What Is HR Strategy? And How Can You Best Execute It?

The highly volatile business environment puts the HR function under enormous pressure to identify strategies that drive enterprise success. The chief human resources officer (CHRO) must break down business goals into strategic implications, but they must also then define priorities that realign HR function service delivery to create business value.

For process, follow these five steps to create an effective human resources strategy that supports enterprise business goals:

1. Understand your organization’s mission, strategy and business goals.
2. Identify the capabilities and skills necessary to achieve those goals.
3. Evaluate the current capabilities and skills of your talent and the HR function, and identify gaps between the current state and future needs of the organization.
4. Develop HR goals to resolve gaps and establish criteria for measuring successful strategy execution.
5. Communicate the HR strategy.

This strategy will drive the strategic plan and any HR transformation initiatives required to move the HR function from its current to its future desired state. To do this successfully, you will need to:

• Understand how well your functional capabilities and the HR operating model are performing in their current state
• Identify next steps and resources required for short-, mid-and long-term plans
• Ensure continuous alignment of strategy and resources to capture market opportunities and respond to volatility as needed

Also needed are mechanisms to ensure the strategy can respond effectively to change (see “When is it time to update the HR strategy?”).

Setting strategy is only the first step; turning it into a strategic HR plan that you successfully execute is far more challenging. The process fails for a number of reasons, including lack of visibility into business goals and inadequately defined measures for success. The volatile conditions in recent years also require measures to keep the strategy aligned as business needs change. Being programmatic helps to ensure that relevant strategy is executed effectively.

Align with business strategy

Human resources strategy should always respond to business strategy; it also should align both upward (with business priorities) and downward (with functional priorities). In a world where talent is increasingly seen as an organizational priority, HR strategy should inform and influence business strategy. 

Establish goals as part of the strategy

Consider what constitutes long-term success for your HR function and how to prioritize goals to support enterprise strategy. Perhaps create a prioritized list of initiatives and goals, and evaluate the gaps between the current state and your most critical initiatives. 

Set criteria for measuring successful strategy execution and adaptation

Once you’ve developed goals, identify four to seven key performance measures that describe the current level of performance of the HR function. Make sure these measures are specific, quantifiable and clearly tied to the desired performance, and use those same indicators to measure performance in the future.

Craft a clear and concise statement that captures the core of the strategy and summarizes the key objectives on which the HR function will focus over the next year. This empowers your organization’s HR professionals and employees to contribute positively to enterprise objectives. Tailor the communication to each stakeholder group to provide employees with direction for their decision making.

It has always been critical for CHROs to prepare their organizations for the future of work (changes in how work gets done, influenced by technological, generational and social shifts). But the pandemic era has reinvented the future of work in new and unexpected ways — from increasing demands for a more human-centric employee value proposition and more seamless employee experience to tough-to-diagnose employee turnover.

In 2022, several key trends will require a strategic response from HR leaders. They include: 

• The growing likelihood that elevated turnover levels could become the norm, turning the Great Resignation into the Sustained Resignation
• The ongoing challenge to affect hybrid work models to the benefit of both employers and employees
• The need to offer a more human and purpose-driven employment deal to respond to peoples’ increased demands for more personal value and purpose from both life and wor
• Fairness and equity becoming the defining issues for many organizations, including who has access to flexible work conditions

Given the growing volume of future-of-work-reinvented trends, HR leaders need to shortlist the most important ones on which to focus when developing HR strategies. This requires a three-step trends analysis:

1. Identify: Recognize trends that could affect how, when and where work is done; who or what does work; or even what work means in the near future.
2. Interpret: Understand the relevance and implication of a future of work trend to your organization.
3. Prioritize: Involve diverse stakeholders for an inclusive process of selecting key parameters. Ensure buy-in by prioritizing trends based on objective evaluation and a comprehensive analysis.

Adapting to the rapidly evolving COVID-19 situation has required C-suite leaders to regularly revisit and adapt their HR strategies and tactics to track changes in business strategy and ensure their organizations’ survival and growth. 

The days when strategic planning was a once-a-year, set-it-and-forget exercise are over. Today’s rapidly changing business environment requires HR strategies to adapt. Gartner research shows:

• Most organizations (66%) say the top barrier to effective strategic planning is the lack of integration with business needs.

• 38% of HR leaders state that their HR strategic planning process is not aligned to the business strategic planning calendar, and changes are not triggered by shifts in the business plans. 

• 58% of organizations point to the lack of relevant metrics to track progress as one of the top barriers to effective strategic planning.

• Only 28% of HR leaders report reviewing their strategies more than once per year, and only 12% change them more than once per year. 

To respond to changes as they happen and avoid wasting time on strategic planning, CHROs should identify external and internal triggers for strategic review and monitor them continuously. To do this:

• Talk with relevant stakeholders to identify business-, management- and function-driven strategy triggers for your organization

• Use this preemptive identification of triggers to act quickly when they occur instead of falling behind the rest of the business

• Once triggers are established, proactively monitor business changes to ensure the function can meet business needs as efficiently as possible and improve overall business outcomes

Workforce planning is the process by which HR leaders generate a forecast that projects the future workforce needs of their organizations. Especially now, workforce and business trends are impacting leaders’ expectations about workforce planning approaches and outcomes. 

For example, digital business transformation often changes critical skills needs, as well as planning and budgeting cycles. This is especially the case as HR adopts tactics more common to IT, such as agile methodologies and multidisciplinary fusion teams. HR’s increased use of technology solutions will similarly impact budgets and staffing to capitalize on innovations (see “How does technology fit into HR strategy?”).

New ways of working demand new talent profiles across all business units. Strategic human resources management will incorporate more granular information about worker skills, capabilities, knowledge and experiences to respond to those needs.

Five types of workforce planning

1. Workforce optimization: How do we optimize the assignment and distribution of tasks and processes to improve capacity utilization, productivity and other business outcomes?
2. Workforce scheduling optimization: How do we optimize workforce schedules to meet compliance and fair scheduling needs while ensuring that we can hit business targets?

3. Operational workforce planning: How do we plan for the right number and types of workforce resources to hit projected business targets and make sure we are executing on that plan?

4. Organization modeling and transformation management: How do we align resources to our new organization structure following a significant transformation (for instance, restructuring, merger and acquisition, divestiture and reduction in force)?
5. Strategic workforce planning: What are the workforce implications of our organization’s short- and long-term strategy? Will we have the right resources? If not, how could we get them?

Goals of workforce planning include:

• Aligning talent planning with the strategic business plan
• Identifying key workforce risks in the short, medium and long term
• Creating a talent strategy to mitigate potential workforce risks
• Mapping out critical skills needed in existing roles
• Ensuring talent readiness for future business needs
• Filling current and projected talent gaps
• Recruiting future talent for the organization
• Preventing attrition

It’s important for CHROs to make sure they and their HR leaders carve out time and resources to conduct workforce planning effectively as few organizations have specific roles or teams dedicated to these efforts. Larger organizations might benefit from specialist full-time employees in a dedicated role.

Six key steps in strategic workforce planning

1. Prepare: Figure out the what, who, where and when.
2. Understand business strategy: Identify strategic priorities, analyze emerging trends, translate priorities and trends into workforce capability needs and prioritize workforce capabilities.
3. Diagnose and analyze risks: Focus on strategy execution and prioritizing critical capabilities.
4. Develop a high-level plan: Create a high-level roadmap to address capability risks.
5. Prepare to execute: Document and communicate the workforce plan, and establish triggers for reevaluating it.
6. Monitor the plan: Measure, adapt and evolve the plan.

As part of strategic workforce planning, it is essential for HR leaders to identify whether the organization has the capabilities and skills it needs to achieve its business goals. It’s also critical to incorporate plans to address skills needs directly into HR strategies.

Skills are a foundational element for managing the workforce within any industry. Improving and automating the detection and assessment of skills enables significantly greater organizational agility. Especially in times of uncertainty, or when competition is fierce, organizations with better data on skills can adapt more quickly by more accurately identifying which opportunities are feasible immediately, and which require more investment over time.

Gartner research shows that headed into 2022, building critical skills and competencies was a priority for 59% of HR leaders — and the challenge remains complex. Gartner TalentNeuron™ data finds that the total number of skills required for a single job is increasing at 6.3% annually.

Many of today’s new and emerging skills are also difficult to obtain, so HR leaders first need a way to sense shifts in skills needs dynamically. This allows them to:

• Anticipate needs as they occur, rather than trying to predict the future, and adapt to those shifts in an iterative, course-corrective way

• Develop skills at the time of need by identifying and implementing skills accelerators — strategies that leverage existing resources (e.g., content, people and skills adjacencies) to develop new skills solutions at speed

• Enable employees to make skills decisions dynamically, such as by creating channels for them and the organization to exchange skills information for mutually beneficial and flexible skills development 

Prioritizing skills according to enterprise goals will help HR leaders understand the key talent issues they will need to tackle. For example, with the COVID-19 response accelerating the speed and scale of digital transformation, many organizations lack the digital skills required to succeed. 

Most organizations will need to deploy multiple talent strategies to acquire hard-to-find critical skills. This involves combining build, buy, borrow, rent and other strategies depending on the particular needs and circumstances.

All processes related to workforce planning use data and analytics intensively, making labor market intelligence and talent analytics (also known as HR analytics, workforce analytics and people analytics) critical for HR leaders to use in:

• Forecasting the future workforce 

• Creating long- and short-term sourcing plans

• Pinpointing emerging roles and skills and identifying skills gaps

• Analyzing competitor hiring trends

• Discovering new competition for key talent

• Understanding market disruptors

Pandemic-accelerated trends continue to transform how organizations acquire, develop, motivate, reward, serve and manage talent. Technology has emerged as an essential tool in responding to uncertainty and creating a more human-centric but adaptive and composable organization. HR technology, in shaping employee experience and driving business productivity, is therefore an increasingly critical component of successful HR strategy.

Increasingly, designers of human capital management (HCM) applications aim to improve the candidate, worker, learner and manager experiences, while acknowledging that most employees spend relatively little time using these applications. Many applications have a conversational user interface or use insights from behavioral science disciplines to engage users, influence behaviors and contribute to improvements in organizational culture. Continuous learning, listening, feedback and performance management are also becoming necessary to support hybrid and agile ways of working. HR technology shapes employee experience and impacts business productivity.

But amid continual hype around technology trends, HR leaders must understand their own needs and capabilities as they plan to add technologies within HR processes and existing applications. Aim to improve the employee experience by resisting one-size-fits-all solutions, and instead deploy flexible, human-centric HR processes and tools to meet diverse workforce needs.

The core functional pillars of human capital management (HCM) applications are:

1. Administrative HR: Core HR organizational and employee data management, employment life cycle processes, transactional employee and manager self-service benefits and payroll administration

2. Talent management: Recruiting, onboarding, performance management, compensation allocation, career and succession planning, learning and development, and workforce planning
3. Workforce management: Time capture, absence management, scheduling, task and activity tracking, budgeting and forecasting
4. Integrated HR service management: Content delivery via a portal and knowledge management capabilities for employees and managers, which may include case management (ticketing/routing), business process management tools and digital document management

Innovation in the HCM technology market is driven by:

• Technological advances, including artificial intelligence, augmented reality and virtual reality
• Increased focus on skills management, as existing HR applications do not support current business requirements
• Wider macro and social developments surrounding the nature and evolution of work practices and policies, such as the increasing importance of diversity, equity and inclusion, automation, remote working and the growth of the gig economy
• Customer demand and extension requests, with functional gaps often being filled through an ecosystem of partners

   

To support ongoing pandemic responses and prepare for subsequent economic uncertainty, the following technologies have attracted renewed interest:

• Internal talent marketplaces
• Ontology-based skills graphs
• Voice of employee
• Learning experience platforms
• Workforce planning and modeling