What is Strategic Human Resource Management?

Strategic Human Resource Management aims to align the focus of HRM with business to achieve
objectives through the strategic deployment of a highly committed and capable workforce, using a range
of cultural, structural, and personnel techniques (Storey, 1995).

These techniques include hiring, promoting, and rewarding employees, building and maintaining high-
performance work cultures, and organizational design to add value and achieve a competitive
advantage.

Strategic HRM centers on creating a talent management framework that drives behavior and culture to
support an organization’s long-term business goals.

In Strategic Human Resource Management, business strategy informs the personnel, cultural, and
structural HR techniques.

The concept of Strategic Human Resource Management was developed in the 1990s – mainly through
work by Storey, Schuler, Wright and McMahan, and Boxall and Purcell – and popularized in the 2000s.
This was triggered by Dave Ulrich’s challenge for the HR profession. HR had become “often ineffective,
incompetent, and costly; in a phrase, it is value sapping.”

Today, Strategic HRM is an essential part of the HR function, particularly for large and rapidly growing
organizations. However, there is no specific strategy that guarantees success, and Strategic HRM is
constantly evolving. That’s why organizations must create their own strategy that aligns with their
specific context, culture, and objectives. Continuous monitoring then allows them to build on and
improve it.

Traditional HRM vs Strategic HRM

HR management was traditionally considered a task-oriented administrative function. It was distanced

from what business leadership was doing and primarily reactive. It met employees’ needs as they arose.
However, it wasn’t in touch with where the company was headed and didn’t anticipate what might be
coming.

For example, traditional HRM would answer employee questions about HR policies, but it wouldn’t
create policies based on the company’s long-term goals and find ways to engage employees with them.
With a strategic HRM plan, HR teams operate more proactively because they are integrated with
business strategies. They understand and center their pursuits on the company’s objectives. This
involves planning and taking action to ensure the organization has the workforce it needs to achieve its
goals.

For instance, instead of hiring based solely on immediate needs, HR will recruit people whose talents
and experience can also meet future demands. This is possible because HR is part of the leadership team
and is fully aware of what the company wants to accomplish in both the short and long term.

Caitlin Weiser, Consultant at Red Clover HR, explains: “Aligning HRM with overall business strategy is
about understanding what employee behaviors are needed to support long-term business goals. By
identifying these behaviors, HR can make strategic process improvements, create incentive programs,
set KPIs, and provide learning and development opportunities to drive results.”

Strategic Human Resource Management examples

Companies that embrace strategic HRM enhance their HR practices to better support business
performance. Let’s look at how this plays out in the real world.

Here are examples of how three different organizations have put SHRM into practice:

Example 1: Nissan

A business goal to differentiate itself from competitors prompted Japanese auto manufacturer Nissan
Motor Corporation to foster a corporate culture that empowers employees to innovate its
manufacturing processes.

Nissan applies a continuous improvement framework called Kakushin. This philosophy challenges
assumptions about operating in a certain way and embraces brainstorming and analysis to make
changes and move ahead. Employees are encouraged to find ways to continually improve methods for
getting work done.

With the business objectives and the Kakushin method in mind, HR leaders can focus HR practices where
they need to be:

Recruiting the right talent, and

Building a secure workplace environment where employees feel entrusted to meet challenges with
autonomy and fresh ideas that drive achievement.

Example 2: Brigham and Women’s Hospital

Brigham and Women’s Hospital is a teaching affiliate of Harvard Medical School. They recognize that
“great patient care begins with great people“. The organization’s strategic HRM efforts primarily target
creating a healthy work-life balance for employees.

HR helps to provide childcare for employees who are caring for children or the elderly, as well as back-
up childcare in case of emergencies. The hospital also assists with home health services, nursing home
placement, and support groups to reduce stress. What’s more, employees who earn below a certain
threshold get subsidized tuition rates.

In general, the hospital actively encourages employees to balance their work responsibilities with their
personal lives and maintain their health and wellbeing.

Example 3: Sainsbury’s

Sainsbury’s is one of the leading supermarket chains in the UK. The company has been an innovator
when it comes to all aspects of the business. They opened their very first “worker academy” almost a
century ago, pioneered self-service shopping, and recently invested in raising all its retail staff’s salaries
to £11/hour.

The retailer works hard to ensure that its employees are empowered to offer customers a great
experience.

Sainsbury’s training academies are responsible for training team leaders and store managers in technical
and behavioral skills to boost their confidence, create a more positive employee and customer
experience, and help them advance in their careers. 58% of colleagues who are in the
Leading@Sainsbury’s program will get a promotion within 9 months of completion.

The company has also ditched the requirement for a CV when hiring for retail colleague roles, creating
more opportunities for people who may lack the education or employment history traditionally required
by other employers for similar roles.

Importance of Strategic Human Resource Management

Reaching success is more likely when the whole company is working toward the same goals. When HR is
tuned into leadership’s big-picture plan, it can have cohesive structures in place to support and engage
employees in ways that will make it come to fruition.

Strategic management of human resources adds value in the following ways:

Connecting employees with organizational goals – The Strategic Human Resource Management process
ensures that HR practices, policies, and strategies link employees with the company’s path to
accomplishing its broader organizational objectives.

Gaining a competitive advantage – Knowing exactly where leadership wants to take the organization
allows the HR department to focus on the skills and abilities people need to do the work it takes to get
there. Through effective talent management, training, and development, SHRM can lead to a more
competent and skilled workforce that yields a competitive edge over rivals.

Adapting to change – A strategic approach to HRM means continually looking ahead, allowing
organizations to anticipate and quickly adapt to changes in the business environment. Plans can adjust
to accommodate technological advancements, market shifts, or evolving workforce demographics.
Meanwhile, HR supports, motivates, and communicates with employees throughout the adjustments.

According to Simon A. Taylor, Head of Organization Effectiveness at Gap Inc., with an understanding that
change is the new constant and no one knows the future, the best thing an organization can do to
prepare for the future is to build the capacity to change quickly, hone in on what’s important, and
quickly adapt.

“Practically, this means two things: 1) building the mindsets, practices, and capabilities within the
organization to spot and rapidly adapt to change, and 2) designing HRM practices with an understanding
that they can – and maybe should – evolve in the not-too-distant future as the business strategy
evolves,” says Taylor.

Enhancing employee performance – Strategic HRM determines how employees add value and facilitates
performance management systems that ensure they are motivated, well-trained, and properly
evaluated. HR can implement methods for addressing employee weaknesses and reinforcing their
strengths, leading to optimal job performance and productivity. What’s more, it can strive to improve
performance through improved employee wellbeing.

Driving business growth – With its emphasis on proactive planning, SHRM identifies gaps in current
resources and forecasts future workforce needs. As a result, the organization is equipped with the
necessary human capital to launch initiatives, enter new markets, and drive growth.

Improving operational efficiency – A strategic approach to HR is about meticulously designing roles,

responsibilities, and workflows to specifically suit the company’s human capital needs. This clarity
streamlines operations to reduce redundancies and boost overall efficiency, directly contributing to
better business performance.

How to create a Strategic Human Resource Management plan

Now that you have a better understanding of what Strategic HRM is and why it matters, let’s explore
how to create and implement a strategic plan for your organization.

Although there is no one specific Strategic Human Resource Management model to follow, there are
some best practices to be mindful of.

The following five tips will help you implement truly Strategic HRM:

1. Create an HR strategic plan that follows the business

The first step towards making an impact with Strategic HRM is creating an HR strategic plan linked to
overall business goals.

An HR strategic plan boils down to:

Understanding the broader business strategy so you know what success looks like and how to measure
it.

Evaluating strengths and weaknesses to uncover where you need to make improvements.

Aligning what you’re doing in HR with the business strategy to build the capabilities needed to carry it
out.

Here are some questions to ask yourself to help understand the business on a deeper level:

What are the long-term goals of the organization?

What are the strengths and weaknesses?

What are your current resources?

What current skills does your workforce have, and are there any gaps?

For example, if the organization plans to grow exponentially over the next five years, you might need to
invest in recruitment programs across different functions. If you’re looking to launch a new product or
service or expand into new markets, think about the skills and capabilities you need to achieve this.
“if a changing business strategy requires different mindsets and ways of working, then that’s going to
have a direct implication for how you manage performance, the cultural principles that need to be
elevated, and the kinds of people you need to hire.

Therefore, whenever the business strategy changes, the HRM strategy needs to change with it. When
this doesn’t happen, HR loses its seat at the table and fails in its primary role – to drive business results.”

– Simon A. Taylor, Head of Organization Effectiveness at Gap Inc. and author of Build Smart: A Blueprint
for Building a High-Performing Organization

LEARN MORE

How to Create an Effective HR Strategy in 2023

2. Align HR activities with the strategy

All HR activities should align with the HR strategy and with each other to create a compound effect that
helps achieve business outcomes. These include recruitment, selection, performance management,
compensation and benefits, organization and function design, and more.

For example, performance evaluation criteria should be the same qualities you look for when hiring
people. In addition, you should strive to develop these qualities throughout the workforce. This allows
your hiring, performance evaluation, rewards, and learning and development to align with what the
business strategy is trying to achieve.

In research, these groups of HR practices are referred to as bundles. An example of such a bundle is
employee retention, which is associated with several HR practices like good job design, employee
involvement, and equal opportunities.

Another bundle is innovation. Innovation is associated with performance appraisal, employee

involvement, teamwork, job design, training and development, and provision of information.

Strategic HRM is about prioritizing HR activities that help you carry out your HR strategy, which, in turn,
contributes to the organizational strategy.
3. Emphasize data

Data is the key to showing the impact of Strategic HRM. Evidence from multiple sources of workforce
data can influence HR practices to sustain better outcomes. You can track success with HR key
performance indicators (KPIs) that are aligned with the strategy of the organization.

In addition to tracking progress, you can use people analytics to measure how your people policies
contribute to business goals. This makes HR’s contributions very tangible and can build a concrete
business case for HR investments.

For example, Best Buy, an American consumer electronics retailer, found that a 0.1% increase in
engagement leads to an increase in revenue of $100,000 per store.

Furthermore, a McKinsey study found that it pays off to shift the best talent to where the business
strategy requires it. Organizations that swiftly reallocate employees to high-priority initiatives are more
than two times as likely to outperform their competition.

4. Don’t forget HR’s other responsibilities

The push for Strategic HRM doesn’t mean that HR can neglect the rest of its responsibilities. Next to HR
strategy, Dave Ulrich defined three other roles of HR as enabling change, efficient administration, and
developing and engaging employees.

Once the strategy is set, the power lies in its execution. The Human Resources department should not
forget to focus on flawless people operations and employee engagement. Beyond the strategic outlook,
you still need to have an engaging and compliant onboarding process, handle employee data, and
manage benefits.

5. Take an outside-in approach

A critical step in being strategic is taking an outside-in HR approach, which provides a more
comprehensive picture of HR’s purpose. Who are the customers of HR? While the obvious answer here
is employees and leadership, there are also other stakeholders, including shareholders, investors, and
customers.

HR practices must align with business strategy, and that strategy also needs to align with these external
stakeholders. Rather than focusing on what it does, HR should gauge the value it creates for every
entity.
When HR practices are in line with the expectations and needs of these stakeholders, it fosters a positive
brand image, strengthens trust, and encourages a balanced business ecosystem.

By showcasing the impact created for each stakeholder through HR practices, HR can contribute to
sustainable organizational growth and drive business excellence.

“If you want to be a real strategic player in HR, you not only want to have the understanding of the
entire landscape, but you need to be able to see all altitudes and see how all the tactical pieces are
dependent on each other.

Taking a broader position will allow the HR professional to understand the business strategy and apply
the human resources efforts (regulatory/compliance, culture, technology, etc.) in a way that
complements and betters the business strategy, not create silos, additional hurdles, or administrative
burdens.”

– Jessica Moore, HR Consultant and Founder at ThriveWise Solutions

A final word

A Strategic Human Resource Management plan guides HR activities so they link people to the
organization’s objectives. In other words, programs like recruitment, performance management, and
compensation and benefits all function so that the workforce is enabled to carry out what the company
aims to achieve.

Operating from a truly strategic framework offers a greater chance for business success because
everyone in the organization is collectively working toward the same goals. HR can add tremendous
value to the organization by executing SHRM properly, and become a strategic partner to the business.

Key Elements of Strategic Human Resource

Management
 Strategic Workforce Planning: SHRM starts with identifying the future human

resource needs of the organization and aligning them with the strategic

objectives. It involves assessing current talent, forecasting future requirements,

and implementing strategies to bridge the gap.

 Talent Acquisition and Retention: Effective recruitment and retention

strategies are crucial for acquiring and retaining top talent. SHRM emphasizes

attracting individuals who possess the required skills, knowledge, and cultural fit.
Additionally, it emphasizes creating an engaging work environment that

encourages employee loyalty and reduces turnover.

 Learning and Development: SHRM recognizes the importance of continuous

learning and development to enhance employee skills and competencies. It

involves providing training opportunities, mentoring programs, and career

development plans that align with organizational goals and individual

aspirations.
 Performance Management: SHRM promotes a performance-driven culture by

establishing clear performance expectations, providing regular feedback, and

aligning individual goals with organizational objectives. It emphasizes fair and

transparent performance appraisal systems that link performance outcomes to

rewards and recognition.

 Compensation and Benefits: SHRM ensures that the compensation and

benefits structure is aligned with the organization's strategic objectives. It

involves designing competitive salary structures, variable pay plans, and

benefits packages that motivate employees and reinforce desired behaviors.

 Employee Engagement and Well-being: SHRM recognizes the significance of

employee engagement and well-being in driving organizational success. It

involves fostering a positive work environment, promoting work-life balance, and

implementing initiatives that enhance employee satisfaction, morale, and

productivity.

Benefits of Strategic Human Resource

Management
1. Competitive Advantage: By aligning HR practices with the overall strategy,

SHRM enables organizations to differentiate themselves from competitors. It

helps in attracting and retaining top talent, enhancing employee performance,

and fostering innovation.

2. Improved Organizational Performance: SHRM ensures that the workforce is

equipped with the necessary skills and competencies to achieve strategic goals.

It improves productivity, reduces costs, and enhances overall organizational

performance.
3. Enhanced Employee Satisfaction and Engagement: SHRM focuses on

creating a work environment where employees feel valued, engaged, and

empowered. This leads to higher levels of job satisfaction, increased employee

commitment, and improved retention rates.

4. Adaptability to Change: SHRM enables organizations to respond effectively to

internal and external changes. It facilitates agility and flexibility in workforce

 planning, talent acquisition, and skills development to address evolving

business needs.
5. Sustainable Growth: By aligning HR practices with long-term strategic goals,

SHRM contributes to the sustainable growth and success of the organization. It

creates a strong employer brand, enhances organizational reputation, and

attracts high-quality talent.