The new possible: How HR can help build the organization of the future

Business leaders watching their organizations experience profound upheaval because of the COVID-19 crisis may find it difficult to understand what it all means until the dust settles.

But the pandemic hasn’t afforded them, or any of us, that luxury. It has created profound and immediate changes to how societies operate and how individuals interact and work. We have all witnessed an at-scale shift to remote work, the dynamic reallocation of resources, and the acceleration of digitization and automation to meet changing individual and organizational needs.

Organizations have by and large met the challenges of this crisis moment. But as we move toward imagining a postpandemic era , a management system based on old rules—a hierarchy that solves for uniformity, bureaucracy, and control—will no longer be effective. Taking its place should be a model that is more flexible and responsive, built around four interrelated trends: more connection, unprecedented automation, lower transaction costs, and demographic shifts.

To usher in the organization of the future, chief human-resources officers (CHROs) and other leaders should do nothing less than reimagine the basic tenets of organization. Emerging models are creative, adaptable, and antifragile . 1 Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder , New York, NY: Random House Trade Paperbacks, 2012. Corporate purpose fuels bold business moves. “Labor” becomes “talent.” Hierarchies become networks of teams . Competitors become ecosystem collaborators. And companies become more human: inspiring, collaborative, and bent on creating an employee experience that is meaningful and enjoyable .

After the pandemic erupted last year, we spoke with 350 HR leaders about the role of uncertainty in their function. They told us that over the next two years they wanted to prioritize initiatives that strengthen their organization’s ability to drive change in leadership, culture, and employee experience.

How are they doing? In this article, we discuss ways that CHROs can continue to meet the moment by rethinking processes in three fundamental areas: identity, agility, and scalability.

How HR fits in the big picture

McKinsey has recently conducted research on how businesses can best organize for the future . The experimentation underway suggests that future-ready companies share three characteristics: they know what they are and what they stand for; they operate with a fixation on speed and simplicity; and they grow by scaling up their ability to learn and innovate.

HR can help propel this transformation by facilitating positive change in these three key areas, as well as with nine imperatives that radiate out from them (Exhibit 1).

Identity: HR can clarify the meaning of purpose, value, and culture

Companies that execute with purpose have greater odds of creating significant long-term value generation , which can lead to stronger financial performance, increased employee engagement, and higher customer trust.

Home in on the organization’s purpose

What is your company’s core reason for being, and where can you have a unique, positive impact on society? Now more than ever, you need good answers to those questions—purpose is not a choice but a necessity.

CHROs play a vital role in making sure the organization is living its purpose and values . HR can articulate and role-model desired individual mindsets and behaviors linked to purpose by identifying “moments that matter” in the company’s culture and translating purpose into a set of leadership and employee norms and behaviors.

For instance, commercial-vehicle manufacturer Scania holds an annual “Climate Day,” during which the company stops operations for one hour to hold sustainability training, in line with its purpose to “drive the shift toward a sustainable transport system.” 2 Scania Annual and Sustainability Report 2019 , Scania, scania.com.

HR can also ensure that clear changes are made to recruitment and capability-building processes by determining the characteristics of a “purpose driven” employee and embedding these attributes within recruitment, development, and succession planning.

HR can also incorporate purpose-driven metrics into compensation and performance decisions. Companies across industries have embarked on these metrics lately. For example, Seventh Generation, a maker of cleaning and personal-care products, recently built into its incentive system sustainability targets for the company’s entire workforce, in service of its goal of being a zero-waste company by 2025. Shell has plans to set short-term carbon-emissions targets and link executive compensation to performance against them.

Think deeply about talent

Organizations that can reallocate talent in step with their strategic plans are more than twice as likely to outperform  their peers. To link talent to value, the best talent should be shifted into critical value-driving roles. That means moving away from a traditional approach, in which critical roles and talent are interchangeable and based on hierarchy.

Getting the best people into the most important roles requires a disciplined look at where the organization really creates value and how top talent contributes . Consider Tesla’s effort to create a culture of fast-moving innovation, or Apple’s obsessive focus on user experience. These cultural priorities are at the core of these companies’ value agendas. The roles needed to turn such priorities into value are often related to R&D and filled with talented, creative people.

To enable this shift, HR should manage talent rigorously by building an analytics capability to mine data to hire, develop, and retain the best employees. HR business partners, who articulate these staffing needs to the executive management team, should consider themselves internal service providers that ensure high returns on human-capital investments. For example, to engage business leaders in a regular review of talent, they can develop semiautomated data dashboards that track the most important metrics for critical roles.

Create the best employee experience possible

Companies know that a better employee experience means a better bottom line. Successful organizations work together with their people to create personalized, authentic, and motivating experiences that tap into purpose to strengthen individual, team, and company performance.

The HR team plays a crucial role in forming employee experience. Organizations in which HR facilitates a positive employee experience are 1.3 times more likely to report organizational outperformance, McKinsey research has shown . This has become even more important throughout the pandemic, as organizations work to build team morale and positive mindsets .

HR should facilitate and coordinate employee experience. Organizations can support this by helping HR evolve, strengthening the function’s capability so that it becomes the architect of the employee experience. Airbnb, for instance, rebranded the CHRO role as global head of employee experience. PayPal focused on HR’s capability and processes to create a better experience for employees, including coaching HR professionals on measuring and understanding that experience, and using technology more effectively.

Strengthen leadership and build capacity for change

Culture is the foundation on which exceptional financial performance is built. Companies with top-quartile cultures (as measured by McKinsey’s Organizational Health Index ) post a return to shareholders 60 percent higher  than median companies and 200 percent higher than those in the bottom quartile.

Culture change should be business-led, with clear and highly visible leadership from the top, and execution should be rigorous and consistent. Companies are more than five times more likely to have a successful transformation  when leaders have role-modeled the behavior changes they were asking their employees to make.

To strengthen an organization’s identity, HR should ask the following questions:

  • How can we develop an energizing sense of purpose that has a tangible impact on our strategic choices and ways of working?
  • How can we identify key talent roles and focus them on creating value?
  • How can we build a data-driven, systemic understanding of our organizational health?

Agility: HR’s role in flattening the organization

Organizational agility improves both company performance and employee satisfaction . HR can be instrumental in shifting an organization from a traditional hierarchy to a marketplace that provides talent and resources to a collection of empowered small teams, helping them to achieve their missions and acting as a common guiding star.

Adopt new organizational models

For instance, as a part of a multiyear agile transformation, a large European bank worked to establish an in-house agile academy led jointly by coaches and the HR function to drive capability building for the transformation.

To be successful, a transformation should touch every facet of an organization—people, process, strategy, structure, and technology. HR can help create an iterative approach by developing core elements of the people-management process, including new career paths for agile teams, revamped performance management, and capability building. It should lead by example as well, by shifting to agile “flow to work” pools  in which individuals are staffed to prioritized tasks.

Create a flexible—and magnetic—workforce

Because many roles are becoming disaggregated and fluid, work will increasingly be defined in terms of skills . The accelerating pace of technological change is widening skill gaps, making them more common and more quick to develop. To survive and deliver on their strategic objectives, all organizations will need to reskill and upskill significant portions of their workforce over the next ten years.

According to a 2018 McKinsey survey , 66 percent of executives said that “addressing potential skills gaps related to automation/digitization” within their workforces was at least a “top ten priority.” HR should help prioritize these talent shifts.

In a more recent survey McKinsey conducted with global executives  about the postpandemic workforce, more than a third of respondents said that their organizations were unprepared to address the skill gaps exacerbated by automation and digitization. The shift to digitization has accelerated during the pandemic: 85 percent of companies have picked up the pace of their digitization (including a 48 percent rise in the digitization of customer channels). In light of these trends and the need to shift skills, there is a clear business rationale behind workforce strategy and planning.

HR should be a strategic partner for the business in this regard, by ensuring that the right talent is in place to deliver on core company objectives. HR can also drive workforce planning by reviewing how disruptive trends affect employees, identifying future core capabilities, and assessing how supply and demand apply to future skills gaps.

Moving to a skills focus also requires innovative sourcing to meet specific work-activity needs (for example, the gig economy and automation), and changing which roles companies need to source with traditional full-time-equivalent positions and which can be done by temporary workers or contractors. In the survey with global executives, about 70 percent said that two years from now they expect to use more temporary workers and contractors than they did before the COVID-19 crisis.

During the pandemic, we’ve seen how organizations have come together to utilize talent with transferable skills. For instance, McKinsey has supported Talent Exchange , a platform that uses artificial intelligence to help workers displaced by the crisis.

Make better decisions—faster

Companies that make decisions at the right organizational level  and that have fewer reporting layers are more likely to deliver consistently on quality, velocity, and performance outcomes and thus outperform their industry peers. The pandemic has trained the spotlight on the power of fast decision making, as many organizations have had to move dramatically more quickly than they had originally envisioned. For example, one retailer had a plan for curbside delivery that would take 18 months to roll out; once the COVID-19 crisis hit, the plan went operational in just two days.

HR can help with strong decision making by empowering employees  to take risks in a culture that rewards them for doing so. McKinsey research revealed that employees who are empowered to make decisions and who receive sufficient coaching from leaders were three times more likely to say that their companies’ delegated decisions were both high quality and speedy .

Introduce next-generation performance management

Companies are experimenting with a wide variety of approaches to improve how they manage performance. According to a McKinsey Global Survey , half of respondents said that performance management had not had a positive effect on employee or organizational performance. Two-thirds reported the implementation of at least one meaningful modification to their performance-management systems.

We identified three practices—managers’ coaching, linking employee goals to business priorities, and differentiated compensation—that increase the chances that a performance-management system will positively affect employee performance. HR plays an important role in embedding these practices in performance management by supporting the goal-setting process, decoupling the compensation and development discussion, investing in manager’s capability building, and embedding technology and analytics to simplify the performance-management process.

To strengthen an organization’s agility, HR should ask the following questions:

  • Can we enable more effective decision making by pushing decisions to the edges of the organization, creating psychological safety  that empowers people, and building capabilities?
  • How do we accelerate the shift to a more diverse and deeply motivated talent base, one that is supported through a human-centric culture that enables outperformance and superior experience?
  • Which organizational areas or end-to-end value-creation streams would most benefit from a shift to new ways of working and organizing?

Scalability: How HR can drive value creation

The new normal of large, rapidly recurring skills gaps means that reskilling efforts must be transformational, not business as usual or piecemeal.

Lean into a learning culture by reskilling and upskilling

Effective reskilling and upskilling will require employees to embark on a blended-learning journey that includes traditional learning (training, digital courses, job aids) with nontraditional methods (enhanced peer coaching, learning networks, the mass personalization of change , “nudging” techniques).

For instance, Microsoft shifted from a “know it all” to a “learn it all” ethos, incorporating open learning days, informal social learning opportunities, learning data for internal career paths, and new platforms and products for its partner network.

Memo to HR: Look in the mirror

To drive and facilitate these workforce initiatives, HR must transform itself first. Talent is consistently ranked as a top three priority for CEOs, yet many lack confidence in HR’s ability to deliver. 3 Dominic Barton, Dennis Carey, and Ram Charan, “People before strategy: A new role for the CHRO,” Harvard Business Review , July– August 2015, Volume 93, Number 7–8, pp. 62–71, hbr.org. The HR function is often overburdened with transactional work and not well equipped to create value for the enterprise.

Yet people-first organizations look at business problems from the perspective of how talent creates value, and HR is well positioned to bring data-driven insights to talent decisions. HR can arm itself with data-driven insights and people analytics to support talent-driven transformation, and HR business partners can then consistently make talent decisions based on data.

Create a value-enhancing HR ecosystem

McKinsey analysis has shown that a preponderance of executives recognize how much external partnerships help companies differentiate themselves. Increased value can be created through ecosystems where partners share data, code, and skills. Success now requires “blurry boundaries” and mutually dependent relationships to share value. The need of the hour is for HR to collaborate on and leverage the landscape of HR tech solutions across the employee life cycle—from learning, talent acquisition, and performance management to workforce productivity—to build an effective HR ecosystem.

To strengthen an organization’s scalability, HR should ask the following questions:

  • How can we set up platforms spanning multiple players in the ecosystem and enable new sources of value and employee experience through them?
  • How can we become the best company to partner with in the ecosystem? How can we set ourselves up for fast partnering and make the ecosystem accessible?
  • What are the critical skills that drive future value creation and how can we upskill our talent base accordingly?

Looking ahead: How transformation happens

As the organization of the future takes shape, HR will be the driving force for many initiatives: mapping talent to value; making the workforce more flexible; prioritizing strategic workforce planning, performance management, and reskilling; building an HR platform; and developing an HR tech ecosystem. For other initiatives, HR can help C-suite leaders push forward on establishing and radiating purpose, improving employee experience, driving leadership and culture, and simplifying the organization.

Given the magnitude of the task and the broad portfolio of value-creating HR initiatives, prioritization is critical.

In May of 2020, HR leaders attending a McKinsey virtual conference indicated that over the next two years, they wanted to prioritize initiatives that strengthen agility and identity. That included 27 percent who said that they would focus on responding with agility and 25 percent who prioritized driving leadership, culture, and employee experience. Next came mapping talent to value and establishing and radiating purpose, each at 13 percent (Exhibit 2).

At a second conference for HR leaders, 4 Survey of human-resources leaders at “Reimagine: Organizing for the future,” a McKinsey virtual conference held in June 2020. about half of the assembled CHROs said that they were focusing on reimagining the fundamentals of the organization and rethinking the operating model and ways of working in the next normal.

We see organizations making this shift. Throughout the pandemic, HR has played a central role in how companies build organizational resilience and drive value . CHROs and their teams can continue on this path by connecting talent to business strategy and by implementing changes in the three core areas of identity, agility, and scalability, as well as the nine imperatives that flow from them.

A more flexible and responsive model will also help organizations meet coming demographic shifts and other workforce changes. Millennials are becoming the dominant group in the workforce (with Gen Z close behind), creating novel challenges for organizations to meet their needs. The prominence of the gig economy and alternate models of working will only grow, with 162 million workers in the European Union and the United States working independently— 70 percent of them by choice . And the rapid spread of digital technology and automation is dramatically reshaping the global economy, with half the tasks people perform already automatable today.

These trends are not new, but they are approaching tipping points, placing organization at the top of the CEO agenda. CHROs can help leadership by transforming their own HR organizations: developing and reinforcing clear priorities; embracing new ways of working, including rapid iteration and testing with the business and seeking explicit feedback; and revamping the HR skill set by embracing agility and digital capabilities.

While clearly a trial by fire, the pandemic also provides an opportunity for HR to accelerate its shift from a service to a strategic function, helping to shape a more dynamic organization that is ready to meet the postcrisis future.

Asmus Komm is a partner in McKinsey’s Hamburg office, Florian Pollner is a partner in the Zurich office, Bill Schaninger is a senior partner in the Philadelphia office, and Surbhi Sikka is a consultant in the Gurugram office.

The authors wish to thank Talha Khan for his contributions to this article.

This article was edited by Barbara Tierney, a senior editor in the New York office.

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aligning human resources and business strategy

Aligning human resources and business strategy

Reading time: about 7 min

You have to consider many factors when you create a go-to-market or business strategy. From brand messaging to product roadmaps to sales processes, effective business strategies also rely on the input of lots of people across many departments. 

Few departments have a better bird’s-eye view of the entire organization than human resources. HR professionals can see both why a strategy exists and how it’s developed and implemented. Yet, too often, HR departments don’t have a seat at the strategy table. Let’s take a look at how HR can help shape business strategy and bring it to life. 

Why HR should get involved with setting corporate strategy

Today, business moves faster than ever—it’s a platitude, but it’s still true. Technologies, industries, and consumers themselves continually evolve in a digitally-driven market, and companies continuously shift their strategic focus to keep pace. 

This culture of change has a significant impact on people. Every business decision has a real-life impact, and HR departments are specially equipped to inform strategy and help employees navigate the resulting changes. 

Consider these reasons why it’s so important for HR to align with business strategy: 

  • Move in lockstep with the rest of the company: Goals are always more achievable when there is universal buy-in and alignment across teams. 
  • Give HR initiatives a strategic focus: In today’s changing economy, there are countless ways to recruit, train, attract, invest in, and support employees. But it’s impossible to tackle every initiative all at once. Aligning with business strategy gives HR a strategic focus and helps prioritize goals. 
  • Secure the right talent: Good talent is always valuable, but companies may need to invest in different skill sets or roles at different times. Understanding the strategic goals of the business will help HR attract and retain the right talent at the right time. 

What role human resources plays in strategic planning

So how does HR become part of the broader business decision-making process? How do HR departments move from a reactive, service-oriented function to a more executive-level, strategic one? 

It starts with setting clear objectives for the department and strong values for the entire organization. Companies with documented values are less likely to ignore the real-life impact of any strategy shifts or big decisions. Consider these steps as you begin.

1. Align and set your HR goals

The main strategic role of HR is to create goals to help meet key business objectives. Goals may vary depending on the company’s strategic plan, but focusing on HR fundamentals is an excellent place to start. Here are some areas of HR most commonly affected by broader strategic business shifts. 

Organizational structure

The way companies are organized largely depends on their current strategic objectives and growth stages. If a company is in a high-growth stage, it may have a sales-driven culture with more sales employees and sales executives in decision-making roles. Mature companies with a retention-focused strategy may hire more customer success roles. 

Aligning human resources

See 7 types of organizational structures—along with pros and cons for each—to find one that fits your strategy.

Employee compensation

Maybe current business goals are more focused on employee retention or culture-building. Conversely, perhaps the company needs to cut costs. In either case, compensation structure may be an important consideration. When HR is aligned and informed on these goals, they can make strategic decisions to help the organization meet them. 

Employee development

Depending on the business goals and immediate initiatives, it may be necessary to train employees on new skill sets. Some employees may resist additional roles and responsibilities, so the role of HR in these situations is to both evangelize additional training and ensure teams are developed to keep pace with shifting needs. 

Performance reviews

Change management .

As a people-focused department, HR often has the best pulse on employee sentiment throughout the organization. HR departments can encourage employees to share their feedback on new business strategies or technology investments to ensure any changes or strategic shifts make sense from an operational perspective. 

2. Formulate specific actions to hit those goals

Once you’ve aligned and set goals, it’s time to develop action plans to execute your HR strategic vision. Focus on developing and improving processes for recruiting, hiring, employee development, and performance reviews. 

When you develop an action plan, you'll need to have a clear understanding of your organization’s current structure and identify any gaps or shortcomings in your processes. Where should you invest more in recruiting? If budgets are tight, what training or employee development programs could maximize the productivity and effectiveness of your existing talent?  The ability to visualize where every player fits into the larger organization can help HR departments align employees to business strategy, maximize efficiency, and see data in context to drive better decisions. Org charts and related visuals can help HR departments optimize organizational structure at every level and make better decisions, such as: 

  • Assigning employees where their skills can make the most significant impact
  • Making informed decisions about pay, equity, and performance
  • Modeling current and future org structures to determine how best to scale your business

Lucidchart template roundup april

Does your organization needs to hire new talent to meet its strategic goals? See how to develop a staffing plan.

3. Track and measure performance

Historically, the role of HR has stayed in the “softer,” people-focused side of the business. However, people analytics are now the new HR, and HR departments are just as responsible for reporting on the performance of their initiatives as any other department. 

With human resource alignment around data-driven goals, HR leaders can ensure that decision-making not only aligns with strategic business objectives but also helps drive those goals. HR leaders can analyze data from sales, marketing, and accounting to break down departmental silos and better align with overall business goals.

According to a Bersin by Deloitte study, data-driven HR teams are four times more likely to be respected by their business counterparts, which can result in more input in strategic decision-making. By combining departmental data and HR data and visualizing it all in a single workspace, HR departments can better align their decisions to business strategy. Consider the ways these types of people analytics can impact the broader business:

Employee analytics

Measure the performance of all the HR initiatives in terms of cost, time, performance, then use a dashboard to track recruiting times, onboarding speed, employee satisfaction, and employee salaries. This data-driven approach to people management helps HR departments evaluate pay disparities, track employee retention, identify trends, and see critical employee metrics that will provide quick insights for better decision-making.  

All this gives you the chance to onboard new employees more efficiently, improve employee satisfaction, and reduce retention.

Talent analytics

Today, effective talent acquisition goes way beyond budget and headcount. HR departments can rely on algorithmic data to quickly sift through deep pools of qualified applicants to attract and retain top talent. 

Today, effective talent acquisition goes way beyond budget and headcount. HR departments can rely on algorithmic data to quickly sift through deep pools of qualified applicants to attract and retain top talent. This allows you to identify and attract high-quality employees and improve your workforce planning.  

Predictive analytics

Set up indicators to see when an employee is at risk of leaving the company. HR departments can use data to identify risk facts and predict employee churn and how this will affect the company. This leads to better retention and employee planning

Invest in better people planning 

Modern human resources departments manage much more than hiring, onboarding, and benefits. Aligning HR with business strategy can boost employee satisfaction and performance, ensure teams are aligned to help the business achieve its strategic objectives and increase their influence and decision-making power across the organization. 

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Everyone knows that HR is an important department in your organization, but few employees know why. Read our in-depth description of what the HR department does (or what they should be doing) to meet the needs of employees.

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How HR Can Influence Organizational Strategy

​At many organizations, senior executives create a strategic plan, only to have it sit on a shelf and gather dust. That leaves the organization investing time and resources in all the wrong places.

At other workplaces, there may be no strategic plan at all.

HR professionals can take a key role in shaping their organization's strategy and contributing to its future success because they know the workforce better than most, according to Michael Wilkinson, managing director of Leadership Strategies Inc. in Atlanta.

"We need to be at the table when strategy is designed. We need to be at the table when strategy is implemented," said Wilkinson, who spoke at a concurrent session at the Society for Human Resource Management 2016 Annual Conference & Exposition in Washington, D.C., on June 21. "But we have to prove we deserve that seat."

HR professionals can influence their organization's strategy by:

  • Promoting strategy development at the organizational, division and department levels. "We should be asking the strategic questions at every level of the organization . : Where are we going? What do we need to be doing to get there?" Wilkinson said.
  • Providing strategy development training and resources to the organization. "We have to equip our people to do their work," he said.
  • Modeling strategy by developing a strategic plan for the HR department to demonstrate its value.

As a first step in developing a strategic plan, assess where the organization is today. Frequently, senior leaders have a great vision, but they don't have a clear and accurate picture of the organization's current status. They may see only the strengths or only the weaknesses, Wilkinson said.

Then, have executives create a shared vision of what they hope the organization will look like in the future. Encourage senior leaders with differing visions to debate once where the organization is going but then to agree to go in the same direction.

Another challenge is understanding what is critical to the organization's success. It may not always be obvious. What key conditions must be created to help the organization succeed? What are the barriers to that?

Next, identify the "drivers" within your organization. They are the people who can get things done.

"The drivers have to break through the barriers to get where we want to be," he said.

Finally, determine how the organization will monitor and measure its progress toward achieving its objectives.

Many strategic plans fail because organizations never get around to the monitoring phase, Wilkinson said. Some make the mistake of measuring activities instead of results. For example, an organization might say its objective is to hold two membership drives a year without stating how many new members it would like to recruit.

Another common mistake organizations make is confusing goals and objectives, he said.

A goal is a broad, long-term aim that defines the accomplishment of the mission, he explained, while an objective is the specific, quantifiable, realistic target that can help you measure whether you're accomplishing the goal.

Other top reasons strategic plans fail include inadequate planning and failing to include key people in the planning, he said.

Dori Meinert is senior writer/editor for HR Magazine.

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link between business planning and human resources

The Essential Link Between Business Strategy and HR Management

link between business planning and human resources

Caroline Reidy

The hr suite.

The business of HR is an increasingly interesting and often complex environment. The level of time and resources allocated to the HR function within an organisation varies dramatically. This article explores a few different aspects around the connection between a company’s Human Resource Management policies and the organisations business strategy.

An increasing number of studies demonstrate the importance of linking business strategy with deployment of human resources within an organisation. A company’s pool of human resources and talent are arguably some of its most valuable assets. A company which links it HRM with its strategic business plan stands to gain a strong competitive advantage in the marketplace.

Strategic decision making is about considering both the internal and external factors and the context around them. The internal factors could be the company’s mission statement, the organisational structure and whether it is a large multi divisional organisation or a smaller single product company. This would usually impact on how the selection, appraisal and development of employees is structured. The external factors could be the political, cultural and economic force which may impact the business.

The human dimension of the Company’s strategy refers to the key subject of employees and employment relations. This resource represents the potential value of workers for achieving goals and gaining organisational success. Management of this includes decision making, implementation and taking actions aimed at employee attitudes and behaviours to achieve the organisational goals.

Strategic HRM can be very effective in organisations when implemented correctly. It benefits the organisation in several ways. It can be a very useful tool to help identify and analyse both internal and external threats as well as opportunities. It also helps to provide a clear business vision and strategy. It is an important influence in the approach to the recruitment and selection process to get the right people with the right skillset into the most effective positions to maximise their potential within the organisation.

A key component of linking business strategy to HRM is a culture of clear communication and trust within an organisation. When employees are encouraged to become involved in various aspects of the business strategy it develops higher levels of trust and respectability between employees and the management team. This trust is built on the knowledge sharing which allows employees to also share in the vision and goals of the organisation. The right strategy therefore helps to retain talent and develop highly competent employees.

The Michigan model is often referred to in discussion around strategic HRM. The model is based on strategic control, organisation structure and people management processes. While it focuses on reward systems for motivating employees it also concentrates on managing human resources to achieve strategic goals. Therefore, having the right structure in place ensures issues are addressed in a timely and effective manner. Most importantly it gets ‘buy in’ from employees as they feel involved in contributing to the overall strategic plan of the organisation. This can result in higher levels of productivity from a high performing workforce.

It takes strong leadership and commitment to consistently maintain the link between HR practices and the strategic plan of the business. There are some barriers such as varying levels of financial support towards the implementations and follow up of HR, development and training policies. There may also be market pressures due to economic difficulties which make it difficult to recruit the preferred talent for specific roles within the organisation. The presence of Trade Unions and threats of industrial action can also have an adverse effect on an organisation’s development and performance in relation to the implementation of Strategic HR Management.

A significant number of Multi-National Corporations base their operations in low cost economies to increase their profit margins. Therefore, the effect of globalisation is also a significant factor affecting business strategy and HRM. As both social and business relationships in distant regions are now instantly linked by advances in communication it is much more sustainable to manage a global workforce.  However, while multinationals often locate to economies which may have lower operating costs and an attractive corporation tax rate, the strategy will only be successful if the pool of talent with the relevant skillset is available.  In summary, this can result in an even more competitive market around recruitment for organisations which demonstrates the challenges around linking business strategy with HRM. It is important that an organisation builds and maintains a strong capacity to recruit and retain high performing employees. Through ongoing training and development these employees would acquire a broad range of knowledge, skills and attitudes throughout their careers.

The importance of strong teamwork and collaboration between various stakeholders at the senior levels within an organisation is crucial to the success of any strategy.  When leaders can demonstrate their willingness to buy in to the combined business strategy and HRM processes of their organisation and openly share this with their teams it can be a very powerful and dynamic tool in gaining competitive advantage in the marketplace.

If you would like more information about using mediation in your workplace, please do not hesitate to contact Caroline or one of the team on 066 7102887 or email The HR Suite on [email protected]

  

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The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.

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Human Resource Planning: Definition & Top Strategies

Lucija Bakić

April 4, 2024

Human resource planning is a key strategy for ensuring long-term business sustainability and resilience.

In this guide, we’ll explore the essentials of human resource planning (HRP), why it’s so important, and the best practices to start your human resource planning process. To learn more about the broader process of resource management, read our guide to business resource planning . Key Takeaways

  • HRP is a process that ensures that companies have enough capacity to meet customer demands and business goals.
  • The main steps of the process include analyzing current availability, forecasting future demand, identifying capacity gaps, and developing and monitoring HRP strategies.
  • Some of the main challenges include ensuring the accuracy of your forecasting with reliable data, maintaining the balance between billable work and capacity building initiatives, and promoting collaboration and transparency. 
  • The right capacity planning solution can help you address the above with automation features, real-time data, and predictive analytics.

What Is Human Resource Planning (HRP)?

Human resource planning (HRP) is a process used to ensure that businesses have employees with the right skills, at the right time, and with the appropriate capacity to meet strategic goals.  Some practical examples of HRP workflows for various businesses include:

  • An e-commerce business forecasting the need for IT capacity increases according to seasonal trends and scaling their infrastructure and support team.
  • A design agency identifying higher demand for digital media through benchmarking and developing strategies to upskill and reskill its employee pool.
  • A law firm initiating a succession planning strategy for the impending employee retirements by developing internal leadership candidates and recruiting external talent.

Why Is HRP Important? Top 4 Benefits

According to research by the Work Institute, 78% of the reasons for voluntary turnover could have been prevented by the employer if identified and addressed on time.  Human resource planning helps businesses increase employee engagement and drive various improvements by:

1. Maintaining a Qualified Workforce

HRP aligns talent capabilities with organizational goals through talent acquisition, training, and development initiatives. Ensuring you have a skilled workforce to meet future workforce requirements reduces the risk of inefficient workflows and supports daily business operations. Investing in employee talent and skills can also help increase employee engagement and satisfaction.

2. Improving Risk and Change Management

HRP is a proactive approach that focuses on identifying issues before they occur. Analyzing trends and forecasting future needs helps businesses create contingency plans for various scenarios. This can include high-impact external changes, such as technological advancements, or internal disruptions, like leadership transitions.

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3. Ensuring Your Business Is Competitive

HRP keeps businesses competitive by helping them attract the right talent and ensuring that current employees are skilled and engaged in the workplace. It helps companies adapt to changes quickly and efficiently, fostering the agility and proactiveness needed to stay ahead of industry trends and competitors. See more : The Top 13 Benefits of ERP

4. Optimizing Workforce Costs

HRP optimizes business costs by providing balanced employee utilization so that your agency isn’t spending excess money on non-productive labor costs. It also ensures that your business can do more work with adequate supply. Finally, HRP reduces the chance of unexpected resource gaps through effective forecasting, minimizing the need for last-minute hiring or overtime work. Related: Operations Strategy Examples

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The Main Steps of Human Resources Planning

The key steps of HRP include:

  • Workforce analysis to determine your company’s current human resource capacity.
  • Demand forecasting to future resource demand based on industry trends and internal needs.
  • Gap analysis includes finding potential roadblocks in your HRP process and developing strategies to address them.
  • Implementation and monitoring of your human resource strategies, usually by tracking key performance indicators.

Analyzing Current Availability

Workforce analysis involves a comprehensive evaluation of the current workforce’s size, skills, and capabilities. It assesses aspects such as:

  • Employee productivity
  • Job satisfaction
  • Skill sets, including technical and soft skills
  • Turnover rates

These metrics are used to identify your organization’s strengths and weaknesses. This is the foundation on which you’ll develop actionable steps to improve your HRP processes.

The utilization rate is the key metric for visualizing productivity — use Productive for real-time insights

Projecting Future Demand

Projecting future demand involves estimating the human resource requirements needed for an organization to meet its future goals. This forecast considers factors such as business growth, market expansion, technological advancements, and changes in operational processes. Three tools that are used in this process are:

  • Ratio analysis , where historical data on the relationship between business metrics and workforce size is used to predict future staffing needs.
  • Trend analysis , which examines patterns in the organization’s workforce data over time.
  • Comparative analysis, whether by comparing internal resource planning practices across multiple projects or benchmarking your performance against competitors.

Another potential strategy is utilizing real-time data, such as forecasting charts that depict the impact of resource scheduling on agency analytics.

Productive’s forecasting charts let you predict your company’s revenue and profit margins

Gap Analysis

Gap analysis compares future human resource needs against the current workforce’s capabilities to identify discrepancies or gaps. A way to conduct gap analysis is to monitor where previous projects went wrong to pinpoint inefficiencies in your workflows, such as miscommunication or a deficit of specific skills. You can do this by checking estimated vs real completion times for various tasks — ERP solutions can deliver these insights with time tracking features.  Then, by examining your upcoming projects or initiatives, you can identify and forecast potential areas where similar imbalances may occur.

Developing and Implementing Strategies

The final step is developing and implementing HR strategies to cover your company’s specific needs and requirements. These strategies may include:

  • Creating a resource plan:  A resource plan is an in-depth document that contains information on your employees, their availability, and their scheduled time. It helps businesses follow strategic objectives and monitor their ongoing processes.

Get an in-depth overview of your business resources and their availability

  • Employee engagement and retention strategies:  For example, drafting career development plans, introducing new benefits packages and competitive compensation, and promoting a healthy organizational mindset.
  • Implementing modern software: Resource planning tools can support various steps of the HRP process, with features such as time off management, billable hours tracking, financial forecasting, real-time reporting, workflow automations, and more.

Best Practices for Effective HRP

Once you’ve pinpointed potential gaps and developed strategies to drive improvements, what are some best practices to ensure they stick?

Monitoring Your Progress

Whichever initiatives you decide to implement, monitoring them through capacity management metrics is necessary to assess their effectiveness. However, keep in mind that while business metrics are important, some benefits of HRP may be hard to quantify. This includes better work-life balance and improved working environment.

Regular Review

HRP can take a long time to provide results. Agility and flexibility are needed to make sure that your strategies can stay aligned with changing business needs and priorities. Regular review helps identify where your strategies have gone off track to implement timely changes.

Continuous Improvement

HRP is an ongoing process. As such, your strategies will need to evolve alongside your business goals and circumstances. Incremental improvements are always better than sudden, expansive changes — consistently seeking feedback and analyzing outcomes is a way to ensure your HRP strategies remain effective over time.

Types of HR Planning 

There are different types or techniques associated with HR planning. Here are some common terms and how you can differentiate them:

Hard vs Soft HR Planning

  • Hard HR Planning focuses on quantitative aspects of human resource management, such as headcount, costs, and labor allocation. This approach often involves in-depth data and forecasting for informed decision-making.
  • Soft HR Planning  considers qualitative factors of workforce management, such as engagement, development, and well-being. It’s less focused on data and more on fostering a committed and resilient workforce.

Short-Term vs Strategic HRP

  • Short-term HRP is more of a reactive approach that addresses immediate staffing needs and focuses on resolving urgent issues. It typically spans a timeframe of up to one year.
  • Strategic HRP is a long-term approach that aligns workforce planning with the organization’s future goals and strategies. It involves forecasting workforce requirements, sustainable talent management, and other proactive strategies for business success.

Employee Reskilling vs Upskilling

  • Reskilling involves training employees in new skills and capabilities to help them transition to different roles within the company.
  • Upskilling focuses on enhancing the current skills and competencies to improve performance, stay competitive, and meet job requirements.

See more : Capacity Building 101

Future Trends in HR Planning

  • Remote work is here to stay. According to survey results, 63% of professionals are willing to take a pay cut to work remotely (FlexJobs). If possible, consider including it as one of your benefits to drive a competitive advantage.
  • In general, employee well-being initiatives are becoming more and more popular. This can include more flexible hours, hybrid or remote work, health insurance plans, as well as various fitness and wellness programs (learn more about workload management ).
  • 72% of professionals agree that all forms of skill-based hiring are more effective than resumes. While the resume is still used to filter the pool of applicants, work-related tasks and technical questions have proven to be the more efficient and cost-effective way of hiring candidates (Test Gorilla).
  • When it comes to daily workflows, 60% of professionals believe that automation helps them fight burnout and work-related stress. It allows for a more flexible work schedule, helps them be more organized at work, frees up their tasks for work they enjoy, and more (Zapier). Consider tools that can provide no-code automations to streamline day-to-day work.

The Challenges of Human Resource Planning

Now that we’ve gone through the main steps of the HRP, it’s time to address some of its main challenges:

  • Accurate forecasting:  Predicting future needs accurately can be a challenge in itself. Not only does it require having an in-depth understanding of your business circumstances, but it’s also sensitive to changes in market demand and economic conditions.
  • Maintaining a flexible workforce: Maintaining a versatile and skilled workforce requires careful management of work hours. This ensures that profitability isn’t compromised, and at the same time, avoids situations where training is neglected entirely for billable work. This balance between billable and non-billable time is crucial for sustainable organizational success.
  • Aligning HR Strategy with Business Goals : Keeping track of the overarching business strategy in HRP can be hard, especially in large or rapidly evolving organizations. It requires transparent communication, cross-functional collaboration, and a deep understanding of the organization’s long-term objectives and the role of the workforce in achieving them.

The Solution: Utilizing Software for Enhanced HR Planning

A way to address these potential challenges is using tools with HR and resource management capabilities .  Modern software provides a way to visualize and forecast employee hours, activities, and their impact on business financials for more informed decision-making. It also helps businesses view project progress in real time to streamline stakeholder collaboration.

Adapt your project management to your working preferences with Productive

An example of such a tool is Productive , with key HRP features including:

  • Time tracking
  • Resource scheduling
  • Workload balancing
  • Time off management
  • Financial forecasting

Book a demo today to discover how Productive can help drive efficient human resource management.

What is meant by human resource planning?

Human resource planning (HRP) is the strategic process of ensuring your business has the correct number of skilled employees to meet company goals. It involves talent management, employee performance and data analysis, needs forecasting, and more.

What are the 5 steps in human resource planning?

The five main steps of human resource planning include identifying current organizational availability, demand forecasting, capacity gap analysis, strategy development and implementation, and results monitoring and analysis.

What are the 3 key areas of human resources planning?

The 3 key areas of human resource planning (HRP) include workforce forecasting, talent management, and gap analysis. Workforce forecasting involves analyzing current availability and predicting the future needs of the workforce. Talent management encompasses various strategies, from recruitment, training, and development to succession planning. Gap analysis involves pinpointing areas of improvement by identifying where capacity fell short of meeting demand (skills, quantity, time, etc.).

Why is human resources planning important?

Human resource planning (HRP) is important because it ensures that the workforce is aligned with the organization’s strategic goals. It helps businesses get the most out of their human resources, both by improving acquisition strategies, developing current talent, and increasing retention. HRP also supports organization agility, flexibility, and resilience by building a well-skilled and satisfied workforce.

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Align HR with Business Strategy

  • Erin Aldridge
  • February 16, 2023

Align Human Resources (HR) with Business Strategy

A business strategy consists of clearly defined plans, actions, and goals that map how a business will use its products or services to compete in one or more markets. Compared to most business functions, Human Resources (HR) intersects with all other departments, making it a vital part of any good business strategy.

More businesses are giving HR a seat at the leadership table and tapping into workforce data to identify and reach critical business objectives. Companies that weave HR activities such as recruitment, retention, and training into their overall business strategy gain a competitive edge that sets them up for long-term success. This article will explain the role of human resources in strategic planning, provide examples demonstrating how to align human resources with business strategy, and more.

link between business planning and human resources

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The Role of Human Resources in Strategic Planning

How to align hr strategy with business strategy, examples of aligning hr strategy with business strategy.

HR is often viewed as a day-to-day administrative business unit responsible for managing talent acquisition efforts, employee benefits, performance management, training and development , compensation, and more. Given the rapidly changing nature of business, HR can no longer operate in a silo. Technology is changing entire industries at a fantastic speed and altering labor markets in a way that has a real impact on people.

With this change comes opportunity, and it requires leveraging human resources as a long-term strategic partner in business. HR can communicate business goals to personnel and help them thrive amid subsequent organizational changes. Using HR to coordinate strategic initiatives directly improves a business’s ability to remain competitive.

Other benefits of aligning HR with the business strategy at large include:

  • Improving communication between leaders and the rest of the business
  • Helping maintain employee and business focus on strategic goals
  • Augmenting productivity
  • Promoting employee engagement and retention

Human Resources can no longer be viewed as just a service-oriented department but rather an essential partner in business decision-making. Whether defining business goals and forming strategic plans starts with the executive team, the HR team, or another department, HR will play an essential role in achieving success.

Dramatic changes to the workplace are already underway, from increasing remote work to rising healthcare costs. Executing a strategic plan requires understanding these challenges. Knowing the long-term business objectives allows the HR department to navigate these challenges in a way that contributes to the business.

To successfully align their efforts with business strategy, HR experts must complete the following:

  • Understand the business strategy and how it impacts other departments
  • Evaluate external and internal workforce conditions
  • Plan and implement the HR strategy that includes key performance indicators (KPIs)
  • Automate applicable tasks
  • Measure and evaluate results

5 Steps to Align HR with Business Strategy

A typical HR team is responsible for a range of business operations that impact how all other business units operate. Here are a couple of examples demonstrating what it means to align HR initiatives with business strategy:

Example 1: Organizational Restructuring

A corporate restructure can take many forms, from moving to a hybrid work model to consolidating departments or choosing a new corporate headquarters. No matter what the organizational change is, it will impact all employees. The restructuring can make them fearful for job security, upend their work schedule, and require them to change teams.

HR should be looped into the goal of the restructuring and play a central role during the transition. If your business is moving towards remote work, HR can find the best technology and processes to help with the change. Are you opening an office in a new city? HR can find the best local talent and onboard them. Overall, aligning HR to the restructuring goal can help retain and recruit essential employees , ultimately preserving productivity and saving money.

Example 2: Employee Retention

In a competitive job market, employees can resign for many reasons. Better pay, flexible work options, and a better work/life balance are a few common reasons. Business leaders prioritizing employee retention should tap HR to execute a plan to stifle employee resignations. HR can run an employee satisfaction survey to determine why staff leave the company and recommend changes to address them. 

Example 3: Social Responsibility

More companies are prioritizing social responsibility and looking to make it a central part of their corporate values. Baking social responsibility into a business’s DNA requires significant input from the Human Resources department. Depending on the specific goals the company wants to achieve, HR might introduce diversity, equity, and inclusion (DEI) training, organize volunteer dates with local charities, or establish a plan for integrating environmentally-friendly business practices.

Example 4: Crisis Management

Nearly every business received a wake-up call during the onset of the COVID-19 pandemic. Many had to significantly cut costs, including laying off employees, dealing a blow to morale and the bottom line. For businesses eager to be better prepared for potential crises, HR should take the lead by creating a business continuity plan (BCP) to mitigate disruptions in the case of disaster.

Keeping pace with the constant change affecting business requires using HR more strategically than ever. The core responsibilities of managing employee engagement, training, performance, and benefits will always be there. Aligning HR with the business strategy is essential for unlocking productivity, sustaining growth, achieving corporate objectives, and remaining competitive. Today’s HR function is more than just administrative cost-centers. It is a crucial partner that keeps the entire business working towards the same goals.

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Module 5: Workforce Planning

Business strategy and workforce planning, learning outcomes.

  • Describe the relationship between business strategy and workforce planning

What is Workforce Planning?

We’ve previously discussed the strategic planning process and the role that HR management plays in supporting the planning and implementation process. As stated in Human Resources Today , the role of human resource management is to ensure that an organization has the talent—the right combination of skills, knowledge, aptitude and attitude—to achieve its strategic goals. The organization’s strategy, including its mission or “why,” core values and culture as well as its competitive strategy, has implications for not only human resource structure, policies and practices but how roles are designed and valued. Workforce planning is not simply a matter of filling open requisitions, it is a complex research and design problem that involves developing a detailed understanding of a role, it’s requirements and how that role relates to organizational strategy and to other roles within the organization.

The state of California’s Human Resource Department abbreviated definition of workforce planning is “having the right number of people with the right skills in the right jobs at the right time.” [1] Good as far as it goes, but this definition doesn’t capture the complexity of workforce planning in what is, practically speaking, a full employment economy on the verge of the next industrial revolution. HRZone’s definition better reflects these operating realities: “workforce planning is the process of ensuring an organisation has current and future access to the human capital it needs to perform effectively.” [2] Using the term “access” also reflects the increasing use of alternative employment—for example, contract and temporary—rather than a traditional full-time employee relationship.

PRactice Question

The workplace planning process.

The Workplace Planning Process. Strategic planning leads to current workforce analysis, which leads to identify future workforce requirements, which leads to gap analysis, which leads to action planning, which leads to execution and evaluation, which leads back to strategic planning and the cycle continues.

Figure 1. The Workplace Planning Process

Workplace planning is generally done based on a multi-year horizon (for example, 3–5 or 5–10 years) and consists of a six step process, as illustrated in Figure 1. The steps in the process are fleshed out based largely on the federal Office of Personnel Management’s workforce management training materials. [3]

  • Strategic planning. Align the workforce planning process with the organization’s strategic plan and annual business plan to support achievement of long-term (strategic plan) and short-time (annual performance) goals and objectives.
  • Current workforce analysis. Analyze current resources, including projections for training and development and turnover.
  • Identification of future workforce requirements. Develop specifications for the types, quantity, and location of human resources required to accomplish strategic objectives
  • Gap analysis. Identify the gaps between current and projected workforce needs.
  • Action planning. Identify how to close resource gaps, including development of implementation plans and associated evaluation metrics. Plans may encompass a range of activities including recruiting, training, reskilling, organizational restructuring, contracting/outsourcing, automation and succession planning.
  • Execution and evaluation. Execution involves, in brief, establishing roles and responsibilities and securing required resources. Evaluation involves monitoring progress relative to goals and making adjustments as necessary to reflect changes in plan assumptions or other relevant factors.

As the circular design implies, this is a continuous rather than linear—start to end—process. For perspective on the significance of this process, the state of California’s HR departments notes that “workforce planning informs recruitment, retention, employee development, knowledge transfer and succession planning.” [4] For perspective on sequencing, author, blogger (HR Bartender) and president of human resource consulting firm ITM Group, Inc., Sharlyn Lauby notes that “before companies can start thinking about their succession plans, they have to understand their jobs.” [5]

  • " Statewide Workforce Planning ." California Department of Human Resources. Accessed September 10, 2019. ↵
  • " What is Workforce Planning? " HR Zone. Accessed September 10, 2019. ↵
  • " OPM's Workforce Planning Model ." opm.gov. Accessed September 10, 2019. ↵
  • " State of California Workforce Planning Model ." California Department of Human Resources. Accessed September 10, 2019. ↵
  • Rassi, Elias. " 6 Quotes About the Value of Succession Planning from 2015 ." SABA Blog. December 30, 2015. Accessed September 10, 2019. ↵
  • Business Strategy and Workforce Planning. Authored by : Nina Burokas. Provided by : Lumen Learning. License : CC BY: Attribution
  • Image: Workplace planning process. Provided by : Lumen Learning. License : CC BY: Attribution

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Creating an Effective HR Strategy: Aligning HR with Business Goals

By: Amy Dozier on March 1st, 2024

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Creating an Effective HR Strategy: Aligning HR with Business Goals

Business Management & Strategy

We're a leading HR consulting and outsourcing firm, which means we field a lot of questions from business leaders about human resources. Perhaps the most common question is: how can I get more from my HR team?

HR teams are filled with talented professionals who are skilled in leadership, communication, and project management. Despite this, the HR department doesn't always support business growth in an obvious way. In fact, projects can sometimes slow down due to HR issues, such as a too-long recruitment process or a lack of training resources. 

What is an HR Strategy? 

An HR strategy serves as your roadmap to cultivate and sustain a high-performing team that can effectively achieve your organization's desired business outcomes. A typical HR strategy will cover elements such as: 

  • Recruitment  and onboarding
  • Training and professional development
  • Employee engagement
  • Organizational culture and work environment
  • Operational policies and compliance
  • Compensation strategy and Total Rewards
  • Employee retention
  • Succession planning

A comprehensive HR strategy takes into account the diverse aspects of human capital. This includes evaluating the individual employee experience and determining their level of engagement, as well as assessing the effectiveness of your Total Rewards program.

Additionally, it is crucial to examine your strategy from an organizational standpoint. This involves considering factors such as business resilience, demand planning, and succession. By doing so, you will gain a deeper understanding of why HR strategy is essential for the overall success of your organization.

Download the guide: 20 Questions to Ask Your HR Leader

Why is HR strategy important for business strategy? 

In a new organization, HR plays a critical role in recruiting and integrating top talent into the team. However, HR leaders understand that their responsibilities extend far beyond day-to-day tasks such as payroll and compliance. They recognize that the business relies on them to think strategically and contribute to the long-term success of the organization. Business strategy depends on human capital factors, such as: 

  • Employer reputation : According to Glassdoor , 75% of candidates are likely to apply to companies that actively manage their employer brand . An excellent HR strategy can help you build a reputation as an employer of choice or best place to work.
  • Cost management : Labor is the biggest expense for most companies. A good compensation strategy can help keep these costs down. Training and development can also reduce costs by empowering workers to be more productive. 
  • Team stability : Staff turnover can be a massive disruptor for your business strategy, especially when you're trying to grow. The right HR strategy can help engage and retain your most important team members, ensuring you've got the correct people in place to deliver your goals.
  • Depth of skills : Your organization's skills requirements will change over time. For example, you might need people who can work with a new technology or connect with clients in new markets. Your HR strategy can support these changes through recruitment and professional development initiatives. 
  • Compliance : Regulatory compliance is non-negotiable for every business. From payroll laws to OHSA to anti-discrimination rules, employee legal protections can be a minefield. The right HR strategy will help you stay compliant and avoid costly fines that might threaten business growth.
  • Strategy and planning : Strategic HR leaders can help develop and implement the company's long-term strategy. They understand the current team's strengths and weaknesses, so they know if the company is prepared for the next stage in its development.   

Having a solid HR strategy can give your organization a competitive edge. However, it's not sufficient to simply have a plan for HR. It is equally important to ensure that your HR strategy aligns seamlessly with your overall business strategy.

Recommended reading: HR Trends 2024: Your Strategy Guide for the Year Ahead

Five steps to align HR strategy with the business strategy

How can HR leaders ensure they are contributing to long-term business success? Like any other leader, they achieve this through careful planning, effective employee communications, and thorough analysis. Here's a step-by-step guide on aligning your Human Resource strategy with the broader corporate strategy.

1. Understand the main strategic goals

All strategies should be aligned towards the same outcomes. If the main business goal is growth, the HR strategy should aim to reduce time-to-hire, improve onboarding, and scale up training and development. If the goal is business resilience, HR needs to look at operational efficiency and compensation planning.  

You will also need to understand the current state of the organization. Are there budgetary pressures? Regulatory issues? Market movement, such as a new competitor arriving on the scene (or an existing competitor departing)? If you understand where the company is and where you're going, you'll be in a better position to support the main corporate strategy.

2. Map out a skills matrix

How does your current team contribute to the company strategy? Each individual brings something different, so you'll speak with team members one by one and discuss their strengths and weaknesses. This approach will help you prioritize training resources where they're needed most. 

You can also work with strategic leaders to map out a skills requirements matrix. For instance, if your company plans a major digital initiative, you might need a team with strong IT skills. You can compare these requirements to your current skills matrix, which will help you decide if you need to invest in training or recruitment. 

3. Formalize your talent strategy

Once you know where the organization is headed and what it requires of its people to get there, you must determine the gaps between its current workforce and what is necessary to accomplish the main business goals. 

Define strategies needed to acquire, train, develop, performance manage, and reward the very high-performing talent that will carry your organization into the future. It's a good idea to document and formalize this strategy to get everyone on the same page. 

4. Measure HR goals and outcomes

Whether you use an HR scorecard or other HR metrics, these measures indicate if your HR talent strategy is successful or when a course correction is necessary. Pay close attention to things like: 

  • Time-to-hire
  • Engagement survey or pulse survey results
  • Professional development progress
  • Stay interview and exit interview results

People metrics such as these will help you ensure that you're headed in the right direction. If the HR strategy is failing to support the main business strategy, then it's time to review the HR strategy.

5. Stay in touch with the key strategists

But what happens if the business strategy changes? That's why it's essential to have a connection between HR leadership and primary decision-makers and stakeholders. You can't support a well-rounded business strategy unless you know what that strategy is.

Aligning with the core strategy can be tricky, especially if HR doesn't have a voice in the board room. Some companies benefit from having a CHRO that can help shape the people-focused business strategy. If you don't have an executive in charge of human capital, then the HR leader needs to have a good relationship with the CEO or COO. 

Need help with your HR strategy?

Strategic HR requires a lot of experience in human resources management. If you've got a veteran human resources team, then they will be able to help you build a responsive, resilient strategy that helps deliver your business goals. 

But what if you don't have that in-house expertise? Or if your HR team is too snowed under to think about strategy? 

That's when you need an HR outsourcer. An HR consultant can give you the benefit of their years of expertise in delivering measurable business outcomes. 

Book a no-obligation chat with a Helios HR consultant today. Let's talk about how you can build a winning HR strategy. 

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Human Resource Planning: The Ultimate Guide

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Human Resource Planning: The Ultimate Guide

Have you ever wondered how a company decides exactly how many people to hire, what skills they should have, and the best time for them to join?

That's where human resource planning comes into play.

Today, we'll explain what it is, why it's important, and how to do it.

As a bonus, we'll share some of the best tools to make HR planning easier.

What is human resources planning?

Strategic human resource planning involves a company figuring out:

  • how many people they need,
  • what skills they should have,
  • and when they should join the team.

They look at things such as company goals and what's happening in the market to decide.

Then, they fill any gaps by hiring new staff or training current workers . It's all about putting the right people in the right place at the right time to help the company grow.

Why is the HR planning process important?

human resource planning

The HR planning process is key for any business wanting to stay ahead.

Let's break down why you should pay attention to it.

Efficient forecasting

Forecasting is predicting what you'll need in terms of staff in the future.

The HR planning process helps you estimate how many employees you'll need to meet your business goals.

This way, you're never short-handed or overstaffed.

Resource allocation

Resource allocation is assigning the right resources, including human resources, where they are needed most.

Strategic human resource planning ensures that every department has the right number of qualified employees to operate properly.

Talent acquisition and retention

Finding and keeping talented employees is the way to any company’s success.

With a proper plan in place, HR professionals can understand the skills the company needs and develop strategies to attract and keep these skilled individuals.

Cost management

Managing costs cannot be overlooked.

Effective human resources planning can be useful when controlling costs.

This is done by hiring and training staff strategically, avoiding unnecessary expenses by retaining current employees, as well as planning for the future.

Adaptation to change

Change is constant in business.

The HR planning process lets your company adapt quickly by preparing in advance.

This might involve training existing employees to take on new roles or hiring new talent to meet evolving business demands.

The human resource planning process step by step

Now that you know how big of a piece in the puzzle human resource planning is, let's get down to something more practical.

We've prepared a 7-step guide on how to plan human resources in your company:

Environmental analysis

In this initial step, you take a broad look at the outside factors that could influence your workforce.

Key areas include:

  • Economic conditions: These refer to the overall health of the economy where your business operates. Are jobs plentiful, or is unemployment high ? Economic swings can affect how easy or hard it is to recruit and retain employees.
  • Technological changes: Technology impacts how industries operate. Staying updated on technological advancements helps you anticipate the skills your workforce needs to stay competitive.
  • Legal issues: This involves understanding employment laws and regulations. Laws may dictate everything from hiring practices to benefits and can vary by region. Keeping on top of legal changes makes your business comply with the law and avoid costly penalties.

Internal analysis

Next, you should do a detailed examination of your current workforce:

  • Skills assessment: Start by cataloging the skills that each employee brings to the table. Are there emerging technologies or new market demands that your current staff can't meet due to a lack of necessary skills? Identifying these gaps early allows you to plan for targeted training or hiring.
  • Strengths and weaknesses: Evaluate the overall strengths and weaknesses of your workforce. Which departments excel and which ones struggle? Understanding this can help you make strategic decisions, such as where to allocate resources or which areas might need restructuring.
  • Employee feedback: Gather input from your employees about their work environment, job satisfaction, and where they see room for improvement. This feedback will let you identify hidden issues that may not be immediately apparent from a top-down perspective.

Forecasting human resource demand

Moving forward, it's time to predict the future needs of your workforce in terms of both quantity and quality.

Here’s a quick how-to:

  • Project business growth: Start by estimating how much your company is expected to grow in the coming years. Will new markets or products require more staff? Understanding your business's trajectory helps you anticipate how many new employees you might need in the future.
  • Analyze skill requirements: Evaluate what skills will be necessary to meet your business goals. For example, if you're planning to adopt new technology, you might need employees with expertise in that area.
  • Consider turnover rates: It's also important to account for the natural turnover within your company. Employees may retire, resign, or move to other roles, which can affect your staffing levels. Thanks to forecasting these changes, you can plan recruitment and training more effectively.

As a result of forecasting human resource demand, you align your staffing strategy with your business objectives. This way, you have the right people with the right skills at the right time - no more inefficiencies and disruptions in your operations.

Identifying gaps

After forecasting your human resource demands, the next task is to identify any gaps between your future needs and what your current workforce offers.

This involves:

  • Skill gaps: Look for discrepancies between the skills your future projects will require and what your current employees possess. For instance, if your business is moving towards more digital solutions, but your team's tech skills are lacking, that's a gap that needs addressing.
  • Staffing levels: Assess if your current staff numbers will meet future demands. If you're planning to expand operations or launch new products, you might find that you currently don't have enough hands on deck.

Tip: Use detailed skills matrixes and workforce analytics tools to systematically evaluate and document these gaps. This will provide a clear visual representation of where enhancements are necessary.

Developing action plans

Once you've identified the gaps, it’s time to develop targeted action plans to bridge them.

Here's how you can do it:

  • Recruitment strategies: If you need more people or specific skills, create a recruitment plan targeting the kinds of talent that align with your future business needs. Consider which roles are critical and prioritize hiring for those positions.
  • Training programs: Develop training and development programs to upgrade the skills of your current employees. This not only helps close the skills gap but also boosts employee engagement and retention.
  • Workforce adjustment: Sometimes, aligning your workforce with business goals might mean making tough decisions like staff reductions or restructuring teams to better fit the company's strategic direction.

Tip: When developing action plans, consider using scenario planning to imagine various future states of your business. This approach can help you create flexible strategies that adapt to different possible outcomes.

Implementation

Implementing your action plans is where strategy meets reality. You put into practice the recruitment, training, and retention strategies you've developed:

  • Hiring: Start by rolling out your recruitment strategy. Make your job postings clear and reflective of the exact skills and qualities you're looking for. Use both digital platforms and networking events to attract a wide but relevant audience.
  • Upskilling: Launch training initiatives that are specifically designed to address the skills gaps identified. Make these programs accessible and engaging to encourage active participation from your staff.
  • Retention strategies: Implement retention measures such as competitive compensation, career development opportunities, and a positive work environment to make your employees feel valued and motivated to stay.

Tip: Use project management tools to keep track of implementation processes. Regular check-ins and updates will keep every part of your plan on track and any issues will be addressed swiftly.

Evaluation and adjustment

After implementation, the last stage is to evaluate the success of your human resource strategies:

  • Monitor outcomes: Regularly review the outcomes of your recruitment efforts and training programs. Are your new hires meeting expectations? Are employees improving after training?
  • Feedback loops: Establish channels for employee feedback to gauge satisfaction and effectiveness from the ground up. This can provide insights that might not be visible through performance metrics alone.
  • Adjust strategies: Based on the evaluations, make necessary adjustments. If certain strategies aren't working, tweak them or try new approaches. The business environment is always changing, and your strategies should be flexible enough to adapt.

Consider setting up a dashboard that tracks key performance indicators (KPIs) related to HR activities. This can provide a real-time snapshot of how well your HR strategies are performing and quickly highlight areas needing adjustment.

  • Check this out: key HR metrics to track

The best tools for human resource planning

Alright, you know the ins and outs of the human resource planning process.

But do you know how you could supercharge it?

The answer lies in tools.

Check out these top solutions that are extremely useful when it comes to the workforce scheduling process:

Time tracking apps

human resource planning apps

What do they do:

Time tracking apps monitor how employees spend their work hours. This makes it easier to manage workloads and improve productivity.

Who should use them:

Any business that wants to enhance efficiency and make employees manage their time well should use these apps. They are especially useful for teams with remote or flexible work arrangements.

The best pick: Unrubble

the best human resource planning app

Are you looking for a solution to streamline your HR processes and boost productivity across your teams? Unrubble is here to revolutionize the way you manage time, and make your human resource planning more strategic than ever!

Precision time tracking : Unrubble's cutting-edge time tracking features let you capture every second of billable time with ease and accuracy. From the seamless mobile time clock with face recognition to real-time timesheets, managing your team's hours has never been easier.

Smart scheduling : Say goodbye to the chaos of manual scheduling. With Unrubble, scheduling is not just made easy - it's made smart. Automatically generate schedules, send instant updates, and make changes on the go.

PTO tracker : Planning time off doesn't need to be a headache. Unrubble's PTO tracker simplifies how you handle vacations, WFH days, and business trips.

Employee Self-Service App : Motivate your employees with a tool that speaks directly to them. Our app allows staff to manage their time, request days off, and check their schedules anytime, anywhere.

Optimize your human resource strategy: Unrubble not only helps with the hiring process and tracking skilled employees but also aligns with your strategic human resource planning. Our tools integrate smoothly into your existing systems, supporting your strategic human resource plan and boosting overall efficiency.

hr planning

Don't just track time, manage it like a pro with Unrubble. Start unrubbling for free today and experience a boost in productivity and collaboration that will propel your business forward.

Human resource information systems (HRIS)

HRIS manage employee data and automate HR processes such as payroll, benefits administration, and compliance. They make operations smoother and reduce administrative burdens.

HR professionals looking to improve strategic human resource planning and reduce time spent on administrative tasks should use HRIS. They're suitable for all sizes of organizations.

Good picks:

BambooHR, Zoho People, and Gusto are well-regarded for their robust features and ease of use.

Workforce planning software

hr planning tool

This software assists in predicting future staffing needs, planning for employee development, and managing risks related to workforce changes. It supports strategic human resource planning.

Businesses that want to align their workforce strategy with company goals should use this software. It's ideal for HR professionals responsible for long-term planning.

Workday, SAP SuccessFactors, and Oracle HCM Cloud offer tools for successful workforce planning.

Talent management software

Talent management software helps with hiring, onboarding, performance management, and succession planning. It simplifies processes to retain and develop talented employees.

Organizations looking to nurture and retain top talent through effective employee retention strategies should adopt this software. It's essential for HR teams focused on employee growth and satisfaction.

LinkedIn Talent, Cornerstone OnDemand, and TalentLMS are known for their extensive features that support talent acquisition and development.

Skills assessment and gap analysis tools

hr planning software

These tools evaluate the skills of current employees and identify gaps that could impact organizational goals. This data is needed for targeted training and recruitment.

HR professionals and managers aiming to improve team capabilities and address skill shortages should use these tools. They're particularly valuable for companies undergoing technological upgrades or strategic shifts.

Skillsurvey, GapJumpers, and Thomas International offer precise assessment capabilities to help optimize your workforce according to strategic needs.

  • Check this out: free templates for HR

Wrapping up

So, there you have it - the nuts and bolts of human resource planning, all laid out.

It’s not just filling chairs - it's plotting a course for your company’s future.

With each step carefully planned, you’re setting the pace.

Whether it’s by using the power of the latest HR tools or mastering the art of strategic planning, the future of your workforce looks bright.

Your company’s next chapter starts now!

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You may also like to read these..

Explore the extensive resources compiled by experts in the field.

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Relationship Between HR Strategies & Business

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The Best Practices for Manager-Employee Relations

Top three recommendations for implementing an hr strategy in an organization, consequences of poor human resource planning.

  • HR Strategies With Business Strategies
  • Emerging Issues in HR

The personnel administration function of human resources has become outdated in the past 20 years. Today, human resources departments have a more defined, strategic role in organizations, and an HR strategy affects the bottom line. One of the challenges for HR leaders is convincing executive leadership teams that human capital is one of the most important resources in which the company can invest. This return on investment is an essential part of the argument for including HR as part of an overall business strategy.

HR Strategy Is Business Strategy

In an ideal world, there is not a line drawn in the sand between human resources strategy and business strategy. A successful business owner realizes the strong connection between the two. Developing human capital is important to the longevity and success of a business. In the past, personnel administration was merely the processing of payroll, benefits and applications. Human resources strategy today involves executive leadership teams conferring with human resources experts to develop complementary goals for human resources and the overall business.

HR Strategy and Business Productivity

The recruitment and selection process of your human resources department is paramount in building a productive workforce. Developing a human resource strategy for recruiting and selecting the best employees affects your organization's bottom line. Maintaining a workforce where employees enjoy high levels of job satisfaction and job security translates into a workforce that helps achieve business goals. According to HR experts, human capital, or human resources, is your most valuable resource.

Trends Affect HR and Business Strategy

In a study conducted by consulting giant Towers Watson, business executives are paying close attention to a trend toward blending human resources strategy and business strategy. According to the results of a 2010 Towers Watson study, "[W]e may be witnessing a tipping point — where HR technologies become the integrated engine for advancing the broader needs of the business, supporting far more than basic transactions, and advancing the HR and business agenda of the future. ... Human resources information systems are integral in the development of performance management, recruitment and selection.

Interaction Among Executive Leadership

The real test of a relationship between human resources and overall business strategy is the quality of the interaction between human resources executives and other company executives. Many times, human resources leaders who are denied access to the boardroom complain that organizations don't appreciate the value of human capital. The way to improve the relationship between HR and C-level executives is by demonstrating the return on investment (ROI) in human resources activities. This may involve explaining the connection between a reduction in employee turnover and an improvement in job satisfaction that improves the bottom line.

Considerations

A number of factors affect the relationship between human resources and business strategy. Executive leadership needs first to understand the benefits of aligning HR goals with overall business goals. Forward-thinking concepts may need to be approached carefully to avoid skepticism among old-school executives who still consider human resources as merely personnel administration. Building the relationship may also require the assistance of an HR consultant to map the strategy for effecting change in your organization.

  • Entrepreneur: Four Steps to Building an HR Agenda for Growth
  • Management.com: Integrating Human Resource Strategic Planning to Achieve Business Excellence
  • U.S. Office of Personnel Management
  • Society for Human Resource Management
  • National Human Resources Association
  • American Society for Training & Development
  • U.S. Equal Employment Opportunity Commission

Ruth Mayhew has been writing since the mid-1980s, and she has been an HR subject matter expert since 1995. Her work appears in "The Multi-Generational Workforce in the Health Care Industry," and she has been cited in numerous publications, including journals and textbooks that focus on human resources management practices. She holds a Master of Arts in sociology from the University of Missouri-Kansas City. Ruth resides in the nation's capital, Washington, D.C.

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Differences between transactional hr & strategic hr, the main job of the hr function in an organization, the relationship of hr with business strategy, what is the hr business partner model, hr issues & solutions, the advantages of the human resource management strategy, what makes a human resource strategy successful, the skills needed for strategic human resource management, the disadvantages of an hr scorecard, most popular.

  • 1 Differences Between Transactional HR & Strategic HR
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How Is Human Resource Planning Integrated With Strategic Planning?

All businesses, no matter how small, have three categories of resources available to them: the technology they use to create a product or service; the finance they use to operate and grow the business, and the people whose talents they use to accomplish the company’s goals.

Strategic planning is the process of figuring out why the organization is in business and what long-term goals it wants to achieve with its available resources. Human talent is one of those resources, so there’s a direct link between strategic and human resources planning – neither one can exist without the other.

What Is Strategic Planning?

The purpose of strategic planning is out figure out what a company wants to do and why it is in business. For example, an organization might decide that it wants to diversify into new markets because it has gone as far as it can go in its current markets. The strategic options here include:

Developing new products to sell to its existing customers.

Also Read: How Is Human Resource Planning Integrated With Strategic Planning?

Selling the same products to a completely new group of customers, such as people in a different country.

Buying a company that operates a different business model that may or may not complement the company’s business model.

The process of strategic planning would involve investigating all of these options and deciding which one represents the company’s vision of the future. From there, the company’s leadership team would start drilling down into the specific strategies that can enable the company to meet its big-picture goals.

What Is the Strategic Planning Process?

Businesses typically look three to five years ahead when formulating a strategic plan, and the process results in a document that articulates the company’s vision, mission, big-picture goals and the broad strategies it will use to reach those goals. This planning document is intended to guide leadership in its decision-making.

A key part of strategic planning is assessing the company’s resources. It’s easy for any company to dream big and have stratospheric ambitions, but what the company can realistically achieve is limited by the number and type of resources it has at its disposal. For most businesses, those resources fall into three main categories:

Technology resources: This includes all the equipment, processes and infrastructure the business uses to create the products and services that it brings to market.

Financial resources: Finance comprises all the liquid resources the company can use to carry out its business operations – namely cash in hand, short-term and long-term bank deposits, liquid financial investments like stocks and bonds, and approved bank loans.

Human resources: This resource comprises the people whose talents, skills and personal characteristics the business can use to accomplish its strategic goals. While technology and money are important assets, human resources are the most important, because technology and money need people to manage them.

As you can see, human resources are an integral part of any strategic plan. If the business does not have the right skills and talent in place to achieve its goals, then the strategic plan will fail due to a lack of knowledge and manpower. Similarly, if talent is acquired and deployed without reference to the company’s strategic goals, then you’re going to end up with a lot of people doing jobs that don’t add value to the business, and which don’t move the company closer to where it wants to be.

What Is Human Resource Strategic Planning?

The purpose of human resource planning is look into the future and decide what skills, knowledge and competencies the business is going to need in one, three or five years’ time to meet its strategic goals. For example, if the company is currently outsourcing its marketing function but intends to bring this function in-house, then an obvious early strategy is to recruit a full marketing team, from a senior manager all the way down to a junior marketing associate or intern.

Whatever the mission of the business, one of the major objectives of human resource planning is to dig into the talent pipeline and answer the following questions:

How can the business attract the right type of people in the right numbers? What kind of training and development can it offer to its current employees, to close any knowledge gaps? How can it balance projected labor demand with supply so there is no labor surplus or understaffing? Who are its key people, and how can it incentivize them to stay?

Answering these questions ensures the business has the right people in the right numbers in the right job roles to ensure the company’s profitability.

What Is the Relationship Between Human Resource Planning and Business Strategy?

Strategic planning and human resources planning basically have a symbiotic relationship, in that each function is dependent on the other. Here are some examples of how the relationship works in practice:

Impact assessments

When leaders start developing a strategic plan, they will liaise with different department heads to see how the proposed business strategies might affect them. The human resources planning team will figure out the financial impact of the initiative based on the recruiting, training and retention strategies that may be necessary to support the plan. If the initiative involves downsizing, for example, then human resources managers must look at the various options for decreasing the labor supply through dismissals, retirements, transfers out of the department, sabbaticals and voluntary quitting.

Invariably, there will be a time cost associated with a new initiative. It’s up to HR to feedback how long it will take to hire or upskill permanent staff members and whether the company can work with contractors in the interim. This helps senior leaders develop a timescale for the new initiative.

Executing the plan

As soon as a strategic initiative receives the green light, the human resources team must ready the company’s employees for the changes that are about to ensue. This might include changing people’s job descriptions, moving people between job units, policy making, motivation strategies, developing training programs, and pinpointing and eliminating labor shortages through recruitment and outsourcing.

Feedback and monitoring

Once the strategic initiative is implemented, HR will monitor the changes that are being made to the workforce to establish whether the policies are sufficient, affordable and sustainable. Because the strategic plan is a long-term plan, it is crucial for the business to keep monitoring its talent pipeline, and keep updating its demand forecast, to ensure that the business always has the right people in place to meet its objectives.

Which Comes First, the Chicken or the Egg?

Because strategic planning and HR planning are interdependent, it really doesn’t matter which plan the leadership team begins to develop first. In fact, they probably should be developed in conjunction with each other. That’s because the strategic plan cannot be finalized until there are supporting talent strategies in place from human resources, and the human resources plan cannot be finalized until the long-term goals of the company are clear.

The most effective organizations are those that achieve alignment between the technology, finance and human resources of the business and the formulation and implementation stages of the strategic plan. It should be an integrative activity, rather than a leader-follower process.

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What is the correlation between hr strategy and business strategy.

Relationship Between HR And Business Strategies

HR is an integral part and the essential department of an organization. The level of resources allocated to the HR functions varies for different organizations. The human resource department is considered one of the most valuable assets of the company. When linked with a strategic business plan helps the company gain a competitive advantage in the market.

In a business setting, Strategic decision-making has to be done by considering both the internal and external factors and their context. The internal factors can be the organizational structure and the company’s mission statement. 

These factors usually affect the structure of selection and appraisal of employees. The external factors include the political, cultural, and economic forces that may impact the business.

The human dimension of an organization’s strategy involves managing and fostering employee relations. The human resource represents the potential value of workers to achieve organizational goals. 

Employee relations management includes implementing specific policies and taking necessary actions regarding employee’s behavior and attitudes to achieve organizational goals. 

Relationship Between HR Strategies And Business Strategies

When implemented correctly, Strategic Human Resource Management can be very effective in an organization. HR strategies and business strategies, when combined, can be very beneficial to the organization.

It acts as a valuable tool to help companies identify new opportunities and analyze internal and external threats. In addition, it also helps to provide a clear business vision and strategy. To maximize employee’s potential within the company, it is vital to implement a strategic selection process of employees to get the right people with the right skills into the most influential positions. 

Aligning HR Strategies With Business Strategies 

The following are few steps to be followed to align HR strategies with your business strategies:

  • Define Success 

To make more efficient business decisions, the HR department needs to understand the business’s strategic goals. When the organizational objectives are not clear, it can be challenging for the HR department to align with these objectives or strategies and support them. 

When the HR strategies align with your business strategy with clear set goals, they help increase productivity and reduce cost, thereby moving the business towards success.

  • Align And Set Your HR Strategies 

After setting clear organizational goals, the next step is to articulate the HR goals. HR strategies need to be planned to increase retention rate while decreasing the turnover and increasing productivity with a more efficient onboarding process. 

As the HR department plays a crucial role in promoting a company’s success, setting proper strategies and aligning them with business strategies is crucial. 

  • Formulate Actions To Achieve These Goals 

Developing a proper plan of action is the next step in aligning your HR strategies with business strategies. Companies must create specific targeted actions to actualize objectives and achieve organizational goals.

It can be done by creating employee surveys to understand the employee satisfaction rate and then take necessary actions to improve their satisfaction level. It is crucial because satisfied employees are motivated to be more productive, thereby making it easier for companies to achieve organizational goals.

  • Measure The Effectiveness 

The final step is to focus on the effectiveness of the campaign. With the alignment of the human resource department and including data-driven goals, it is easy to ensure that decision-making aligns with business goals and helps meet these goals. 

The HR team can measure the performance by analyzing data from marketing, sales, and accounting teams to ensure the departmental strategies align with overall business strategies.

One of the vital components of linking business strategy to human resource strategy is to develop an organizational culture of clear communication and build trust within the company. 

In addition, higher levels of trust and respectability between employees and the management team can be developed when employees are encouraged to become involved in various aspects of the business strategy. This trust is built with knowledge sharing, which allows employees to share in the organization’s vision and goals. 

The right strategy, therefore, helps organizations retain talent and develop highly competent employees.

Various factors affect the relationship between human resources strategy and business strategy. Therefore, Executive leaders must first understand the importance and benefits of aligning HR strategies with overall business strategies. 

Therefore, business owners should develop forward-thinking concepts and build a strong relationship with employees for effecting change in your organization and achieving your organizational goals.

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The Relation between Business Strategy and Human Resource Management: Conceptual Review

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whilst there has been increasing interest concerning the relationship between business strategy and human resource management, limited research attention has been paid providing evidence in support of them. This study investigates business strategy and human resource management. The findings indicate a strong relationship between business strategy and human resource management. Further, the results provide support for the assertion that business strategy and human resource management fit can significantly assist a firm in improving performance. Therefore, support is obtained for the efforts at aligning business strategy and human resource management.

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The universalistic perspective of human resource management practices perceives that a set of practices can achieve competitive advantage and firm performance. This study sought to investigate the relationship between best human resource practices and firm performance. A descriptive survey research design was used to gather primary data using self-administered questionnaire. The study population (n=312) was comprised of non-executives, executives, managers, and top management from seven major insurance firms at headquarters in the Klang Valley, Malaysia. The study found that performance appraisal, internal communication, SHRM alignment in the organization, and career planning were the human resource management best practices.

link between business planning and human resources

British Journal of Management

Fernando HR

Drawing on Snow and Thomas's (Journal of Management Studies, 31 (1994), pp. 457–480) matrix, we empirically explore the state of the art in human resource management (HRM) research. The data were obtained through a questionnaire directed to HRM scholars all over the world, in which they were asked about their particular theoretical and methodological approaches. The evidence obtained shows clearly that HRM scholars are progressively abandoning the universalistic perspective and completing their models with contingent and contextual variables. Trying to classify the different contributions proposed and discuss their integration, HRM is described as a field of research with three dimensions: subfunctional, strategic and international. The paper concludes that to provide reliable explanations and valid responses to professional problems, HRM research must advance simultaneously in these three dimensions. As follows from our analysis, there are certain HR issues that still need to be addressed: (1) the strategic use of HR practices, (2) their international applicability, (3) global HR strategies and (4) the synergic integration of HR activities. Nevertheless, to advance our knowledge in these issues, it seems necessary to integrate previous research in subfunctional, strategic and international aspects of HRM.

folorunsho oladipupo

Lucas Elumah

The paper studies the connection between Human Resources Management (HRM) practices and the performance of firm in Nigeria, focusing on firms owned by the government which are public companies and that of private firms owned by private individual across Nigeria. A multi respondent study of 285 firms both public and private across Nigeria was undertaken; collected data was analysed using correlation analysis as well as descriptive statistics in accordance with the aim of finding a fit between organizational performance and human resource management (HRM) practice. The result indicates that HRM practices are reasonably practiced by companies operating in Nigeria in public and private companies. It is also held that the type of firm whether public or private has an effect on the level of HRM practices.

International Journal of Human Resource Management

International Research Journal Commerce arts science

The purpose of this research paper is designed to identify extant literature that addresses the roles and relative influence of business line managers and human resource professionals in the management of human resources and specifically whether any of this literature focuses on the capital markets and investment banking sector. For the purpose of this study is ―'human resource environment' is defined as the socially complex organisation environment within which all internal and external stakeholders interact.The source material for the literature review includes academic papers published in respected management journals and human resource specific journals; books published for academic study and popular business texts; general management periodicals, human resource specific periodicals; business sector specific periodicals and reports; consultancy papers; and, conference material. A large and varied body of literature exists which investigates various aspects of the human resource environment within organisations and represents both quantitative and qualitative methodologies (Legge, 2005). However, the different methodologies and their associated methods do not always appear to have informed each other in a critical and progressive way and this is exemplified by Strauss (2001) who states that

sharon evangeline , C. Brewster

This paper provides a European perspective on Human Resource Management (HRM). It explores these issues by examining the growing field of comparative HRM; exploring some of the conceptual approaches to the topic and the different explanations for national differences that they espouse; considering some of the issues that make HRM in Europe distinctive; examining the notion of Europe itself and the variations within it; and considering whether the differences within Europe are reducing over time as a result of globalisation. The paper argues that Europe offers a wider ranging and more critical concept of HRM.

Gürhan Uysal

Aim of this study is to discuss differences and characteristics between HRM in the US, Europe and Asia. Divergence can be seen in HRM practices between markets due to cultural and legal differences that enables international firms to adapt local norms. To identify characteristics provides a firm of effectively managing their international HRM practices.Therefore, literature studies demonstrate differenf characteristics in managing human resources between markets.

Intangible Capital

Wan Khairuzzaman Wan Ismail

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Please note you do not have access to teaching notes, linking business strategy and human resource management: issues and implications.

Personnel Review

ISSN : 0048-3486

Article publication date: 1 February 1994

Considers the idea of linking decisions on business strategy, product market characteristics and personnel/human resource management policies. Initially explores some theoretical aspects of business strategy‐personnel policy linkages and then considers some empirical evidence from a survey of Irish organizations. While some of personnel literature suggests that organizations should adapt particular “best practice” modes in each personnel area, it is increasingly accepted that optimal personnel policy choice is linked to the unique characteristics of the individual organization. Consequently, argues that organizations need to achieve a fit between personnel policy choice and broader strategic considerations, particularly product market conditions and business strategy. However, the Irish survey evidence considered presents quite a mixed picture. While some organizations appear to be successfully aligning HR policies and business strategy this development does not seem widespread.

  • Corporate strategy
  • Human resource management
  • Organizational structure
  • Strategic management

Gunnigle, P. and Moore, S. (1994), "Linking Business Strategy and Human Resource Management: Issues and Implications", Personnel Review , Vol. 23 No. 1, pp. 63-84. https://doi.org/10.1108/00483489410053038

Copyright © 1994, MCB UP Limited

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Linking organizational strategy to Human Resource planning

Human resource planning ultimately translates the organization ’s overall goals the number and types of workers needed to meet those goals. Without clear cut planning, and a direct linkage to the organization ’s strategic direction, estimation of an organization ’s human resource needs are reduced to mere guesswork. This means that human resource planning cannot exist in isolation. It must be linked to the organization ’s overall strategy . The steps involved in linking are as follows:

1. Assessing current human resources : Assessing current human resources begins by developing a profile of organizations current employees. This is an internal analysis that includes information about the workers and the skills they currently possess. From a planning viewpoint, this input is valuable in determining what skills are currently available in the organization . The profile of the human resource inventory serves as a guide for supporting new organizational pursuits or in altering the organization’s strategic direction. This report also has value in other HRM activities, such as selection individuals for training and development , promotion , and transfers.

2. Determining the Demand for labor: Once an assessment of the organization’s current human resources situation has been made and the future direction of the organizations has been considered, a projection of future human resource needs can be developed.

3. Estimating the future supply of labor: Estimating changes in internal supply requires the HR to look at those factors that can either increase or decrease its employee base. An increase in the supply of any units’ human resources can come from a combination of four sources, new hires, contingent workers, transfers in, or individuals returning from leaves. Decreases in the internal supply can come about through retirements, dismissals, transfers out of the unit, layoffs, voluntary quits, sabbaticals, prolonged illnesses or deaths. HRM manager should consider these increases and decreases to estimate the future supply of labor.

4. Estimated Changes in future supply: there are some factors outside the organization that influence the supply of available workers. We should review these changes outside the organization to estimate changes in the future supply.

5. Matching the demand and supply of labor: The objective of human resource planning is to bring together the forecasts of future demand for workers and the supply for human resources , both current and future. The result of this effort is to. Pinpoint shortages both in number and in kind, to highlight areas where over staffing may exist.

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Welcome to Straightforward HR

The Role HR takes in Business Planning

By: Adam | Published on: Mar 29, 2019 | Categories: Featured , HR Strategy | 0 comments

HR and Business Planning

What is a HR Business Plan?

A HR Business Plan defines how a company is going to operate and develop over a given period of time.

It focuses on the elements of how to make a profit and identifies the risks which may prevent this. But don’t be fooled into thinking this is a one off process…. HR Business planning is ongoing!

This includes constant tweaks and changes depending on what is working and what isn’t. It is also the anticipation and preparation for changes that might need implementing as the plan progresses.

That change may come about through many things. Some examples you might experience are:

  • Altering markets
  • The need for new technology and product development
  • Global pandemics!

Failing to plan is not an option!

60% of start-ups will fail within their first five years. The reason?

Most of their time is concentrated on their product and what’s immediately in front of them ( the urgent ).

They don’t place enough importance on what’s going on around them. Or how they should be ready to respond ( the important ).

What’s going on around them can be regarding an internal market as well as an external one.

The HR Business Plan

The Business Plan is a dynamic document that should ask challenging questions.

It should be reviewed on a regular basis with the company’s strategic objectives and goals in mind.

Long term objective and goals will be under constant scrutiny. This is to ensure that they are on target, remain relevant in a fluctuating market and are culturally robust.

Good HR business planning is about making smart choices in order to sustain the strategic vision.

But one significant reason for failure is that the business concentrates on a set of goal which is too narrow. Examples of this include:

  • Product or service based

The key omission is often planning for the people who are going to make the business succeed.

The Role of HR Business Planning

This is where HR plays a vital role. It should work alongside key senior staff to ensure that plans include areas of HR involvement and participation.

Aligning the HR function with the business plan will ensure that the full potential of staff members is realised.

Visions and Values

In the business planning process, HR ensures that executive focus includes the heart and core of the business. This is its vision and values.

The HR professional position aligns the business’ vision and values as a solid foundation for strategy. This guarantees they are highlighted in strategy discussions!

It also ensures that it is the values of the business that drives people’s motivations and behaviours.

The HR professional demonstrates the importance of business culture. They also highlight how a dysfunctional culture can disable even the best of strategies.

HR is the only function with a business-wide view of employee performance, productivity and effectiveness.

Financial goals are usually the top priority, sometimes being the only priority. However, the HR professional can demonstrate how the attraction, retention and use of the most talented people can enhance secure financial rewards.

This is particularly when centred around a culture that is aligned to a progressive vision and strategy. Naturally, this is when addressed up front in the HR business plan.

HR business plan

Three Key Elements of HR in the Planning Process

1. resource planning.

Once the business goals are set, it is people involved who will carry them out. So, having the right people in the right roles at the right time is key.

A resource plan is the people equivalent of a financial forecast. Consider these questions:

  • When will the business require more people?
  • Of what type and skill-set?
  • Where will you find them and how will you recruit them?
  • How long before you need them do you need to commence your recruitment activities to ensure they are in place, inducted, fully trained and ready to go?
  • Do you anticipate losing people over the period of a resource plan?

Staff may resign, retire or go on maternity leave. All of which will have an impact on the numbers and types of roles you need to recruit for.

The HR professional will be able to define every aspect of the process for hiring the right people. They will:

  • Working with management to define the profile of the role
  • Compose the specification of the person who will best fulfil the role
  • Dictate how and where to advertise
  • Know what to put in an advertisement to attract suitable candidates
  • Define and structure interviews so that the best person may be selected.

HR can also ensure that before any hiring process begins, the hiring fits with the long-term HR business plan.

This ensures that the role is not just a knee-jerk reaction to a stressful period of overload.

Or one that will not become quickly redundant as the business stabilises, grows and changes

2. Organisational Design and Development

Psychological studies from as far back as the 1930’s have revealed that organisational structures and processes can influence the behaviour and motivation of a workforce.

In the modern era, the objectives of Organisational Design (OD) are twofold

  • To put in place structures and processes that will increase operational efficiency and success, decrease risk and improve problem solving
  • To create structures and processes that increase trust, motivation and commitment in the workforce, enabling better problem solving by confronting and managing problems through worker enablement and co-operation.

HR has a unique role here. It is involved in the creation and development of what the design of the organisation is and should be on a company-wide issue.

HR, with its whole-company overview can ensure that the creation of new systems and processes in one area are likely to have an impact on other related areas.

The HR professional will put forward people-based strategies to guarantee the consistency of the alterations across the organisation.

3. Training and Development

OD is likely to include the need for some new roles and changes to others. Therefore, training and development are guaranteed to be needed as part of the strategic growth process.

The HR business plan is likely to be looking at where the organisation will be in 5 -10 years’ time.  HR can ask if the workforce is acquiring sufficient skills to meet the growing demands that company’s a business’ growth.

A CIPD study revealed that 49% of respondents believed that they were either underused or over-skilled for the roles they were carrying out.

More significantly, those who felt that their skills were suited to their role were more likely to have job satisfaction (74%). At the end of the study, CIPD said:

Individuals who report using their skills fully in the workplace have higher levels of job satisfaction, earn more and are more resilient to change, while businesses benefit from a more productive workforce and increased profitability.

So, it’s going to be the HR professional who can speak authoritatively on the need for a strategic approach to training and development. This is part of HR business planning and will provide input to help the business achieve its goals effectively.

The HR professional, with access to objective data, is best placed to offer insightful ideas and plans on how to support the people aspect of the business plan.

If HR is allowed to be a key influencer in the business, they can solicit ideas, suggestions and feedback from both management and employees about both input and execution of strategy.

To Conclude on the Role HR Takes in Business Planning

HR’s key functions are all-important to the business planning process.

A shrewd organisation will realise this and make sure that a ‘plan for people’ plays a role of equal importance alongside the other facets of HR business planning.

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COMMENTS

  1. The new possible: How HR can help build the organization of the future

    To usher in the organization of the future, chief human-resources officers (CHROs) and other leaders should do nothing less than reimagine the basic tenets of organization. Emerging models are creative, adaptable, and antifragile. 1 Corporate purpose fuels bold business moves. "Labor" becomes "talent.".

  2. Aligning human resources and business strategy

    1. Align and set your HR goals. The main strategic role of HR is to create goals to help meet key business objectives. Goals may vary depending on the company's strategic plan, but focusing on HR fundamentals is an excellent place to start. Here are some areas of HR most commonly affected by broader strategic business shifts.

  3. How Is Human Resource Planning Integrated With ...

    Writer Bio. Human resource strategic planning is the process of forecasting a company's demand for people so the business has the right skills and competencies to meet its long-term business ...

  4. How HR Can Influence Organizational Strategy

    HR professionals can take a key role in shaping their organization's strategy and contributing to its future success because they know the workforce better than most, according to Michael ...

  5. Strategic human resource management

    HR role. Strategic human resource management (strategic HRM) provides a framework linking people management and development practices to long-term business goals and outcomes. It focuses on longer-term resourcing issues and other HR strategies, such as reward or performance, determining how they are integrated into the overall business strategy.

  6. How to Align Your HR Strategy with the Business Strategy

    6 Learn and innovate. The sixth and final step in aligning your HR strategy with the business strategy is to learn and innovate continuously. This means you need to keep abreast of the latest ...

  7. The Essential Link Between Business Strategy and HR Management

    The business of HR is an increasingly interesting and often complex environment. The level of time and resources allocated to the HR function within an organisation varies dramatically. This article explores a few different aspects around the connection between a company's Human Resource Management policies and the organisations business ...

  8. Human Resource Planning: Definition & Top Strategies

    The 3 key areas of human resource planning (HRP) include workforce forecasting, talent management, and gap analysis. Workforce forecasting involves analyzing current availability and predicting the future needs of the workforce. Talent management encompasses various strategies, from recruitment, training, and development to succession planning.

  9. HR Strategy: What is it and How to Create One

    To drive HR strategic planning and any HR transformation initiatives, follow these five steps to create an effective human resources strategy that supports enterprise business goals:. Understand your organization's mission, strategy and business goals.; Identify the critical capabilities and skills.; Evaluate the current capabilities and skills of your talent and the HR function, and ...

  10. Strategic Human Resource Management (2024 Guide)

    The process involves knowing the goals of your company, its abilities, future needs and resources. From there, you put your plan into action, then reassess and pivot if necessary. Here are the ...

  11. SHRM: alignment of HR function with business strategy

    Thus, the SHRM can be defined as the organisations action plan to align HRM with strategic business objectives so that the competitive advantage can be achieved through its skilled, committed and well-motivated workforce. This can only be possible if every HR function is strategically aligned. Strategic human resource planning.

  12. Align Human Resources (HR) with Business Strategy

    Understand the business strategy and how it impacts other departments. Evaluate external and internal workforce conditions. Plan and implement the HR strategy that includes key performance indicators (KPIs) Automate applicable tasks. Measure and evaluate results. 5 Steps to Align HR with Business Strategy.

  13. Business Strategy and Workforce Planning

    Align the workforce planning process with the organization's strategic plan and annual business plan to support achievement of long-term (strategic plan) and short-time (annual performance) goals and objectives. Current workforce analysis. Analyze current resources, including projections for training and development and turnover.

  14. Creating an Effective HR Strategy: Aligning HR with Business Goals

    1. Understand the main strategic goals. All strategies should be aligned towards the same outcomes. If the main business goal is growth, the HR strategy should aim to reduce time-to-hire, improve onboarding, and scale up training and development. If the goal is business resilience, HR needs to look at operational efficiency and compensation ...

  15. Human Resource Planning: The Ultimate Guide

    Strategic human resource planning involves a company figuring out: how many people they need, what skills they should have, and when they should join the team. They look at things such as company goals and what's happening in the market to decide. Then, they fill any gaps by hiring new staff or training current workers.

  16. Relationship Between HR Strategies & Business

    The real test of a relationship between human resources and overall business strategy is the quality of the interaction between human resources executives and other company executives. Many times ...

  17. Aligning HR Planning with Strategy: A Synergistic Approach

    The purpose of human resource planning is look into the future and decide what skills, knowledge and competencies the business is going to need in one, three or five years' time to meet its strategic goals. For example, if the company is currently outsourcing its marketing function but intends to bring this function in-house, then an obvious ...

  18. Relationship Between HR And Business Strategies

    The human resource department is considered one of the most valuable assets of the company. When linked with a strategic business plan helps the company gain a competitive advantage in the market. In a business setting, Strategic decision-making has to be done by considering both the internal and external factors and their context.

  19. (PDF) The Relation between Business Strategy and Human Resource

    THE RELATION BETWEEN BUSINESS STRATEGY AND HUMAN RESOURCE MANAGEMENT There is a close connection between human resources management and corporate strategy, which in turn refers to www.ijerm.com International Journal of Engineering Research And Management (IJERM) ISSN: 2349- 2058, Volume-07, Issue-01, January 2020 the business environment and ...

  20. Linking Business Strategy and Human Resource Management: Issues and

    Abstract. Considers the idea of linking decisions on business strategy, product market characteristics and personnel/human resource management policies. Initially explores some theoretical aspects of business strategy‐personnel policy linkages and then considers some empirical evidence from a survey of Irish organizations.

  21. Aligning human resources and business strategy

    September 4, 2018. This paper aims to provide a fuzzy framework for aligning human resources strategies with business. strategies at The University of Applied Science and T echnology. This ...

  22. Linking organizational strategy to Human Resource planning

    The steps involved in linking are as follows: 1. Assessing current human resources: Assessing current human resources begins by developing a profile of organizations current employees. This is an internal analysis that includes information about the workers and the skills they currently possess. From a planning viewpoint, this input is valuable ...

  23. Overlaps between Human Resources' Strategic Planning and Strategic

    The link between strategic planning and human resource planning 3.1 Strategic Human Resource Planning Decenzo and Robbins (2005) stated that human resource planning is the process by which an organization determines the right number of employees, type of required expertise and skills in order to achieve its overall goals.

  24. What Is The Role Of HR In Business Planning?

    Naturally, this is when addressed up front in the HR business plan. Three Key Elements of HR in the Planning Process 1. Resource Planning. Once the business goals are set, it is people involved who will carry them out. So, having the right people in the right roles at the right time is key. A resource plan is the people equivalent of a ...