmental conditions.
- possesses the necessary responsiveness and adaptability that a company needs to survive and compete in human resource management.
- Personnel bottlenecks, understaffing or overstaffing are avoided.
Conclusion: HR Strategy as the Cornerstone of all HR Work
A successful HR strategy is derived from the company’s overall strategy and shows a deep understanding of the entrepreneurial challenges. It is coordinated with the top management and the specialist departments and is communicated transparently and openly within the company. The personnel strategy is actively lived and implemented every day. It adapts flexibly to changing environmental and framework conditions. Your success is measurable, the selected HR measures can be adjusted if necessary. The HR strategy makes an important contribution to the company’s success and increases the acceptance of the HR department as a strategic partner. It is an indispensable part of any HR work.
