It is said that “the best tool to manage humans at work is providing them a pleasant work environment, making them feel valued and giving them a happy healthy work culture with work-life balance.” When people feel better at work, their productivity will be better.
In any organization, the most valued asset is PEOPLE, as they are the main contributors to achieving the company’s goals.
Considering the need to have a positive and productive environment at the workplace, HR needs to make some strategic planning that helps boost employee morale, retention, and ultimately the productivity of the organization. HR strategic plan is a platform where HR visualizes and communicates the organization’s objectives, key results areas, and indicators to improve HR management and to ensure that the new strategy meets the needs of both employees and the employer at the company.
An HR strategy plan is a document that helps employees and employers to shape their goals, ideas, and thoughts in a way that makes it easy to achieve them and to be in a WIN-WIN situation for both employee and employer. But in this rapidly changing time frame, how do HR plan and design strategies that will directly thrust the company toward goals?
This article provides an introduction, definition, and information on strategic HR management. The article discusses the following:
- Assessing the organization’s current environment.
- Role of statements of mission, vision, and values.
- 4W of strategic HR management.
- Key Elements of Strategic HR Plan.
- Benefits to HR to engage in strategic planning.
- Implementing, monitoring, and evaluating the HR strategic plan.
Defining strategic human resource management
According to a few HR practitioners, strategic HR management and planning is a behavioral method used to forecast HR needs. Others say that it is a managerial side, it is a way that decision-makers use to tackle human resource-related issues.
Easily, we can say that strategic HR management and planning is a process to formulate and implement an organization’s long-range business plan, that guides the HR to take day-to-day decisions while handling people at work.
For a successful HR strategic management plan an organization must have a well-communicated purpose, mission and vision, and values of the organization. The purpose of strategic HR management is to help the business to meet its objectives through people. To do so, the mission of strategic HR management is to create innovative solutions to attract, develop, engage, and retain a diverse workforce and to make the business a great workplace. This will help in achieving the ultimate mission of strategic HR management, which is to cultivate a work environment with the most engaged, highly productive, and diverse workforce.
Process of strategic human resource management
The human resource strategic planning process is important for any organization to determine how the workforce should be developed to meet business needs. But despite its importance, some organizations do not have a strategic human resource planning process in place.
If you are planning to implement strategic HR planning in your organization, this article will explain what it should contain and how to document your plan.
Strategic human resources management consists of the following steps
- Define the company’s objective.
- Access the current HR capacity.
- Forecast future demand.
- Analyze the gaps.
- Human resource action plan formulation.
- Implementation of HR Plan.
- Monitoring, control, and feedback.
Defining organizational objective
The first step is critical as it explains what the organization wants to achieve in the future. In this step, the organization’s mission, values, and culture play an important role. The Organization’s mission statement and its purpose of strategic planning must be in sync. If management or leaders have differences in their expectations, it must be discussed. Thus, it is vital to communicate the mission and objective of the organization.
To develop an effective HR plan it is important to align HR practices to organizational strategic objectives. In today’s world HR works hand in hand with the company’s top management so they have a clear understanding of company goals, and accordingly, they can focus on human capital to achieve those objectives.
Assessing the current HR capacity
The second step of HR strategy planning is to assess the human capacity of the organization. The HR manager needs to identify the skill set, qualification, certification, and any additional training employees have done. A skill matrix can be created for each employee.
HR managers must know what talent pool they have apart from their current job role expectations. For example, customer relationship executive employees may also have strong data entry knowledge. HR managers can pick up on these less obvious talents through regular conversations with employees through both informal and formal channels. Personnel files available in data rooms already have a wealth of information that can help HR to monitor employees’ skills, like:
- Employee resume
- Education and qualification history
- Previous performance reviews
- Projects completed
Having a system where employees can update their skill set, new certifications and training they have done and skills they have added to their profile can help to keep track of employees’ talents much easier. At the same time, when employees know that HR is making note of their responsibilities, strengths, and learning they feel motivated.
With the help of the above data, now HR can check which job role needs to be filled based on the forecast, and map current human capital, their skill, potential, and performance with the KRA of that role and you can then decide whether you have internal resources available to fill that role or if you need to go to add the external resource.
Forecast future demands
In this step, the question “Where do we want to be?” will be answered to forecast human capital demand in organizations. This will include deciding the number of employees with the right quality and quantity that the company is targeting over a specific period. When gaps in the workforce and skills are forecasted, HR can plan to hire and train to ensure that the required talent is available when needed.
5 Most commonly used HR forecasting techniques are:
i) The Markov model
The Markov model is a quantitative HR forecasting tool. Using the Markov Model, the HR manager lists down the education, qualification, work experience, skills, roles, and performance levels of the workforce. In this, HR managers update and maintain the skill reports of the workforce regularly, this way they keep a check on the future talent and skill demands. Reports allow HR managers to know the internal supply of the workforce and the need for external hires. This technique is majorly used in telecommunications, engineering, and economics.
ii) Workload analysis
This technique is useful when the estimated workload can be measured easily. In the Workload Analysis method, the total expected production or expected service delivery is for a prescribed period. Based on past data, the HR team estimates the required workforce that will be hired to reach the expected production capacity. Demand for the workforce is forecasted based on the total production estimated and each employee’s contribution to delivering each unit.
iii) Managerial analysis
The managerial analysis is a technique for forecasting short-term workforce needs. In this method, managers assess the future needs of the workforce in their teams in all categories. For the forecasting of the workforce by skill category, managers will need to collect data related to employee skills, reskilling, up-skilling, retirement, and more.
iv) Nominal group technique
It is a method of forecasting demand using expert assessments. In this, the HR manager identifies people who hold key positions in organizations and forms an expert panel. This panel is presented with a set of forecasting-related questions. Based on their knowledge and experience panel members share creative ideas and innovative solutions to the issues. These ideas are collected anonymously and the panel is asked to vote on each idea, this way they finalize one idea out of all.
v) Delphi technique
Delphi is an important method for forecasting the workforce. In this method, managers share their workforce needs with HR managers, and HR collects the data, analyses it, and prepares a report. The process is considered completed when all the managers agree on the same number of workforce requirements.
Factors affect forecasting
Forecasting is a critical part of strategic management and there are several factors, which affect forecasting. These are:
- Market trends related to employment
- Requirement of replacement
- Current team’s productivity
- Workforce absenteeism
- Plan for business or service expansion.
Analyze the Gaps
Once you have done the forecasting, you will have a clear idea of future requirements of the workforce and if they are available internally on a full-time/part-time/contractual basis or if you need to hire externally.
When HR managers perform gap analysis, they will assess the organization’s HR practices and infrastructure to know where the organization is lagging. If the right number of employees is available but the desired skills are not available with them they can be trained and developed so they will be upgraded and the gaps can be filled.
Human Resource Action Plan Formulation
Information and data collected from the gap analysis will help to review the current workforce status: Do you have a sufficient workforce available? Do they possess the desired skill set? Based on this, the HR department will formulate an action plan to finalize the need to recruit new talent or internal transfers.
Implementation of HR Plan
Implementation of the HR action plan is the most challenging step. In some cases, companies do invest huge money to implement the plans but those plans are not utilized properly. Company executives should share plans and associated benefits, to bring them on board. To overcome employee resistance to the process one plan should be rolled out at a time, so employees can be adjusted to the changes. The best way to implement a new HR strategy plan is to conduct training and gradually shift to a new culture.
Monitor, Control, and Share Feedback
Rigorously observing progress helps to identify whether your plan is working well or it needs some changes. The HR plan is a base document for organizational operations that should be changed on the demand of circumstances. Ongoing evaluation and constant improvement efforts will keep the organization moving toward its strategic goals.
Benefits of strategic human resource management
The supreme benefit of strategic human resource management is the improvement of organizational performance by incorporating and aligning with business strategy, by focusing on how the organization’s human resources work.
Strategic human resources management helps in achieving lesser turnover and employee absenteeism, enhanced employee experience and job satisfaction, and better productivity and profits. This promotes positivity in the workplace, which translates to better employee and customer satisfaction. It also has several financial benefits in the form of high sales, higher asset values, better returns on investments, and higher profits and market share.
Other related benefits are:
- Finding new methods of human capital valuation.
- Better allocation of resources to all organizational operations
- Helps to plan a better performance management system
- Provide a guideline & direction to the workforce
- Strategic planning
- Better policies and timely review
- Support of higher management
- Redesigning of HR processes
- Outsourcing of non-value-added HR processes
- Regular management of HR function
- Reduces risk
- Psychological safety
Challenges in HR planning and execution
Five major challenges of HR planning and execution are:
- Forecasting: HR plan depends on forecasting and forecasting is never 100% accurate which becomes a big challenge in HR planning and its execution
- Workforce Resistance: Sometimes employees become resistant to accepting the changes as they feel that it might increase their work pressure.
- Frequent Change: Unpredictable situations like absent labor, high employee turnover, some changes in technology, and fluctuations in the market highly affect HR planning.
- Incompetent Information Systems: If you do not have current and correct data on current employees it will be difficult to make the plan.
- Time and cost Factor: IT is a time taking and expensive process, so most companies avoid it and thus do not know the benefits.
Key factors for the success of strategic human resources management
The following are the factors that help to run a successful strategic human resources management plan in the organization:
1. Culture: An organization’s culture is known to be its HEART. Culture is the attitude and behavior that shows how things are done there. Every company tries to build a culture where employees feel “valued, benefited, and committed”.
2. Talent Hiring: It is not easy to find good talent, specifically in this competitive market. Numerous market survey reports show that the biggest challenge faced is recruiting and hiring the right fit for the company. To overcome this challenge a well-drafted recruitment policy and process can help to find, evaluate, select, and hire the best talent for a company. Keeping records of active and passive candidates also helps to build the candidate pipeline.
3. Resource Planning: It is the key factor to consider that the future need of the workforce should be planned well. It plays a crucial role in the company’s success in keeping clarity on the current talent of the company and to draft their development plan based on future forecasts.
4. Compensation: Most employees consider compensation as the primary factor when they join a new organization, If the compensation is not as per their expectation, they would consider leaving the employer. So employers have to make a salary band that is well matched with current market standards. Bonus, incentives, and ESPOs are the recent trends to make the compensation package look attractive.
5. Employee wellbeing: Employee wellbeing should be the top priority for any company. Well-being and benefit plans should be reviewed periodically and based on the current environmental condition. The following should be considered while drafting or reviewing the benefits plans:
- Flexi work hours
- Work-from-home policy
- Vocational leave and family leave options
- Health insurance, dental insurance
- Free of cost health check-up
6. Training and development: Employees can be trained at either work or via classroom training. Every employee should be tracked for their participation and a proper post-training assessment should be conducted. A training budget should be allocated and the trainer and trainee both should be provided with feedback.
7. Leadership and development: Building a pipeline of resources who have the potential to be future leaders should be kept ready. It will help the company to be ready for future needs. HR managers should track the attrition happening in a specific department, it will help to understand the strength of managers leading to the department.
8. Employee engagement: HR should try to keep the employee engaged in organizational activities like training, welfare activities, fun activities, rewards, recognitions, etc. Satisfaction surveys can be conducted to know the commitment and engagement level of an employee. Building groups and committees for communication can also help to keep the employees engaged.
9. Employee Relationship: A company should always have an open door policy where employees with ideas, suggestions, and issues should be well heard. It will make an employee and employer bond stronger.
10. Performance Management System: A transparent performance management system helps to show the effectiveness and productivity of employees at work. It will also show the improvement areas of employees. Using a human resources information system with a performance management module can help to keep records of employee ratings, feedback provided by managers, and their productivity and efficiency reports.
11. Compliance: Every company must operate under these pre-defined legal boundaries, as well as ensure compliance with laws related to provident fund, maternity benefits, employees’ state insurance, compensation and wage codes, paid leaves, and child labor laws, to name a few.
In today’s competitive world, strategic human resources management is a critical part of the success of an organization. The success of strategic human resources planning contributes to organizational success only when it is well-aligned with company objectives and has an employee-centric approach. When organizations implement strategic human resources plans and practices, it improves performance drastically. Strategic human resources management of any organization is influential in employees’ commitment to exhibiting positive and flexible attitudes at work and it is always needed for the image of the organization. These are critical in relations within or outside of the organization which is dependent on trust. Employees’ performance and organizational reputation together lead to higher customer satisfaction specifically for service-based organizations. These practices develop a sense of a supportive organizational environment and employee-centric management that ultimately boosts the behaviors that contribute to achieving organizational objectives. Thus, strategic human resources planning and implementation practices stimulate business growth. No matter how well the organizational plans are constructed, an employee’s attitude plays a critical role in success or failure.