What Strategic HR Management Can Do for Your Business

To get the most out of your organization’s human capital, aligning HR processes with business goals is key. Learn how strategic human resource management helps accomplish those goals.

People spend most of their waking hours at work. In fact, according to the World Health Organization, most adults spend one-third of their lives working. In terms of hard numbers, that’s approximately 90,000 hours, says performance management expert and author Jessica Pryce-Jones in her book Happiness at Work: Maximizing Your Psychological Capital for Success.

But the sad reality is that many employees waste their time at work. A study by Gallup found that 85% of employees are either not engaged or actively disengaged at work. In dollar terms, this translates to approximately $7 trillion in lost productivity globally, says Jim Harter, chief scientist for Gallup’s workplace management and well-being practices.

What’s even sadder is that those not engaged "likely come to work wanting to make a difference -- but nobody has ever asked them to use their strengths to make the organization better," Harter adds.

If employee disengagement is a challenge your organization is also battling with, an approach called strategic human resource management just might be what you need.

Overview: What is strategic human resource management?

Strategic human resource management -- also known as strategic HRM, strategic HR management, or SHRM -- is a business process focused on aligning human resource policies and practices with the company’s overall business strategies.

Said differently, it’s all about meeting strategic organizational objectives through better and smarter HR management.

Its underlying benefits include:

• Improving business performance
• Achieving a competitive advantage
• Managing people better to boost retention
• Maximizing employee skills and competencies
• Creating better work experiences
• Inspiring a culture of creativity and innovation
• Taking advantage of the full benefits of employment, both for the employer and the employee

Strategic HR management vs traditional HR management

So how does SHRM differ from traditional human resources management?

For one thing, SHRM is proactive, while traditional HRM is reactive. SHRM considers the company’s future workforce needs, while traditional HRM focuses on the company’s current employees. Traditional HRM is purely administrative in nature, and tasks are focused on recruiting and hiring the best talents, providing the training they need to excel at their jobs, and taking care of payroll and other employee benefits.

SHRM does everything traditional HRM does -- plus, the HR team works hand in hand with other departments and makes sure HR processes and approaches align with overall organizational goals. They hire people with the goal of meeting future needs, and they create employee handbooks, conduct training, and devise ways for employees to successfully meet strategic business objectives.

Benefits of strategic human resource management

When done right, the strategic human resources management process comes with a host of benefits, including:

Exceptional workplace culture

When the workplace is nurturing and inspiring, stress levels go down, creativity skyrockets, and collaboration is at its strongest. Plus, according to Gallup, "great cultures win the best talent for two reasons." One, they turn employees into brand ambassadors. Two, top talent prefer to work in organizations with great cultures.

Leadership sets the tone for how employees behave in the workplace, and being the caretaker of a company’s culture, HR’s job is to make senior executives aware of employee concerns and expectations -- and act on addressing them.

At the same time, part of strategic HR’s responsibility is to develop programs that emphasize the organization’s core values and employees’ part in something bigger than their jobs, such as how they’re contributing to the company’s commitment to the community, for example.

Happy, productive employees

Employee happiness is fast becoming a competitive advantage. Engaged employees care about what happens to the company and work hard to contribute to its success. These are the types of employees who come to work excited for the day ahead.

If walking into a room full of happy people bustling with energy isn’t incentive enough, consider this: The University of Oxford’s Saïd Business School, through a study of 1,800 call center workers, found that happy employees:

• Worked faster
• Made more calls per hour
• Generated 13% more sales

SHRM is not just about recruiting, hiring, and training people with the right skills. It’s also about equipping employees with the tools and knowledge they need to make the right decisions and affording them reasonable control over how they work. Strategic HRM ensures employees know what’s expected of them and how they fit in the overall picture. It acknowledges their hard work and makes them feel valuable through rewards and recognition.

Which brings us to the third benefit...

Happy, loyal customers

"The customer is always right" may not be a maxim everyone agrees with, but it illustrates just how important customers are to any business. When asked about the foremost reason for Amazon’s massive success, Jeff Bezos said it was obsessive customer focus.

Not only are happy employees more productive, they also take good care of customers. Engaged employees commit themselves to upholding their company’s promise to customers. They deliver excellent customer service consistently, resulting in happier and more loyal customers.

How to incorporate strategic human resource management in your business

Strategic people management drives both positive short- and long-term results, not just for companies experiencing growth, but also for companies that believe in the workforce as an essential driver for business growth.

Different companies will have different strategic objectives. Even companies in the same industry will likely not share the same objectives. That’s because your goals will be based on the specific needs of your organization.

For example, companies selling marketing automation software will want their solution to be easy to use, while retail agencies will want to increase customer loyalty.

So how do you get started? What are the steps necessary to incorporate human resources management strategies into your business?

Let’s take a look.

Step 1: Evaluate the current situation

Your strategic HR management approach begins with a plan. To create the plan, start by taking stock of where you are currently.

What evaluating the current situation looks like:

• Assess current HR capacity: Catalog each employee’s skills. Include their degrees, certifications, work experience, and even volunteer activities. Find out which field they want to be trained in.
• Analyze HR data: This includes turnover causes and rates, population demographics, statistics on diversity, future workforce gaps and surpluses, health and safety stats, and employee survey results. Regulatory restrictions, current and foreseen, should be taken into account, too.
• Conduct a SWOT analysis: SWOT is short for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are your company’s capabilities and limitations, things you can control and change. Examples are your business location and the people in your teams. Opportunities and threats, on the other hand, are external factors affecting the market. You have no control over them, but you can take advantage of them (opportunities) or protect yourself from them (threats). Examples are changing customer buying habits, economic trends, and legal restrictions in the territories or countries you operate in.

Step 2: Estimate future HR requirements

Make HR projections based on where the company is headed. Take into account external factors -- such as competition and technological advancements -- that may affect your ability to achieve strategic objectives.

When you’re able to accurately predict future workforce needs that correspond with the company’s overall strategic direction, you identify:

• New jobs and roles to meet future business requirements
• The skills and qualifications that current employees must possess to undertake new roles
• Whether HR is equipped for growth
• Whether you’re making full use of your employees’ skillsets

What estimating future HR requirements looks like:

• Review the company’s mission and values statements: Your mission statement should embody your company’s vision of the ideal future, specifically what it wants to become and accomplish down the line. Your vision statement clarifies what your company believes in and how it’s expected to behave.
• Use supply and demand estimates: This is so you can limit your company’s exposure to labor surpluses and shortages. You want the right people available at exactly the right time.
• Perform a gap analysis: A gap analysis compares your current HR state to the envisioned future state to identify strengths and areas where HR falls short.

Step 3: Develop strategic HR objectives

Strategic HR objectives are HR-specific steps that will allow the HR department to contribute to the achievement of the company’s strategic goals.

To achieve the company’s sales objectives, for example, HR may have to work with the sales manager to devise an adequate but competitive incentive plan for the company’s sales representatives.

What developing your strategic HR objectives looks like:

• Identify the actions necessary to achieve your objectives: Each objective constitutes a specific set of steps. For example, a company’s business continuity plan may involve cross-training employees, so that business stays as usual in case someone calls in sick, is fired, or retires. When planning your course of action, you want answers to the question, "How do we get there?"
• Plan for contingencies: Not everything will go as planned, so include buffers that will account for the unexpected in your plan.
• Determine your success metrics: There has to be a way to know if you’re achieving your target objectives. This is where metrics measuring performance come in. The key indicators and HR metrics you choose should align with your strategic objectives.

Step 4: Monitor and evaluate

Once your strategic HR plan has been in motion for a certain period of time, measure how your efforts are progressing against each objective. This will allow you to identify what’s working and what’s not, and then make adjustments accordingly.

What monitoring and evaluating looks like:

• Conduct reviews: To evaluate performance, some companies conduct yearly or quarterly reviews. Choose whichever makes sense for your business. When assessing employee performance, use the workforce metrics you’ve identified in the previous step.
• Identify factors affecting your strategy: These could be internal or external. For example, your competitor’s newly launched product may hamper your organization’s bid to become the market leader in your industry.

Align HR processes with company objectives through strategic HRM

There is always a human component to the realization of an organizational objective. The best equipment and tools, including HR software for streamlining employee management processes, won’t account for much without capable and highly motivated employees to use and manage them.

When all is said and done, the quality of your organization’s people and processes will determine whether you're on track to achieving your business goals.