How to Develop an Effective HR Strategy: The Complete Guide

Developing an effective HR strategy is crucial for any organization, big or small, aspiring to stretch its HR department, grow operationally and look after its people. Creating one, however, is challenging, as it needs to balance the needs of the business versus the needs of the people, which is difficult to achieve.

If you’re wondering where to start when creating an HR strategy, this complete guide will walk you through the process. Here, we’ll learn — among many other things — what is an HR strategy exactly, its importance, and actionable steps on how to develop your own.

What is an HR strategy?

An HR strategy is a long-term plan that aligns HR practices with an organization’s culture, policies and goals, all in the objective of having the right people in the right place at the right time in the right way. It pulls together organizational goals, employee engagement and quantifiable metrics for productivity and other particulars.

The HR strategy is, essentially, a roadmap for accomplishing this, covering all HR areas such as effective recruitment, training and retention plans that are fully aligned with the organization’s needs. Tying together the strategy is an effective and open communication plan so every employee is aware of what is happening and what their role is.

Key components of an HR strategy

HR strategies need to ensure that people processes are aligned with those of the company and they’re designed to get the most out of employees.

Here are six key components that form an effective strategy:

1. Compensation and benefits

Competitive and fair compensation and benefits packages are essential for attracting and retaining talent.

This includes salaries and bonuses as well as other benefits, from things like health insurance to retirement plans and other perks like flexible work options and wellness programs.

Transparency is crucial here, as is regularly updating reward practices and benchmarking your packages against what competitors offer their employees. Similarly, tools like family partnership agreements can offer families a structured approach to managing shared business ventures or assets.

2. Compliance processes

Underpinning everything that makes an HR strategy effective is the need to have strict compliance processes in place. These are processes that ensure HR departments and the wider organization are working fairly, equitably and in accordance with the law.

The strategy must govern how policies are approved and how decisions are made. It must also be developed in accordance with employment law and regulations, and be frequently reviewed to ensure it always remains compliant.

3. Diversity, equity and inclusion

The best HR strategies accommodate DEI needs. Indeed, diverse teams can bring different perspectives, which then drives teamwork, innovation and creativity, as well as a tremendous sense of belonging within teams.

DEI can be implemented through simple but effective interventions, such as fair and open hiring practices, as well as making sure that all employees — both current and prospective — have access to growth opportunities.

4. Employee development

Investing in the development of your employees helps your HR strategy nurture a skilled, knowledgeable and adaptable workforce. That said, it’s important to ensure there’s a wide variety of learning and development opportunities for staff, such as workshops, mentoring and eLearning.

Well-developed employees will be better positioned for promotions, saving money on external recruitment. Employee development also includes the provision of structured and fair appraisal processes.

5. Employee engagement and retention

Sustaining respectable levels of employee engagement is a great way to reduce labor turnover and to improve outputs such as productivity.

Engagement is driven by fostering a positive culture, maintaining open lines of communication (especially with leadership), as well as by offering recognition programs, opportunities to learn and grow, and team-building activities.

Engagement and pulse feedback surveys can help you analyze employee sentiment, which can then help you address any concerns proactively.

6. Talent acquisition

Hiring practices are central to an effective HR strategy. This begins with identifying clear goals and developing thorough job descriptions, aligning these with competitive compensation packages, as well as advertising jobs on diverse platforms (like job boards, recruitment agencies and social media).

Once new hires are onboarded, reinforce the employer brand with a comprehensive onboarding experience to ensure recruits grasp the organizational culture and hit the ground running. Talent acquisition should also include a talent review and succession plan to identify the strengths of current talent and how they can be utilized in the future.

The importance of an HR strategy for your organization

A clear HR strategy is vital for any company seeking long-term success, as it aligns people processes with business goals. And this alignment comes from several key areas.

Below are the five main benefits of an effective HR strategy:

1. Alignment of workforce and business goals

HR strategies tangibly ensure that the organizational workforce is aligned with the business’s goals. Through areas such as compensation and benefits, DEI, learning and development, engagement, retention, and talent acquisition, the HR strategy aligns the employee experience to future business success.

The strategy also offers a roadmap for how employees are empowered to meaningfully contribute to business goals, enabling leaders and stakeholders to make informed decisions about matters such as resource allocation.

Such alignment creates economies of scale, cost efficiency, and makes the business appear organized and attuned to its most important asset: its people.

2. Enhanced talent acquisition and retention

An effective HR strategy provides a roadmap for attracting, hiring and retaining the best talent: people who align with the company’s culture and goals.

By offering competitive pay, career progression opportunities and a strong employer value proposition, your organization can decrease labor turnover, reduce time-to-hire and nurture best-in-class employees.

The best HR strategies incorporate retention programs to ensure that talent is managed and developed, contributing to long-term business success. This way, companies can demonstrate that their talent is looked after from the moment they’re approached for a role, all the way through their time in employment.

3. Improved organizational culture

A well-thought-out HR strategy will complement organizational goals to drive company-wide synergies with many benefits. Indeed, it can significantly influence organizational culture through the establishment of core values and clear behavioral norms.

These values are supported by policies and procedures that convey the organization’s ethos and employer brand, which ensures everyone is working and behaving consistently.

Additionally, HR strategies can institute conflict resolution and DEI practices, fostering healthy conflict management and trust at work. By creating a fair, trustworthy and consistent workplace, the organization becomes an employer of choice, attracting even more top talent.

4. Increased employee engagement and productivity

Striving for high employee engagement is not just corporate jargon. Workplaces with high engagement are more supportive and inclusive. Indeed, engaged employees are more likely to put in discretionary effort (going the extra mile to achieve business goals), take initiative, collaborate effectively and be invested in the success of the organization.

Engaged businesses also prioritize open lines of communication and constructive feedback, driving trust and transparency at work. Moreover, engaged workforces ensure an undeviating alignment between skills and roles, helping employees realize their career goals, while boosting motivation and productivity.

5. Risk management and compliance

Robust HR strategies reduce the risk of regulatory or legal violations by providing a framework for employees and leaders to adhere to employment laws and governance standards. Clear guidance on fair and lawful working practices minimizes the risk of fines or litigation.

Additionally, HR strategies clarify employee rights and responsibilities, which in turn fosters a compliant, ethical and positive working environment.

Top HR strategy frameworks

When developing an effective HR strategic plan, you don’t always have to think about things from the ground up. There are many established frameworks that can offer structure and guidance to ensuring alignment with business goals

Here are five of the best frameworks to consider:

1. Balanced Scorecard

A commonly used strategic management framework, the Balanced Scorecard (or BSC, for short) helps organizations look at a broad range of metrics, not just financial management.

An HR Balanced Scorecard approach is easy to tie into an organization’s BSC and is focused on aligning HR priorities with four key areas:

• Customer: Driving customer experience through improving employee experience.
• Financial: Measuring and analyzing the cost-benefit of HR projects, such as recruitment and training, and adopting a value-based approach to enriching these.
• Internal process: Finding ways to modernize and add efficiencies to HR processes. These can include many areas, such as policy, onboarding or performance management, and finding HRMS and HRIS tools that can power these.
• Learning and growth: Implementing an inclusive but targeted approach to the development of employees.

2. Harvard Model

The Harvard Model is a useful tool that balances the relationship between HR policy, organizational goals and outcomes, and wider stakeholder interests. Like the BSC, it focuses on four main areas:

• Employee influence: Encouraging employees’ involvement in decision-making and discretionary effort.
• Human resource flow: Investigating the processes that drive HR and how these work, including recruitment, training, development, onboarding and offboarding processes.
• Reward systems: Making sure that the design and implementation of reward practices are forward-thinking, inclusive, competitive and fit for purpose.
• Work systems: Investigating ways to work smarter and more efficiently while understanding constraints such as talent or cost.

The Harvard Model deep-dives into these areas and applies them to longer-term strategic outcomes like organizational performance, wellbeing and societal impact. It aims to place HR at the center of stakeholder strategy.

3. High-Performance Work System

The focus of the High-Performance Work System (or HPWS, for short) is to drive competitive advantage for companies through developing enhanced work processes with a focus on HR strategy and practice.

HPWS is centered on critical HR areas such as selective hiring, performance-based rewards and ongoing training. The outputs of HPWS contribute to creating high-performing organizations — companies that can easily maximize employee productivity, foster commitment, increase innovation and align employee performance with organizational goals.

4. McKinsey 7S Model

The McKinsey 7S Model focuses on seven interconnected ambitions aligned to drive organizational goals. Like many of these models, there are non-HR applications as well as HR applications.

Here is how the 7S model can contribute to an effective HR strategy that holistically drives HR performance across all areas of the employee lifecycle:

• Shared values: Aligning organizational goals and needs with employee aspirations and values.
• Skills: Developing competencies across the workforce and implementing L&D programs to bring these to life.
• Staff: Recruiting the right people and ensuring they’re in the right jobs at the right time.
• Strategy: Ensuring HR has a seat at the table and can contribute effectively to business operations.
• Structure: Organizing HR functions effectively.
• Style: Designing and shaping an effective organizational culture, as well as sustaining it.
• Systems: Ensuring all HR systems and processes are in place and accessible, and they effectively contribute to the business.

5. Ulrich’s HR Business Partner Model

Dave Ulrich developed this model to place HR professionals and the function as a strategic partner to the business, rather than a purely administrative service.

To this end, it categorizes HR’s role into four areas:

• Administrative expert: Streamlining HR processes to enhance efficiency.
• Change agent: Driving organizational transformation.
• Employee champion: Advocating for employee needs and rights, as well as engagement.
• Strategic partner: Aligning HR with company goals and strategy.

How to develop an HR strategy

As we already discussed, creating an effective HR strategy guarantees that your HR department is in tune with the organization and its overall goals.

Here are 10 practical steps for bringing your HR strategy to life:

1. Understand organizational goals

The critical first step when developing an effective HR strategy is to understand the organization’s short- and long-term objectives. These are important so the HR function can align its initiatives with pertinent business priorities that might include areas like growth, revenue development, cost efficiency or innovation.

For example, let’s say the organization plans to expand internationally. HR would need to develop cross-cultural training, devise international recruitment strategies, and investigate compliance with local and national labor laws.

2. Conduct a workforce analysis

Conducting a comprehensive workforce analysis helps HR teams identify and understand the current state of the workforce in terms of skills, competencies and performance gaps. This analysis sounds like a lot of specialist work, but it can be achieved through matrices, performance reviews, workforce analytics, and even engagement surveys — which can all provide meaningful insights.

This is a data-driven approach that can feed into other areas of HR, such as recruitment, succession planning and training strategies, tying into organizational needs. Regularly conducting a workforce analysis ensures your strategy remains relevant and is adaptable.

3. Engage stakeholders in the process

A critical component of getting the HR strategy off the ground is to engage stakeholders in the process. Stakeholders can include employees, managers and senior leadership, all of whom have important viewpoints and are critical to developing an HR strategy.

Gaining stakeholder input ensures that the strategy addresses current organizational needs. Additionally, it helps the relevant groups become engaged with the strategy and garners support for the HR function across various levels of the business.

Different stakeholders can provide different purposes for championing the HR strategy; for example, senior stakeholders can communicate its importance, managers can provide operational context, and employee feedback can shape policies.

4. Prioritize employee development

Ensuring employees have consistent access to learning and development is central to all HR strategies. This will include provision for training programs like workshops and classes, mentoring opportunities, and access to e-learning platforms.

Building L&D into your HR strategy from the start will ensure that development is always top of mind and that a culture of growth is embedded into the people operations from an early stage. Getting this right will mitigate the risk of employee turnover, poor succession planning and low resilience.

5. Foster a positive workplace culture

As Peter Drucker said: “Culture eats strategy for breakfast.”

Build into your HR strategy frameworks, tools and processes to drive a positive workplace culture. After all,it’s the role of HR to promote and facilitate core values such as collaboration, inclusivity and respect.

This can be effectively accomplished through building clear policies and, critically, a robust recognition program that aims to reward all employees frequently and equally. Promoting this positive culture will attract top talent and boost productivity, too.

6. Leverage technology and analytics

Factor workforce analytics into your HR strategy from an early stage. Measuring the growth and implementation of your strategy is important to ensure your HR culture is landing well.

HR technology, such as applicant tracking systems, can effortlessly streamline HR processes and can also be used to improve the employee experience for the workforce. These systems require significant investment, so it’s vital they’re built into your HR strategy from an early stage so you can get the required buy-in from senior stakeholders.

7. Develop a robust talent acquisition strategy

Given that an HR strategy is designed in part to grow and sustain the workforce, a focus on talent acquisition is essential for bringing the strategy to life.

Talent acquisition comprises the full recruitment lifecycle and will begin with the strategy mandating clear job descriptions, consistent interview guides, competitive compensation packages, and working with leadership and marketing on creating an amazing employer brand.

Work multiple recruitment channels into the HR strategy, and link up with learning and development to create a best-in-class onboarding process to ensure new hires are set up for success from day one.

8. Implement flexible work policies

HR strategies need to be created in concurrence with contemporary workforce trends, and flexible working is perhaps the most prevalent of these at the present time.

Flexibility has become a key expectation for employees, and employers should allow remote work, flexible schedules and hybrid working wherever possible. This requires careful planning and execution to ensure manager buy-in and to ensure that flexible work policies don’t interfere with operations.

9. Ensure the strategy is measurable

An effective HR strategy can be tracked and measured, enabling both HR professionals and other business leaders to evaluate its success. HR strategies must factor in KPIs and other SMART goals that are established at its inception and used as a barometer for success as the strategy comes to life.

Effective measurement of an HR strategy is important to establish its progress, understand return on investment, and allow HR professionals to tweak the strategy to ensure it remains effective and competitive. The measurement should be developed in tandem with wider organizational goals to ensure HR priorities align with organizational ones.

10. Emphasize DEI

All throughout the HR strategy, there should be a focus on DEI. As we discussed before, DEI efforts are vital to creating a sense of belonging in the workplace, and diversity drives things like creativity and innovation.

HR teams must create strategies that embrace DEI and are accessible to all. Employees can be consulted with as the strategy is pulled together to ensure that every member of staff can benefit from it and that it doesn’t unintentionally disadvantage certain groups of people.

HR strategy examples to inspire you

Pulling together an HR strategic plan is a huge undertaking, and there are so many things to think of when considering how to create one.

Here are 20 examples of HR strategy ideas to inspire you and your organization.

1. Aligning rewards to performance

Establishing links between performance and rewards can, among other things, motivate employees and contribute to higher performance work systems. While the effectiveness of this depends on the wider organizational culture, rewarding people for the work they do can drive the organization forward, as well as increase transparency in how reward processes are administered.

2. Career development plans

Part of the L&D strategy, career development plans intend to align employees’ aspirations with available talent development opportunities and company goals. These plans can be introduced around the same time as the annual appraisal process and can be connected to the feedback the employee receives.

3. Comprehensive induction programs

Robust onboarding processes improve retention and make sure that employees are welcomed into the business and set up for long-term success. This can include orientation training, meet-and-greets with managers, buddy systems, and periodic check-ins throughout the probation period.

4. Corporate social responsibility

Corporate social responsibility and corporate governance initiatives can connect employees to significant causes and make their work more rewarding. CSR activities can include paid volunteer days, donation programs charity drives, and educational outreach. The HR strategy should indicate how employees can get involved and provide opportunities to do so in an inclusive and frequent manner.

5. Creating a communication plan

An HR strategy is only as good as how it’s communicated. It’s vital for HR pros to advocate for the strategy and communicate its successes, either through updates in meetings or via social media where policies allow. This helps people understand what HR is working on, as well as raises the presence of the department.

6. DEI initiatives

Effective DEI practices can be embedded throughout the HR strategy through various initiatives that are accessible for all. These can include diverse hiring panels, unconscious bias training, and leadership pipelines, supporting ERGs and fostering a proactive approach to reporting concerns. Auditing DEI and equal pay processes will guarantee ongoing compliance.

7. Employee engagement surveys

Employee engagement surveys are in-depth and regular analyses of the employee experience. They’re often comprised of various drivers such as overall engagement, pay and reward, teamwork, leadership, and working environment. HR and leaders should create an action plan based on the results and demonstrate to staff that their opinions are heard and acted upon.

8. Employee resource groups

Employee resource groups are employee-led workgroups that are populated by people with shared experiences, identities or interests, such as LGBTQ+ employees, working parents, or people with specific religious beliefs. The purpose of ERGs is to foster camaraderie and to advocate for organizational changes. Organizations can fund these to ensure their success and impact.

9. Exit interviews

Structured exit interviews that are conducted consistently offer meaningful insights into employee turnover. The exit interview process can uncover employee issues, such as dissatisfaction with leadership or a lack of career growth. While it’s hard to retain the leaver at the exit interview stage, further turnover can be mitigated based on the findings.

10. Internal mobility programs

Encouraging your employees to consider internal transfers is a great way to boost retention and improve motivation. This can be done simply through programs like job shadowing and cross-training or investing in apprenticeship and internship programs to bring new talent seamlessly into the organization. Depending on local or federal regulations, you can also consider making more visas available for overseas transfers.

11. Learning and development platforms

Keeping learning and development fresh and engaging is crucial for sustaining an HR strategy. Continuous learning opportunities will help employees remain competitive in the workplace and happy. Modern elements like gamified learning and incorporating recognized certifications into your L&D offering can further participation, as can collaborating with well-known platforms like Coursera or LinkedIn Learning.

12. Parental and family support programs

Embracing family-friendly workplace policies will boost inclusivity and demonstrate an organization's commitment to employee wellbeing. While some processes might have to be offered as per law, offering a range of options can make a huge difference, including paid parental leave, adoption leave, on-site childcare or tax-free childcare vouchers. There’s a lot to consider and offer your people.

13. Performance management systems

Establish a modern approach to performance management and consider what can be done above and beyond the standard employee appraisal. Regular check-ins help keep feedback informal and constant, and build trust. Implementing 360-degree feedback systems helps employees receive a wider range of advice.

14. Pulse surveys

Pulse surveys are short and frequent engagement surveys that can provide real insights into how staff feel about working in your organization. These can help your company stay on top of changes and sentiment that can impact the employee experience, as well as ensure that problems don’t become too large or too ingrained to fix.

15. Recognition and rewards programs

Providing structured and visible recognition programs will ensure employees know what they can expect if they do great work. Such programs can include “Employee of the Month” or open recognition platforms where employees can directly celebrate each other. Whatever you decide to do, make sure that it's promoted and championed by senior leaders to add gravitas.

16. Staying on top of trends

As part of the HR strategy evolution, HR teams should always stay on top of trends and news in HR processes. This makes sure they can update the HR strategy to keep it current, effective and competitive. Following HR websites and organizations like the SHRM or CIPD, and staying on top of legislative changes is critical for keeping your HR strategy fresh.

17. Succession planning

Identifying and nurturing existing talent for critical roles will ensure organizational continuity. This can be accomplished through directed training for high-potential employees or offering cross-training or task force opportunities to give them additional experience. These interventions can be identified by using talent review meetings.

18. Team-building activities

Team building fosters collaboration and trust, and also allows employees to connect in an environment where work isn’t the main focus. Regular team-building activities (like meals out, hiking trips or escape rooms) can strengthen working relationships and boost organizational effectiveness.

19. Wellness programs

Wellness programs help employees feel looked after and that they can trust their employer to address their most important needs. The best wellness programs will cover a variety of pillars, including social, mental, physical and financial wellbeing. Providing access to an employee assistance program can also be very beneficial.

20. Workplace culture initiatives

Bringing the workplace culture to life includes aligning policy and practice with company values. Activities such as frequent town hall meetings, celebrating service milestones, and championing an open-door leadership policy help. Many companies, like Zappos, make a big deal of hiring for cultural fit too.

Frequently asked questions

If you’re looking for a few extra ideas to get your HR strategy off the ground, here are five frequently asked questions that might give you some inspiration:

Key takeaways

Developing an HR strategy doesn’t happen by accident. It requires hard work and alignment with organizational priorities and ever-changing goals. Here are a few key points to keep in mind:

• The importance of HR strategy rests on how it is created to align with business goals and strategies.
• HR strategies must incorporate all aspects of the employee experience, from recruitment to offboarding.
• There are tried-and-tested HR strategy frameworks to make the process as straightforward as possible.
• Once you have a basic HR strategy drafted, flesh it out with actionable examples that are tailored to your organization.
• Don’t hesitate to enlist support from others, like ERGs and operational leaders, to ensure your HR strategy is relevant and in alignment with organizational needs.

Keeping your HR strategy aligned with company priorities ensures that people, leadership and processes work in harmony to achieve incredible results. An effective HR strategy can be a key ingredient in this recipe for organizational success.