How to Create an Effective HR Strategy

Creating an effective HR strategy will elevate a business’s culture and positively impact the bottom line. Learning how to properly allocate your human resources and align their incentives with the goals of the company is a sure-fire way to succeed. Dive in to find out what HR strategy is and how to create an effective strategy for your business.
How to Create an Effective HR Strategy
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The HR department is playing a bigger and more important role in the success of companies coming of age at the start of this decade. Company executives are calling on HR leaders to be more strategic, and the human resources department is answering the call. HR strategy is a critical component of the larger business strategy, and in many cases, it will have a direct impact on the outcome of the business.

Lawrence Bossidy, longtime CEO of AlliedSignal and a former executive at General Electric said, “I am convinced that nothing we do is more important than hiring and developing people. At the end of the day, you bet on people, not on strategies.”

The business strategy will only succeed if the people in the organization have been hired and trained properly and are bought into the company’s mission and vision. This work is all part of your HR strategy.

What is HR Strategy?

HR strategy can be defined as the business’s plan to manage, train, and allocate its human resources and align those resources to the business’s goals and objectives.

Of course, the statement above sounds like confusing corporate jargon, so let’s break it down even further.

When you think about HR strategy, think about having a plan. The whole point of developing a strategy for your human resources department is to get your team on the same page so that everyone has a shared understanding of what you want to happen. HR strategy is a plan to help the people in your organization accomplish the goals and objectives of the business.

"HR strategy is a plan to help the people in your organization accomplish the goals and objectives of the business."

A good strategy is proactive, not reactive. It anticipates events in the future based on the learnings of the past. It actively pursues a goal or dream. It doesn’t wait for things to happen, but rather it makes things happen.

The human resources strategy will direct the business on many of the following ideas:

  • Who to hire
  • When to hire
  • How many people to hire
  • How to train employees
  • How to cultivate company culture
  • How to increase employee engagement
  • How to decrease employee turnover
  • How to manage underperforming employees
  • Promotion and compensation plans
  • Organization structure
  • Vacation and sick policies
  • Employee conduct and behavior
  • Termination policies

As you can see, that’s not a small list! Many of these activities are vital to the company’s well-being and may be the difference between success and failure.

Good HR strategists will work directly with company executives and leadership teams in order to understand the business’s goals. Once the business goals are clear, the HR strategist can begin formulating a plan to meet those goals by hiring, training, and engaging employees who are capable of achieving the business objectives.

Software makes it easy to manage the HR department, giving you more time to think about creating an implementing strategy. Eddy is the #1 HR software tool for small businesses.

How do you create an effective HR strategy?

Your HR strategy should always focus on the organization it serves. Because of this, no two HR strategies will be alike. Your strategy should be unique to the needs of your company.

To begin, you’ll want to analyze your organizational needs. Based on your company’s goals and objectives, what will need to change? Will you need to hire more people? Will you need your current employees to produce more? Will you need certain employees to learn new skills or earn specific certifications or licenses?

A great place to start when planning for the future is to look back to the past. Did your company achieve its goals last year? If not, what held them back? Sometimes it’s easier to connect the dots in the past than it is to forecast the future. If you understand where your company has been weak or fallen short in the past, then you can make adjustments to strengthen those positions.

Another key part of your HR strategy is data. Like any good strategic decision, your human resources strategy should be numbers-driven. If you want to make good decisions and achieve desired outcomes then don’t assume you’ll simply be able to follow your “gut-instinct” to get there.

Finally, your HR strategy should result in specific behavior that can be measured and tracked. If your strategy is too general or too ambiguous, it’ll be hard for anyone in the business to tell if you succeeded. Just as a business creates goals and objectives, your HR department should have clear, written, time-sensitive goals that point to your desired outcomes. Hold yourself and your team accountable to these goals as your work towards them.

"Your HR strategy should result in specific behavior that can be measured and tracked."

How will you know if you’ve created a good HR strategy?

This is a tricky question. As we mentioned previously, no two HR strategies will be the same. Because every company has different needs and different objectives, the HR strategy for each company will vary. However, there are some fundamental principles that you can follow when developing and implementing your plan. Here are some of the best practices that we’d encourage you to keep in mind:

  • Your HR strategy is aligned with your company strategy. This is definitely the most important aspect of a good HR strategy. If you don’t know what your company strategy is or aren’t aware of the specific goals and objectives of the business, then start there. Understand what the business is trying to achieve and then find a way for HR to positively impact that outcome.
  • Company leaders and executives are aware of your strategy and are bought-in. If you never share your strategy with anyone then how will you know if you’re on the right track? Make sure you’re actively sharing, discussing, debating, and re-thinking the HR strategy with the rest of the leadership team. Get them bought-in to what you’re trying to achieve and help them see how your plans will make a positive impact on the company’s goals.
  • You have a clear way to measure your outcomes. You probably don’t have a great HR strategy if you don’t explicitly know how to measure your success. Tie your goals to key performance indicators that you can monitor and quantify.
  • You have short and long-term objectives. In general, a good HR strategy will not be able to be implemented overnight. It’ll take time, effort, and patience on your part as the company slowly but surely makes the progress you hope to see. While your overall vision should be focused on long-term success, make sure you also have short-term goals and milestones that you can hit along the way.

Real-World Example of Good HR Strategy

A now-famous example of great HR strategy has been executed by Netflix. About a decade ago, Netflix released its “Culture Document” to the world. The document, which is around 125 slides long, outlined the people strategy that Netflix lived by.

Here are some of the highlights:

  • “Actual company values are the behaviors and skills that are valued in fellow employees.” Netflix says that many companies post their company values on the wall, but do not use those values to make decisions when it comes to hiring, promoting, and compensating employees. Instead of following the crowd and not actually living their core values, Netflix decided that the people who are hired and promoted would demonstrate nine key behaviors or skills.
  • “A great workplace is not espresso, lush benefits, sushi lunches, grand parties, or nice offices. A great workplace is stunning colleagues.” As part of their HR strategy, Netflix emphasizes the importance of working with high performing people. They make a genuine effort to hire the best and openly say that “adequate performance” will not cut it.
  • “We’re a team, not a family.” Some companies like to promote their “family” atmosphere, but Netflix rejects this idea entirely. Netflix goes on to say that not only are the employees part of a team, but they’re part of a “pro sports team” and not some child’s recreation team. 
  • “Hard work is not relevant.” Netflix states clearly that they’re not concerned about how many hours of work you put in the office or how hard you’re working compared to your peers. What they do care about is accomplishing great work. “A-level” effort with “B-level” results is not enough to keep your job.
  • “Responsible people thrive on freedom and are worthy of freedom.” Netflix doesn’t want to create a bunch of rules and complex processes to govern its company as it grows. So, as part of its HR strategy, they have committed to allowing responsible people the freedom over their choices. They believe that by granting this freedom, high performing employees will stay around longer and will be happier.
  • “You don’t need policies for everything.” To continue with this idea of freedom and responsibility, Netflix has decided not to track employee hours or employee vacation time. Employees are expected to take the time they need when they need it and to take an appropriate amount of time. Netflix also doesn’t have a dress code policy. They make the point that “there is no clothing policy at Netflix, but no one comes to work naked.”
  • “Pay top of market is core to a high-performance culture.” Netflix is somewhat obsessed with high performing employees, but they know they can only ask for this because they pay the highest salaries. One question Netflix has managers ask themselves is, “what would you pay this employee if they were threatening to leave unless they got a salary bump?” The answer to that question is exactly what the employee should be paid now. 

Now, the Netflix culture document is over a decade old, and undoubtedly, many of their policies and strategies have changed over time. That’s perfectly normal and expected behavior. Policies and strategies should change over time, especially as your company grows into different phases of its lifecycle. But the takeaway here is that Netflix established a strong HR strategy and then published it to the world. They wanted everyone who worked at Netflix and even people who were considering to work at Netflix, to know what they were all about.

Of course, when you develop your HR strategy, you don’t need to feel pressure to share it externally. But it should be shared internally so that your employees and leadership team knows what to expect from the HR department. 

Want to learn more about the strategic shift in human resources? Check out our complete guide to become a strategic HR leader.

Conclusion

If you remember nothing else, remember this: HR strategy is a plan to help the people in your organization accomplish the goals and objectives of the business. That plan can and will encompass a lot of different things. It’ll include ideas about hiring and firing, onboarding and training, promotions and raises, policies and behaviors, and so much more. If that’s overwhelming, then just start with one thing and move on from there. Your plan doesn’t need to be complete today, tomorrow, or even this month. Start by focusing on one thing in one area of the business that needs particular attention. Once you’ve got that taken care of, move on to something else. Over time your plan will come together and you’ll have a cohesive, exhaustive HR strategy for your company.

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