How to create a business-driven HR strategy

Learn how to create a business-driven HR strategy with this guide from HR expert Gemma Dale.

Every business that employs people should have an HR strategy, no matter what its size or structure, or the sector or industry in which it operates.

What is an HR strategy?

An HR strategy (or people strategy, as it is sometimes known) is simply a formal plan relating to all aspects of employee management and the employment lifecycle. Usually long term in nature, this plan will normally set out the organisation’s aims and objectives related to its employees.

Although every HR strategy is different, it is likely to include areas such as talent acquisition, employee engagement, learning and development, reward and recognition, and equality and diversity. In some organisations, the HR strategy may also include internal communication, wellbeing, workforce planning, or organisational performance.

Learn more: What is performance management?

HR strategy and business objectives

No HR or people strategy should ever stand alone: at its heart should be the strategy of the business itself, along with its mission, vision, and values. The HR strategy should both align with and provide support for critical business objectives.

As a generalised example, a company which as part of its business plan is looking to expand its market share might have as an element of its HR strategy: “to recruit and develop a marketing team which delivers a 20% increase in business leads by April 2025”. This will have implications for recruitment, talent management, learning and development, and reward and recognition.

There is no single HR strategy model that will fit all situations, and no strategy best practice – the best HR strategies fit the business and its unique context. A good HR strategy is one that is driven by the business, for the business. It should be unique and tailored: this is always better than following any particular strategy model or general ideas about what amounts to effective Human Resources. Aim for best fit, not best practice.

Key components of an HR strategy

The starting point for any HR strategy is the business strategy and the current business drivers shaping that strategy...

What are the organisation’s mission, vision and values?
What is its five or ten year plan?
What is it seeking to achieve and by when?
What are the current challenges the organisation is experiencing?
What are the internal and external factors impacting upon the business?
What are its strengths, opportunities, and threats?

These are all critical areas to consider before any HR strategy can be developed. The answers to these questions will show where HR functions can truly add value and focus their time and energies to best effect.

An effective HR strategy will consider the following components:

HR initiatives and programmes: The strategy sets the overall direction of the HR function. The next step is to identify those specific projects, initiatives and programmes that will ensure the strategy can be delivered.
HR services and technology: HR services, such as those transactional activities that must take place from paying people to posting a job vacancy, must be effective, efficient, and responsive. Although these may appear operational rather than strategic in nature, they often underpin and enable the delivery of successful HR strategies.
Key performance indicators: Easy to understand measures of HR performance that can help to evaluate strategic success – and the performance of the HR function itself. To find out more about HR reporting, read my article on the 5 standard HR reports every small business needs to run smoothly.
Employee lifecycle and experience: Any good HR strategy will consider the needs of employees. Employees need to be engaged, motivated, developed, rewarded, and supported. HR strategies should consider all stages of the employee lifecycle and the experience of working for the organisation.

As ways of working remain disrupted and perhaps altered forever as a result of the global pandemic, an effective HR strategy developed today will also consider how HR should respond to new ways of working, the business implications of Covid-19, and the current views of the workforce.

Learn more: How is work set to change after coronavirus?

Creating a business-driven HR strategy

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Once the business strategy and context is fully understood, there are several steps to developing a best-fit HR strategy.

Seek input from stakeholders

HR has multiple stakeholders with leaders, managers and employees being the main groups. What do each of these need from the HR department and the HR strategy?

Be future focused

The world of work is changing rapidly, and this is only going to intensify as a result of the pandemic. Digital transformation in particular is a key driver of future change. Any strategy currently under development must be thinking about not just the present and short-term, but the potential futures that may arise in the years ahead.

Consider how you will measure success

A strategy must be capable of assessment. This is how we can identify if it is delivering its objectives. Key Performance Indicators are part of measurement; HR departments may also wish to develop a balanced business scorecard to share people data regularly with the wider organisation.

What is needed practically to deliver the strategy?

This might include the structure of the HR team, its resources, skills, knowledge, and experience. There may also be a need for investment in people, systems or technology.

Share the strategy and gain buy-in

When the strategy is nearing completion, share it with business leaders and other stakeholders. Seek their input and feedback. This will help to support the later stages of implementation.

Whatever strategy is devised, and whatever operational plan is put in place to support it, the final, critical step to successful HR strategy is to keep it under regular review. As the business develops, or its plans change, so must the people strategies and plans that support and enable it. Our continually changing environment demands continually adaptive and responsive HR strategies to ensure business success through its people.

Written by Gemma Dale

Gemma Dale is an experienced senior HR professional, CIPD Chartered Fellow, HEA Fellow, and a regular speaker and writer on a variety of HR topics. Gemma is the co-author of the book 'Flexible Working' published by Kogan Page in 2020. She is also a lecturer in the Business School at Liverpool John Moores University and runs her own business, The Work Consultancy.