HR strategy
Creating the framework for successful
people management
Questions this tool is designed to help you answer
What are the main building blocks of HR strategy?
How can I build an HR strategy that contributes to business success?
How do I know if I am developing an effective HR strategy?
We would welcome your feedback
If you have any queries about these tools or would like to contact us, you can get in touch with the CIPD at:
151 The Broadway London SW19 1JQ Tel: 020 8612 6200 Fax: 020 8612 6201
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Cover
Benets of this
tool
Benets of this tool
The context of HR
strategy
The HR strategy
development
process
Diagnosing HR
priorities
Implementing HR
strategies
Sources of
information
How to use the
tool
Tool map
For you:
Identify the key characteristics of an effective HR strategy.
Clarify the issues that need to be addressed in developing an effective HR strategy.
Build an HR strategy that engages the organisation in delivering that strategy.
For your organisation:
Establish a clear process for integrating people management with business
strategy.
Review existing practice and ensure future practice helps to sustain current and
future organisational performance.
Who is the tool for?
Students wishing to enhance their knowledge of HR strategy in practice.
Organisations wishing to review their current approach to HR strategy.
Whats in the tool?
A short overview of the context of HR strategy.
A summary of the steps required to formulate strategy.
Questions to consider when diagnosing priorities for an HR strategy.
A checklist for implementing strategy.
Date updated: January 2005
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Cover
The context of HR strategy
Benets of this
tool
The context of HR
strategy
The HR strategy
development
process
Diagnosing HR
priorities
Implementing HR
strategies
Sources of
information
How to use the
tool
Tool map
There is no universal prescription for an HR strategy. Its purpose should
be to provide a framework for applying people management practices
to achieve business outcomes. Therefore each strategy will be unique
and dependent on the operating environment, business goals etc of the
organisation to which it applies.
HR strategy should be concerned both with the delivery of effective
people management services and innovating new policies and practices.
It is therefore also about making decisions about what needs to change,
managing those changes and establishing what needs to stay the same.
This tool outlines:
key steps in the HR strategy development process
diagnosing HR priorities
implementing an HR strategy.
Before you begin, ask yourself:
Is this the rst time strategy is to be formulated or is it an updating
of an existing strategy?
Does a well-dened business strategy or plan already exist? If not,
what information can be obtained about business intentions?
What is the initial assessment of the key issues with which the HR
strategy should be concerned?
What is the initial view of the strategic intent how are the key
issues to be addressed?
Are the resources available to develop and implement the strategy?
To what extent is top management sympathetic to the idea of an HR
strategy?
What does top management hope to get out of it and do they
recognise the link to business outcomes?
Will line managers support strategy initiatives and do they have the
skills to implement them?
How are staff generally likely to react to the strategy? Can any
difculties be anticipated, and if so, how can they be dealt with?
Who should be involved in developing the strategy?
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The HR strategy development process
Benets of this
tool
The context of HR
strategy
The HR strategy
development
process
Equipped with the answers to these questions you can then begin to
consider how you might take the steps required to formulate the HR strategy
summarised in the following diagram.
Diagnosing HR
priorities
Implementing HR
strategies
Decide who is to be involved
and-how
Sources of
information
How to use the
tool
Dene business strategy
Tool map
Analyse the context
Identify business needs
Identify key HR issues
Develop the strategic framework
Dene specic HR strategies
Assess HR capability and
resources required
Prepare action plans
HR strategy Creating the framework for successful people management CIPD 2005
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Cover
Benets of this
tool
The context of HR
strategy
The HR strategy
development
process
Diagnosing HR
priorities
Implementing HR
strategies
Sources of
information
How to use the
tool
Tool map
Dening the business strategy
Most organisations have at least a short-term business plan if not a long-term
strategy. When HR people are active at board level as business partners they
are more likely to have been involved in the formulation of business strategy.
They would therefore already have had the opportunity to ensure that the
people issues are addressed during this process, making the HR strategy an
integral part of the business strategy.
Whatever the positioning of HR responsibility within the organisation it is
important that HR strategy is aligned to business need. This requires HR
professionals not just to be able to understand the business strategy but to
be able to articulate its implications for human resource management and the
consequences for HR strategy.
Action 1
List your organisations HR policies against the stated aims of the
business plan.
Can you identify any gaps?
Analyse the context
HR people must understand not only the provisions of the business strategy
but also the context in which it is prepared and implemented. This means
appreciating the strengths and weaknesses of the organisation and the threats
and opportunities it faces. It also means assessing the core competencies of
the organisation what its good at doing and what it has to continue to be
good at doing and identifying its critical success factors, especially those
concerned with people.
Action 2
Assess what information you have available to assess the
competencies of your employees, for example, from:
training needs analysis
development plans
performance management data
job descriptions
management feedback.
Does this provide enough data to make an accurate assessment?
What other data might you collect?
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Cover
Benets of this
tool
The context of HR
strategy
The HR strategy
development
process
Diagnosing HR
priorities
Implementing HR
strategies
Sources of
information
How to use the
tool
Tool map
Identify business needs
This is the crucial stage. Your task is to identify the business issues that should
be addressed by the HR strategy. It is necessary to be as precise as possible.
For example, the business strategy might include plans for product/market
developments. In this situation, you need to nd out what the resourcing
implications are in terms of numbers and skills and devise plans to satisfy them.
Or maybe a merger or acquisition is proposed. In this case you may be involved
in a due diligence exercise to assess the human resource capabilities of the
business that might be taken over. Whether or not you have been involved
at this stage, you will need to develop a strategy for dealing with the human
resource implications of the merger, such as rationalising pay structures.
In some circumstances there may only be some very broad-brush strategic
intentions expressed by top management, like improving performance,
productivity, quality or levels of customer service. You will have to be prepared
to take apart this strategic intent and assess how HR practices can make a
specied and added-value contribution to achieving these broad goals.
Action 3
Look at each business need in turn, whether specic or a declaration
of intent. Map this against the list of existing HR practices. Get a group
of line and HR colleagues to rate each practices likely contribution to
achieving that need.
Identify key HR issues
The key HR issues are those that directly affect the achievement of business
goals. They may be arranged under general headings such as organisation
structure or development, or they may be more specic such as the need
to develop intellectual capital or to improve communication and reporting
relationships.
Develop the strategic framework
The strategic framework will dene the main strategic goals, their
interconnections and their priorities. The links between them will need
to be identied so that mutually supporting processes can be developed,
for example, performance management processes or human resource
development programmes. This will enable priorities to be established. In
some cases the strategies will be bundled together. In other cases they might
be implemented in sequence on the grounds that there is only so much
innovation and change that an organisation can cope with at any one time.
However, the evidence suggests that a piecemeal approach to change is not as
effective. It is important that interrelationships and sequencing are considered
with care and nothing should be done without assessing its consequences for
other aspects of the business or HR strategy.
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Cover
Benets of this
tool
The context of HR
strategy
The HR strategy
development
process
Diagnosing HR
priorities
Implementing HR
strategies
Sources of
information
How to use the
tool
Action 4
With a group of HR and line colleagues, using the outcomes from
Action 3 consider how practices t together and what new practices
might need to be implemented to support business priorities.
Dene specic HR strategies
You now need to amplify the strategic framework by statements of the
business needs the various individual HR strategies are designed to satisfy.
You must explain how they will meet the needs, the resources required, the
programme for implementation (this will involve prioritisation) and their
benets in terms of added value. The strategy may be set out in summarised
form with supporting material providing more detail.
Tool map
Assess HR capability and resources required
The next step is to assess the capacity of HR to do what has to be done. This
means looking at two things:
1. Subject current human resource management to close scrutiny to assess
strengths and weaknesses in relation to the demands that will be made
on it. The weaknesses may include inadequate processes or gaps in HR
activities that will inhibit the ability to meet strategic goals.
2. Assess the extent to which the function itself how it is structured and
the skills of its members is capable of responding to new demands. If
additions have to be made, then a cost-benet analysis must be carried out
to answer the question What added value will be gained by this addition
to HR resources?
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Cover
Diagnosing HR priorities
Benets of this
tool
The context of HR
strategy
The HR strategy
development
process
Diagnosing HR
priorities
Implementing HR
strategies
Sources of
information
How to use the
tool
Tool map
When formulating HR strategies, the key
questions are:
1
What are the key components of the business strategy?
How can HR strategies support the achievement of the business
strategy?
What are the strengths and weaknesses of the organisation and
the opportunities and threats it faces?
What are the implications of the political, economic, social,
technological, legal and environmental contexts in which the
organisation operates?
To what extent is the organisation in a stable or dynamic
(turbulent) environment and how will this affect our strategies?
What is the nature of the corporate culture? Does it help or
hinder the achievement of the organisations goals?
What needs to be done to dene or redene our values in-such
areas as quality, customer service, innovation, teamworking and
the responsibility of the organisation to its employees?
What do we need to do to increase commitment? How do we
communicate our intentions and achievements to employees
and what steps do we take to give them a voice ie obtaining
feedback from them and involving them in the affairs of the
organisation?
To what extent do we need to pursue a strategy of highperformance or high-commitment management, and what would
be the main features of such a strategy?
10
How in general can we increase the resource capability of
the organisation?
11
To what extent do existing HR practices meet future business
needs? What needs to be done about any gaps or inadequacies?
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Cover
Benets of this
tool
When formulating HR strategies, the key
questions are:
The context of HR
strategy
12
In the light of this gap analysis, what specic aspects of
HRM (processes and practices) do we need to focus on when
formulating strategy?
Implementing HR
strategies
13
How can we best bundle together the various HR practices?
Sources of
information
14
How can we achieve coherence in developing the different HR
practices?
15
How can we achieve the exibility required to cope with change?
16
What kind of skills and behaviours do we need now and in the
future?
17
Are performance levels high enough to meet demands for
increased protability, higher productivity, better quality and
improved customer service?
18
Will the organisations structure and systems be able to cope with
future challenges in their present form?
19
Are we making the best use of the skills and capabilities of our
employees?
20
Are we investing enough in developing those skills and
capabilities?
21
Are there any potential constraints in the form of skills shortages
or employee relations problems?
22
Are our employment costs too high?
23
Is there likely to be any need for de-layering or downsizing?
24
How should we involve people in developing the strategy?
25
How can we ensure the strategic plans are implemented?
The HR strategy
development
process
Diagnosing HR
priorities
How to use the
tool
Tool map
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Cover
Lets look at two examples:
Benets of this
tool
The context of HR
strategy
The HR strategy
development
process
Diagnosing HR
priorities
Implementing HR
strategies
Sources of
information
How to use the
tool
Tool map
Example A. Fundamentals of HR strategy at a not-for-prot
organisation
The strategy is focused on the following core outcomes:
continuous development and improvement of HR strategy
organisational development in support of the corporate plan and
change management leadership
promotion of a positive employee relations climate
effective use of staff resources
commissioning training and development appropriate to business
and employee need.
The priorities for action are informed by the corporate plan and the
need to support services for managers. They are also shaped by a set of
core values:
Reach out develop the commitment to respect all staff.
Involve and listen recognise the contributions of individuals.
Overcome injustice encourage fair and just processes.
Recognise and nurture provide opportunities for development.
Example B. Core components of HR strategy in an education
sector establishment
Invest in intellectual capital to ensure the continued support of
customers.
Manage performance to ensure performance is in line with core
values.
Design jobs to ensure they relate to the whole business while
providing interesting and stimulating work for individuals.
Reward to manage team versus individual incentives.
Create worklife balance to ensure staff achieve their optimum level
of exibility.
This organisation believes it must align all these components, otherwise
it would become dysfunctional.
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Implementing HR strategies
Cover
Benets of this
tool
There is often a gap between the rhetoric of HR strategies and the reality of
what happens subsequently. This is essentially a change management issue.
Everyone concerned with implementation, especially line managers, needs to
be included in a change management programme.
The context of HR
strategy
The HR strategy
development
process
Diagnosing HR
priorities
The main features of such a programme as
described by Armstrong (2001) are:
Implementing HR
strategies
Sources of
information
Strong commitment and visionary leadership from the top.
How to use the
tool
Clear understanding of the levers for change in the
organisation.
Tool map
Appropriate temperament and leadership from those
concerned with managing change.
A learning organisation that creates a climate for change
and learns from failures.
Participation in the planning and implementation of change
by those most affected by it. The aim should be to get them
to own` the change.
A reward system that encourages innovation and recognises
success in achieving change.
Strategies for change are adaptable the ability to respond
swiftly to new situations and demands, which will inevitably
arise, is essential.
Hard evidence and data on the need for change as well as
how to satisfy it.
An emphasis on change in behaviour, not enforcing values.
Processes, structure and systems are designed and aligned to
deliver the required changes.
i
Anticipation of implementation problems.
Active and visible champions of change.
Ongoing communication about why change is essential and
how it will affect everyone.
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Cover
Sources of information
Benets of this
tool
The context of HR
strategy
The HR strategy
development
process
Diagnosing HR
priorities
Implementing HR
strategies
Sources of
information
How to use the
tool
Tool map
From the CIPD website
Managing reward for business performance. CIPD Practical Tool
Understanding the people and performance link: Unlocking the black
box. CIPD bookstore
Further references and reading
ARMSTRONG, M. (2001). A handbook of human resource practice, 8th
edition. London. Kogan Page.
The library holds a range of books and resources offering more detailed
guidance. If you would like further information, please consult the
CIPD Library and Information Services.
This tool is based on a summary extract from the CIPD book Strategic HRM:
The key to improved business performance by Michael Armstrong and
Angela Baron. For further details about the book see the CIPD bookstore
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Cover
How to use the tool
Benets of this
tool
The context of HR
strategy
Tool map
The HR strategy
development
process
Tool map
Diagnosing HR
priorities
Implementing HR
strategies
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Cover
Benets of this
tool
Tool map
The context of HR
strategy
The HR strategy
development
process
Cover
Diagnosing HR
priorities
Implementing HR
strategies
Benets of this tool
Sources of
information
How to use the
tool
The context of HR
strategy
Tool map
The HR strategy
development process
Diagnosing HR
priorities
Implementing HR
strategies
Not-for-prot
example
Education
sector example
Sources of information
How to use the tool
HR strategy Creating the framework for successful people management CIPD 2005
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