How to build an effective HR strategy

HR strategy and people strategy are often used interchangeably, and most businesses see them as the same thing. Some larger organisations might have both a people strategy and an HR strategy. In these businesses, the people strategy has a wider remit and the HR strategy focuses on HR team operations. 

As a good HR strategy should include elements of traditional people strategy, many businesses opt to have one clear plan. Depending on the company and culture, it might be known as either an HR or people strategy. 

A good HR strategy aligns people management with your overall business strategy. It translates those big-picture goals into real initiatives that drive the business forward. 

An effective HR strategy: 

• Improves employee productivity: Use real data and feedback to introduce processes, policies, and support that enables employees to work at their best.

• Avoids non-compliance costs: Create workflows that align with requirements and best practice, and proactively monitor for potential non-compliance before it becomes an issue.

• Increases employee engagement: Nurture a workplace culture that promotes employee safety, wellbeing, happiness, and autonomy, for a positive impact on engagement levels.

• Supports realistic forecasting: Analyse current and future talent requirements, so you can plan ahead for greater consistency.

• Improves employee retention: Use culture and retention strategies to make your workplace more attractive to current employees.

• Supports effective recruitment: Attract the best talent by promoting your company culture, supportive policies, and approach to work.

These HR strategy benefits feed into your wider business strategy goals — especially employee engagement. Research by Gallup shows that businesses with high levels of employee engagement see a 23% increase in profitability and an 18% increase in productivity.

Your HR strategy should cover every area of people management, including: 

• People operations

• Talent acquisition 

• Onboarding

• Performance management

• Learning and development

• Employee engagement

• Employee wellness

• Compensation and benefits

• Company culture

• Diversity and inclusion

• Employee relations

• Employee retention

• Succession planning

The strategy informs HR operations at all levels and helps teams make decisions about policies, processes, and technology. 

Follow this six-step plan for a straightforward way to build or update your own HR strategy.

Work with your leadership team to understand wider business goals, then suggest HR strategies and initiatives that align with them. For a fast-growing tech company, talent acquisition, company culture, and employee retention are areas to focus on. If you want to increase customer satisfaction, the strategy should focus on employee engagement, autonomy, and recognition. 

Understand current positives and challenges from a people management perspective, so you can identify what to work on first. Complete a SWOT analysis, identify skills gaps, and invite feedback to give you a clear picture of what’s working, what isn’t, and how strategic HR can solve those problems.

Get clear on your priorities, then set goals, metrics, and HR KPIs (Key Performance Indicators) to track progress along the way. Agree which metrics are most valuable and introduce systems to collect the data you need. Common metrics to track over time include employee satisfaction, turnover rate, engagement rate, and time to fill vacancies. 

Build a roadmap of initiatives and programmes that deliver results against your goals. The plan section of your strategy should include deliverables, deadlines, resources, budget, responsibilities, and accountability. Your strategic plan explains what you’re working on, when it’ll happen, and who’s involved in making it a success.

Involve key stakeholders early and secure buy-in for your HR strategy so that you have the support, resources, and authority you need to make your plans a reality. Get the attention and engagement of employees with initiatives like pilot programmes, incentives, and extra training.

Secure approval for the HR strategy and share your plans with stakeholders. Start to roll out initiatives and programmes according to your schedule. Keep everyone informed along the way with a solid communications plan, and use a project management system to hold team members accountable. 

Track your KPIs over time and check in at regular milestones to make sure your strategy is still effective. Share feedback and insights with executives and stakeholders, and don’t be afraid to adjust your plans if the data supports it. 

Your HR strategy should include a number of initiatives and tactics that support your overall goals and KPIs. Based on the areas we highlighted above, here are some examples of what to include in your HR strategy plan.

Streamline your onboarding programme

Personio can help your HR team build a comprehensive and automated onboarding programme that sets employees off to a flying start. Let us show you how it works and how our all-in-one HR software can benefit your entire HR strategy.

See it in action

Your HR strategy is a roadmap towards success, but it’s only as effective as the work you put in. Use these expert insights and best practice tips to build a more impactful strategy:

• Ask strategic questions: Involve stakeholders from the start and ask questions that help you understand every department’s needs and HR challenges. 

• Be thorough with your research: Invite employees, managers, and executives to share feedback on their highest priority issues and roadblocks, so you don’t miss an opportunity for improvement.

• Prioritise initiatives: Decide which projects will have the greatest impact or help you hit a target sooner, then schedule the rest according to remaining resources.

• Promote employee advocacy: Give everyone a voice during and after the planning process by introducing employee feedback initiatives like surveys and open forums.

• Ask for the budget you need: Present a proposal to senior executives that clearly demonstrates your needs, so you can secure the resources you need to deliver your HR strategy successfully. 

• Get the right HR systems in place: Audit your existing HR tech stack and make plans to improve it if necessary.

• Keep an eye on emerging HR tech and trends: Embrace digital transformation in HR and be open to testing new software, tools, and initiatives that could support your plans.

• Consider using an established HR strategy model: Research popular frameworks (like Ulrich, Deloitte, McKinsey 7S, Warwick, or Harvard) and use one as a foundation if it aligns with your needs.

• Communicate openly: Create a clear communications strategy and share updates with stakeholders throughout the strategy planning and delivery process.

• Review the strategy regularly: Monitor KPIs and review how the strategy is performing, then make decisions based on real data.

Start building your own people strategy with our guide

Through the lens of Personio's own Chief People Officer, we built a helpful guide to developing your own people strategy. Grab a copy for yourself right now.

Grab your copy

An effective HR strategy guides you on what to do and how, and the right HR software helps you execute on your plans. Whether you want to streamline your onboarding workflow or introduce a way to keep compensation fair across teams, Personio handles this and more.

Personio enables you to: 

• Save time on core HR

• Automate processes and workflows

• Recruit, support, and develop employees

• Collect, analyse, and report on people data and KPIs

Turn your HR strategy into action with Personio’s intelligent HR platform. Book a demo to see how Personio can support your strategic goals.

Like other strategic documents, it’s best to review your HR strategy at least once a year and at any major milestones like the arrival of a new executive team or Head of HR. Check that your goals are still aligned, your initiatives are effective, and your KPIs are relevant. If they’re not, use this opportunity to adjust them so that they are. 

At an employee level, HR tech integrations can support hybrid work by improving onboarding, tracking time and attendance and managing performance. They can also support employee mental health support by providing access to employee assistance programmes (EAPs), mental health assessments, wellbeing tracking, and performance analytics.

At a business level, advanced HR analytics tools enable companies to measure success by analysing vast amounts of employee data, identifying trends and gaining insights into HR initiatives. By analysing this data, companies can assess the effectiveness of their HR strategies, identify areas for improvement, and make data-driven decisions to achieve business goals.

Data-driven methods for measuring HR strategy include benchmarking, correlation analysis, predictive analytics, text analytics, churn analysis and ROI analysis. By leveraging these methods, HR professionals can gain valuable insights into their HR strategies.

HR software can automate the tracking of HR strategy goals by collecting data, visualising it, benchmarking, predicting trends, integrating with other systems and automating routine tasks. This helps organisations improve efficiency, make data-driven decisions and achieve their HR objectives.