The guide to Strategic Human Resource Management (SHRM)
Strategic Human Resource Management (Strategic HRM or SHRM) means acquiring, managing and developing employees and other human resources in accordance with corporate / business strategy and long-term organizational goals.
The main idea behind strategic HRM is to go beyond the daily duties and administration of HR (maintaining personnel records, managing benefits, ensuring compliance…) with a more strategic outlook on human resources.
That’s why it’s also called “people strategy”. There are many different ways to approach long-term human resource management and each organization must find its own optimal strategy according to their business goals.
In this blog post we’ll overview the main elements of strategic human resource management. We’ll also add some best practices, different approaches, and overall tips on long-term human resource management.
Although strategic human resource management is most frequently present in bigger organizations, there are many great ideas from the HRM layer that can be applied to any organization.
- The main benefits of Strategic Human Resource Management
- Strategic outlook in human resources
- Aligning business strategy with HR strategy
- The strategic human resource management plan
- Matching human resources to the future needs
- Shaping the right organizational culture
- Formal HR policies
- The main challenges of strategic HRM
The main benefits of Strategic Human Resource Management
There’s no good business strategy without taking people or human resources into account. At the end of the day, people are not the only thing in an organization, but are simultaneously everything in an organization.
People are, without a doubt, the most important organizational asset. Only with the right people can an organization’s continuous growth and improvement be ensured.
The main benefits of Strategic HRM activities are:
- Matching employment and employee development plans to future organizational needs
- Developing a unique and attractive corporate culture
- Providing better focus for employees on corporate goals and increased productivity
- Answering key strategic HRM questions (remote work, outsourcing, office outline…)
- Addressing diversity, inclusion, and other strategic HR policies
One very important aspect of strategic human resource management is also the plan for internal leadership development, since that’s many times the bottle neck for the further growth of an organization.
In addition, successful implementation of the strategic human resource management plan greatly depends on good collaboration between leaders.
Strategic outlook in human resources
Strategic human resource management starts with forging a strategic outlook on human resources in the organization. A SWOT analysis is a great help in gaining a strategic perspective, and can also be applied to the HR function.
Performing a SHRM SWOT analysis should give answers to the following questions:
- Strengths – What are the greatest strengths of an organization when it comes to people? These can be leadership, cultural elements, payment and benefits, etc.
- Weaknesses – On the other hand, what are the greatest weaknesses? Internal challenges and struggles such as high fluctuation, poor time management, etc.
- Opportunities – What are the greatest HR opportunities outside the organization? This could be an opportunity to hire a remote work force, open a new subsidiary to attract talent, etc.
- Threats – What are the greatest threats in the environment? These can be increasing labor costs, talent shortage, legislation changes, etc.
Aligning business strategy with HR strategy
To be on the same page, let’s first summarize what a business strategy is. A business strategy is a set of business decisions about where and how to invest money, time, energy, skills, creative potential and other resources of the company, especially in the long run.
A good strategy identifies the key strengths and opportunities of an organization which can lead to multiplying results on the market.
The business strategy answers the fundamental question of what the company is focusing on as a core competency and what things the company is not doing, with the goal of avoiding becoming unfocused and playing on the markets where it simply can’t win.
Strategy, then, means a concentration of resources and the application of those resources to the areas that can bring the greatest outcomes for all stakeholders.
In addition to monetary resources, where to invest human resources (time, skills, potential…), plays a big part in the strategy equation.
Successful implementation of the strategy means concentrating resources on a few selected key objectives / opportunities. Thus, strategy always also means realignment and reallocation of human resources.
For this reason, the human resource strategy must be completely aligned with the business (or corporate) strategy.
Besides making sure the organization has the right number of people with the right skills at the right time, who are committed and fit the culture, strategic human resource management helps with the following aspects when implementing a business strategy:
- Helping executives to communicate the vision and mission of the company
- Implementing core values into the organizational culture
- Focusing employees on the key organizational goals
- Promoting commitment, agility and productivity among employees
The strategic human resource management plan
The strategic human resource management plan is part of the business strategy that addresses the people aspect.
It’s a document that answers the question of where organization is at the moment regarding human resources, where it wants to be, and outlines the plan for how to get there.
The HR strategic document addresses all the main strategic HR points; from matching human resources to future organizational needs, long-term people development, developing the desired organizational culture, ensuring a competitive salary, managing employee performance, etc.
Let’s address the key elements of a strategic human resource management plan.
Matching human resources to the future needs
Strategic human resource management planning starts with analyzing the current state of HR in the organization, including the number of employees (and outsourcing partners if necessary), their knowledge, skills and other abilities, as well as their development and promotion potential and so on.
The second step is to prepare the forecast of HR requirements according to the business strategy and growth plans on different markets.
That includes the number of new positions in a specific period, supply of needed talent on the market, organizational attractiveness for that talent, labor costs, etc.
The current and future HR requirements should provide a clear picture of the gap that needs to be filled.
In this regard, the strategic human resource management plan should give a clear answer to what new jobs will be needed and when, who to promote, and what new employees to hire, where it would be better to go with outsourcing, and how to further evolve the leadership structure.
Based on that, the strategic human resource plan should address:
- Recruitment strategies and tactics
- Employee development strategies and tactics
- Performance management strategies and tactics
- Outsourcing development strategies and tactics
- Changes in the organizational structure and succession planning
- Leadership capacity building
- Reward system
Shaping the right organizational culture
An organizational culture eats strategy for breakfast. That’s a famous quote from Peter Drucker, one of the greatest management consultants of all time.
That means an important role of strategic human resource management is to help shape an organizational culture that will support the business goals defined in the overall strategy.
“If you could get all the people in an organization rowing in the same direction, you could dominate any industry, in any market, against any competition, at any time.” Patrick Lencioni
Changing organizational culture is one of the hardest things to do in an organization. Nevertheless, it’s one of the greatest assets of any successful company. A strong culture brings at least the following benefits:
- Increased employee engagement and productivity
- Lower employee turnover and the ability to attract top talent
- Improvement in employees mental and physical wellbeing
- Strong brand identity and evangelism, and thus customer satisfaction
- A higher level of innovation
In the strategic human resource plan, it should be clearly defined how a company’s culture will be shaped in order to support corporate and HR goals.
On the strategic level, at the very least the following aspects of the company’s culture should be defined:
- Stories – The company’s vision, mission, why, success stories, role models, etc.
- Values, rituals and routines – The desired daily behavior, prioritization system, greeting style, teambuilding events, formal and informal events, etc.
- Symbols – Uniforms, dress codes, brand book implementation, etc.
- Climate, atmosphere – The feeling in the air when you enter the room (relaxed, morbid, tense…).
- Level of control and power structures.
Implementation of a new (HR) strategy always requires growth in an organization, and thus changes are implemented.
Many times, these changes are closely connected with a changing company culture. A strategy that does not identify the main HR and other internal challenges and address them is not really a strategy.
Formal HR policies
An important part of strategic human resource planning are formal HR policies that greatly influence the company’s culture and productivity. HR Policies define rules that employees must obey.
These are much more tangible than the cultural aspects. Many times, organizations must make changes in their policies or adopt new ones. An example would be adopting a new remote work policy with the goal of retaining or attracting top talent.
Some examples of such policies are:
- Anti-harassment, non-discrimination, diversity and inclusion policies
- Time and attendance tracking and pay policy
- Maternity leave and time-off benefits policy
- Meal and break periods policy
- Health and safety policy
- Bring-your-own-device policy
- Remote work policy
- Social media policy
With HR policies come many legal documents, standard procedure explanations, and forms. As an organization grows, there are usually more and more policies adapted.
We must also not forget that many companies employ different software solutions to support HR processes.
At Spica, we provide a time and attendance tracking solution that’s completely flexible so it can fit company’s policies in this regard; and it even supports even remote work.
The main challenges of strategic HRM
In the end, it’s one thing to write a strategy, and another to implement it. The main barriers when implementing a strategic human resource management plan are naturally connected to people, especially on the leadership level.
This is completely normal, namely because with each change some people in the organization gain and others lose. It rarely happens that all people support the new strategy, although there must be critical mass.
The main challenges of implementing such a strategy are:
- Lack of support and commitment from top management
- High resistance from middle management
- Conflicts between departments
- Limited resources to implement the strategy
- Trying to implement too many changes at once
When implementing a strategic human resource management plan, it’s important to track progress and make alignments along the way.
Even though strategic human resource management is a long-term thing, staying agile in the implementation phase is always necessary. Based on internal and external feedback, and changes in the circumstances, the strategy must be adjusted in time.