Human Resource Management (HRM) - Definition and Concept

We often hear the term Human Resource Management, Employee Relations and
Personnel Management used in the popular press as well as by Industry experts.
Whenever we hear these terms, we conjure images of efficient managers busily going
about their work in glitzy offices.

In this article, we look at the question “what is HRM ?” by giving a broad overview of the
topic and introducing the readers to the practice of HRM in contemporary organizations.
Though as with all popular perceptions, the above imagery has some validity, the fact
remains that there is much more to the field of HRM and despite popular depictions of
the same, the “art and science” of HRM is indeed complex. We have chosen the term
“art and science” as HRM is both the art of managing people by recourse to creative
and innovative approaches; it is a science as well because of the precision and rigorous
application of theory that is required.

As outlined above, the process of defining HRM leads us to two different definitions.
The first definition of HRM is that it is the process of managing people in organizations
in a structured and thorough manner. This covers the fields of staffing (hiring people),
retention of people, pay and perks setting and management, performance management,
change management and taking care of exits from the company to round off the
activities. This is the traditional definition of HRM which leads some experts to define it
as a modern version of the Personnel Management function that was used earlier.

The second definition of HRM encompasses the management of people in

organizations from a macro perspective i.e. managing people in the form of a collective
relationship between management and employees. This approach focuses on the
objectives and outcomes of the HRM function. What this means is that the HR function
in contemporary organizations is concerned with the notions of people enabling, people
development and a focus on making the “employment relationship” fulfilling for both the
management and employees.

These definitions emphasize the difference between Personnel Management as defined

in the second paragraph and human resource management as described in the third
paragraph. To put it in one sentence, personnel management is essentially “workforce”
centered whereas human resource management is “resource” centered. The key
difference is HRM in recent times is about fulfilling management objectives of providing
and deploying people and a greater emphasis on planning, monitoring and control.

Whatever the definition we use the answer to the question as to “what is HRM?” is that
it is all about people in organizations. No wonder that some MNC’s (Multinationals) call
the HR managers as People Managers, People Enablers and the practice as people
management. In the 21st century organizations, the HR manager or the people
manager is no longer seen as someone who takes care of the activities described in the
traditional way. In fact, most organizations have different departments dealing with
Staffing, Payroll, and Retention etc. Instead, the HR manager is responsible for
managing employee expectations vis-à-vis the management objectives and reconciling
both to ensure employee fulfillment and realization of management objectives.

Importance of HRM

Scope of HRM

Various Processes in HRM

What is Human Resource Planning ?

The HRM Function

Functions of a Human Resource Manager

Staffing Role of the HR Manager

Role of HRM in Leadership Development

Role of HR in People Empowerment

Talent Management and HRM

Performance Management as a HR Management Concept

Hiring Strategies

Retention Strategies

The History of Human Resource Management (HRM)

The history of Human Resource Management (HRM) begins around the end of the 19th
century, when welfare officers (sometimes called ‘welfare secretaries’) came into being.
They were women and involved with the protection of women and girls. Their creation
was a reaction to the:

Harshness of industrial conditions

Pressures arising from the extension of the franchise

Influence of trade unions and the labour movement

Campaigning of enlightened employers, often Quakers, for what was called ‘industrial
betterment’

As the role grew there was some tension between the aim of moral protection of women
and children and the need for higher output.

20th century developments

The First World War accelerated change in the development of personnel management.
Women were recruited in large numbers to fill the gaps left by men going to fight. This
meant reaching agreement with trade unions (often after bitter disputes) about ‘dilution’–
accepting unskilled women into craftsmen’s jobs and changing manning levels.

During the 1920s, jobs with the titles of ‘Labour Manager’ or ‘Employment Manager’
were introduced to the engineering industry and other industries where there were large
factories. The role involved handling absence, recruitment, dismissal and queries over
bonuses. Employers’ federations, particularly in engineering and shipbuilding,
negotiated national pay rates with the unions, but there were local and district variations
and there was plenty of scope for disputes.

During the 1930s, the economy was beginning to pick up. Big corporations in these
newer sectors saw value in improving employee benefits as a way of recruiting,
retaining and motivating employees. But older industries such as textiles, mining and
shipbuilding were hit by the worldwide recession. These sectors did not adopt new
techniques, seeing no need to do so because they had no difficulty in recruiting labour.

The Second World War brought about welfare and personnel work on a full-time basis
at all establishments producing war materials. The Ministry of Labour and National
Service insisted on it, just as the Government had insisted on welfare workers in
munitions factories in the previous conflict. The Government saw specialist personnel
management as part of the drive for greater efficiency. As a result, the number of
people in the personnel function grew substantially; there were around 5,300 in 1943.

Reaping the rewards of HR

By 1945, employment management and welfare work had become integrated under the
broad term ‘personnel management’. Experience of the war had shown that output and
productivity could be influenced by employment policies. The role of the personnel
function in wartime had been largely that of implementing the rules demanded by large-
scale, state-governed production. As a result, the image of an emerging profession was
very much a bureaucratic one.
Following the development of poor industrial relations during the 1960s, a Royal
Commission under Lord Donovan was set up. Reporting in 1968, it was critical of both
employers and unions; personnel managers were criticised for lacking negotiation skills
and failing to plan industrial relations strategies. At least in part, Donovan suggested,
these deficiencies were a consequence of management’s failure to give personnel
management sufficiently high priority.

In the 1960s and 1970s employment started to develop significantly. At the same time
personnel techniques developed using theories from the social sciences about
motivation and organisational behaviour. Selection testing became more widely used
and management training expanded. During the 1970s, specialisms started to develop
with reward and resourcing, for example, being addressed as separate issues.

Around the mid-80s, the term ‘Human Resource Management’ arrived from the USA.
The term ‘Human Resources’ is an interesting one; it seemed to suggest that
employees were an asset or resource-like machines, but at the same time HR also
appeared to emphasise employee commitment and motivation. At Consensus HR, we
always emphasise to clients the importance of making the most of one of your most
important business assets and resources: your people.

Functions of Human Resource Management

Planning

Organizing

Directing

Controlling

Planning

A manager must plan ahead in order to get things done by his subordinates. It is also
important to plan in order to give the organization its goals.

Also, planning helps establish the best procedures to reach the goals. Further, some
effective managers devote a substantial part of their time to planning.

With respect to the human resource department, planning involves determining the
personnel programs that can contribute to achieving the organization’s goals.
These programs include anticipating the hiring needs of the organization, planning job
requirements, descriptions, and determining the sources of recruitment.

Functions of Human Resource Management

Organizing

After the human resource manager establishes the objectives and develops plans and
programs to achieve them, he needs to design and develop the organization’s structure
to carry out the different operations. Developing the organization’s structure includes:

Grouping of personnel activity into functions or positions

Assigning different groups of activities to different individuals

Delegating authority according to the tasks assigned and responsibilities involved

Coordinating activities of different employees

Directing

The HR Manager can create plans, but implementing the plans smoothly depends on
how motivated the people are. The directing functions of HRM involve encouraging
people to work willingly and efficiently to achieve the goals of the organization. In
simpler words, the directing functions of HRM entail guiding and motivating people to
accomplish the personnel programs.

The HRM can motivate the employees through career planning and salary
administration by boosting the employee’s morale, developing relationships, providing
safety requirements, and looking after the welfare of employees.

In order to do this effectively, the HRM must identify the needs of the employees and
the means and methods to satisfy them. Motivation is a continuous process as
employees have new needs and expectations when the old ones are satisfied.

Controlling

Controlling is all about regulating activities in accordance with the plans formulated
based on the objectives of the organization. This is the fourth function of the HRM and
completes the cycle. In this, the manager observes and subsequently compares the
results with the set standards.

Further, he corrects any deviations that might occur. Controlling is one of the important
functions of HRM as it helps him evaluate and control the performance of the
department with respect to different operative functions. It also involves appraisals,
audit, statistics, etc.
Human Resource policies

Human resource policies are continuing guidelines on the approach of which an

organization intends to adopt in managing its people. They represent specific guidelines
to HR managers on various matters concerning employment and state the intent of the
organization on different aspects of Human Resource management such as
recruitment, promotion, compensation, training, selections etc. They therefore serve as
a reference point when human resources management practices are being developed
or when decisions are being made about an organization's workforce.

A good HR policy provides generalized guidance on the approach adopted by the

organization, and therefore its employees, concerning various aspects of employment.
A procedure spells out precisely what action should be taken in line with the policies.[1]

Each organization has a different set of circumstances and so develops an individual

set of human resource policies The location an organization operates in will also dictate
the content of their policies.

Purposes

The establishment of policies can help an organization demonstrate, both internally and
externally, that it meets requirements for diversity, ethics and training as well as its
commitments in relation to regulation and corporate governance of its employees. For
example, in order to dismiss an employee in accordance with employment law
requirements, amongst other considerations, it will normally be necessary to meet
provisions within employment contracts and collective bargaining agreements.[5] The
establishment of an HR Policy which sets out obligations, standards of behavior, and
documents disciplinary procedures, is now the standard approach to meeting these
obligations. HR policies provide frameworks within which consistent decisions are made
and promote equity in the way in which people are treated.[6]

HR policies can also be very effective at supporting and building the desired
organizational culture.[7][8] For example, recruitment and retention policies might
outline the way the organization values a flexible workforce, compensation policies
might support this by offering a 48/52 pay option where employees can take an extra
four weeks holidays per year and receive less pay across the year.

In actuality, policies and procedures serve a number of purposes:[9]

They provide clear communication between the organization and their employees
regarding their condition of employment.

They form a basis for treating all employees fairly and equally.

They are a set of guidelines for supervisors and managers.

They create a basis for developing the employee handbook.

They establish a basis for regularly reviewing possible changes affecting employees.

They form a context for supervisor training programs and employee orientation
programs.

Development

In developing HR Policies, there should be clear and consistent statement of the

organization's policies regarding all conditions of employment and procedures for their
equal and fair implementation. In order to fulfill this objective, policies and procedures
should be:[10]

Clear and specific, but provide enough flexibility to meet changing conditions.

Comply with all appropriate law and regulation.

Consistent amongst one another and reflect an overall true and fair view approach to all
employees.

HR policies are developed by making decisions and taking actions on the day-to-day
problems of the organization. The process of developing HR policies involves the
assessment of the following factors:[11]

Identify the purpose and objectives which the organization wishes to attain regarding its
Human Resources department.

Analysis of all the factors under which the organization's HR policy will be operating.

Examining the possible alternatives in each area which the HR policy statement is
necessary.

Implementation of the policy through the development of a procedure to support the

policy.

Communication of the policy and procedures adapted to the entire organization.

Auditing the policy so as to reveal the necessary areas requiring change.

Continuous revaluation and revision of policy to meet the current needs of the
organization.

Formulation

Human resource management consists of deliberate organizational activities designed

to improve employee productivity and administration through such means as
recruitment, compensation, performance, evaluation, training, record keeping and
compliance. HR policies should be developed for key HR management functions
covering eight commonly accepted responsibilities:[12]

Compensation and benefits

Labor management relations

Employment practices and placement

Workplace diversity

Health, safety and security

Human resources information systems

Human resource research

Training and development

The following steps should be taken when formulating or revising policies:[13]

Gain understanding of the corporate culture and its shared values

Analyze existing policies: both written and unwritten existing policies.

Analyze external influences: HR policies are subject to the influence of many legislation,
regulations and authorities, thus the codes of practice issued by the professional
institutions should also be consulted.

Assess any areas where new policies are needed or existing policies are inadequate.

Check with managers, preferably starting with the organization's leadership team, on
their views about HR policies and where they think could be improved.
Seek the view of employees about the HR policies, especially to the extent for which
they are inherently fair and equitable and are implemented fairly and consistently.

Seek the view of the union's representatives.

Analyze the information retained in the previous steps and prepare the draft policies.

Consult, discuss and agree on policies with management and union representatives.

In order to write the first draft of the policies as step 7 have stated, the following content
should be included:[14]

Policy name

Effective date of the policy and the date of any revisions

Approval status - At this stage, the status should be 'DRAFT'

References - list other policies or documents related to this policy

Purpose of the policy - what is it intended to promote or achieve

Main policy statement

Definition of any key concepts or terms mentioned in the policy need to be defined

Eligibility or scope - Any stakeholders are covered by the policy

How to deal with potential exceptions

Positions in the organizations responsible for implementing and monitoring the policy

Procedures for carrying out the policy - preferably written in numbered steps

Emerging role of human resource management

Human input in the production process was at one time considered as a variable cost
item. People were treated as dispensible units of labour and easily replaceable. Very
few could think of developing and maintaining the workforce. The emphasis rather was
on controlling and minimising its cost.
This being the position, functions of personnel management remained confined mainly
to recruitment, remuneration and separation. The performance of personnel department
was judged on the basis of how to recruit manpower of requisite strength and skill and
keep its cost at the lowest possible level and get rid of it when no longer required.
Labour was the first area to be hit whenever the problem of the reduction of costs arose.

EMERGING FUNCTIONS: Some of the concomitants of the modern age such as higher
education, higher aspirations, higher standards of living and more liberal ways of life
have already started influencing workplaces.

As a result. employees more educated than ever-before, having higher aspirations, find
it difficult to respond constructively to the narrowly-defined jobs having no scope for any
initiative. In fact, they find their jobs dissatisfying.

The result is more and more apathy towards work with direct impact. on performance. If
the contents of an employee's job hold no interest for him, he can hardly be expected to
take interest in the job. If the job provides no scope for responsibility, he can hardly be
expected to act responsibly.

Moreover, young and educated employees have also started resisting the norms of
discipline. In times to come, they are expected to adopt "what I like approach". Thus the
question arises: how to deal with the emerging workforce, how to put it to productive
use and how to motivate them to achieve the organizational objectives.

As such, developing new forms of work organizations, job enrichment, encouraging

employees empowerment and participation, and socio-technical approach to work,
could be some of the new areas in which human resource managements will have to
pay attention..

The other major problem to be faced by industrial managements in the coming years
will be, how to deal with surpluses of workforce arising out of frequent mergers and
downsizing to meet the challenges of globalization.

Human resource managements have to tackle this problem in a manner that the
industrial peace and working harmony in organizations are not disturbed. One of the
possible ways to meet this challenge could be the training of workers in multiple skills
and adoption of the strategy of outplacement so that the employees becoming surplus
are helped in finding suitable employment.

Dealing with trade unions, including collective bargaining', are presently carried on win-
lose basis. This is one of the factors mainly responsible for adversarial labour-
management relations having adverse effect on the competitiveness of organizations.
There will be need for the adoption of strategies based on the win-win approach in the
new era. Nothing can bring workers closer to each other than having a common
problem and endeavouring for its resolution.

The career planning and development activities of human resource management's are
presently confined to employees in the management and supervisory cadres only. No
attention is given to the development of employees in the cadre of workers.

The result is uneven development leading to imbalance. Moreover, if the job of the
educated workers is to be enriched and made more meaningful they have to be trained
to meet demands of new jobs.

Personnel policies are presently formulated keeping in view the "job requirements". But
the fact remains that when a management hires a person, it hires him as a 'whole-man'.

Although the management may need his hands and muscles yet he brings his thoughts,
aspirations, hopes and the burden of all personal and domestic problems to his
workplace.

The practice of framing personnel policies on the basis of workman concept has.
therefore, to be given up to be replaced by the practice of framing policies on the basis
of 'whole-man; to take care of employees' off-the-job problems.

In the process of promoting discipline the emphasis at present is on treating the

symptoms rather than on the causes of the problems. The result is that measures
adopted, do not produce the desired results. The policy of enforcing discipline through
penal measures alone, has to give way to the adoption of more positive measures to
produce the desired results.

The Executive HR Function

An HR executive performs the basic functions of the HR department, handling areas

such as personnel management, social welfare and the maintenance of HR records. An
HR executive is a key member of the HR department, often playing an instrumental role
in many HR functions, or leading a team of HR staff for various projects.

HR executives should have at least a bachelor's degree. Generally, the more common
degree programs among HR executives are social sciences, business administration,
human resources, communications and management. Moreover, organizations tend to
prefer candidates with HR-related work experience and basic computer skills, so that
they will already be familiar with the basic job functions once they start work.

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Given the nature of his work, an HR executive should have good negotiation,
communication and conflict-resolution skills, as (s)he often has to communicate and
explain the organization's policies to other employees. (S)he should also know the basic
local employment guidelines, especially those related to workplace safety and health
issues. In addition, (s)he often has to represent the organization in negotiations with
external agencies.

While there is no definite, standardized job description, an HR executive's job

responsibilities can be as comprehensive as follows (in this modified and expanded
actual HR executive job description).

* Reviewing resumes and applications

* Conducting recruitment interviews and providing the necessary inputs during the
hiring process

* Working with recruitment agencies to source for candidates for specific job
positions

* Maintaining HR records, such as those related to compensation, health and

medical insurance

* Handling insurance-related issues

* Managing workplace safety issues

* Training new or existing employees

* Firing staff

* Communicating and explaining the organization's HR policies to the employees

* Follow up of confirmation records statutory obligations - PF, ESIC, taxes,

gratuity, LTA, bonus etc
* Preparation of salary statement

* Handling the full and final settlement of the employees

* Administration of all contract labor

* Conducting various welfare activities

* Community initiatives programs - organizing and participation

* Regular updating of communication channels

* Preparing and submitting all relevant HR letters/documents/certificates as per the

requirement of employees in consultation with the management

* Ensuring statutory compliances for PF withdrawal, annual returns, factory

license, shop and establishment license, labour law and record information on a timely
basis

* Liaising with all government agencies to ensure adherence to compliance

* Preparing and processing timely distribution of salary, bonus, increment salary

slip, leave encashment and full and final settlements

* Recording, maintaining and monitoring attendance to ensure employee

punctuality

* Conducting employee orientation and facilitating newcomers joining formalities

* Maintaining and regularly updating master database (personal file, personal

database, etc.) of each employee

* Resolving grievances or queries that any of the employees have

* Escalating to the right level depending on the nature of the grievance or issue

* Checking travel and tour expenses and contractor bills and record in relevant
software for timely credit of the amount into employee's accounts

* Preparing letters such as offer and confirmation

* Implementing and administering performance management processes as per the

PMS policy and timelines

* Conducting exit interviews for employees and recording them accordingly

* Reviewing job descriptions for all positions at regular intervals and updating them
in consultation with the respective managers

* Engaging with employees on a regular basis to understand the motivation levels

of people in the organization

* Keeping records of staff insurance and ensuring timely renewal

* Coordinating with consultants and candidates for scheduling appointments with

the management team for sourcing

* Conducting first round of telephonic interview for the candidates to schedule

interviews.

10 of Today’s Common Human Resource Challenges

Issues such as cash flow, competition, and revenue growth are top of mind for small
business owners and their teams. Along with these challenges comes another area
many companies struggle with: human resource management.

Human resource management (HRM) includes:

Job design and analysis

Workforce planning

Training and development

Performance management

Compensation and benefits

Legal issues

HRM can be a challenge for small businesses especially, which typically don’t have an
HR department to rely on. They may be limited to one HR person, or this responsibility
may still belong to the CEO. Regardless, small business owners need to understand the
challenges facing them so they’re prepared to tackle HR issues as their company, and
workforce, grows.
Here are 10 of today’s most common human resource challenges along with solutions
you can quickly implement in your business.

#1 Compliance with Laws and Regulation

Keeping up with changing employment laws is a struggle for business owners. Many
choose to ignore employment laws, believing they don’t apply to their business. But
doing so could mean audits, lawsuits, and possibly even the demise of your company.

#2 Management Changes

Business owners should focus on communicating the benefits of the change for
everyone. Regular staff meetings are a good place to start. When your team
understands the why, how, and when of the change, they’ll be more likely to get on
board.

#3 Leadership Development

A recent study showed more than a third of companies are doing an average job, at
best, at implementing leadership development programs. Thirty-six percent of
companies surveyed in Brandon Hall Group’s State of Leadership Development Study
admitted that their leadership development practices are below average.

#4 Workforce Training and Development

Investing in the training and development of lower-level employees is another common

HR problem. Some businesses have trouble finding the resources to do so. Employees
on the front lines are some of your hardest workers, and may not have the time to take
a training course.

#5 Adapting to Innovation

Technology is constantly changing. Businesses must be quick to adapt, or risk being left
in the dust by their competitors. The challenge for small business owners is getting
employees to embrace innovation and learn new technology.

#6 Compensation

Many companies are struggling with how best to structure employee compensation.
Small businesses have to compete not only with businesses of a similar size, but also
with corporations with big payroll budgets. Plus, you have to factor in the cost of
benefits, training, taxes, and other expenses, which can range from 1.5 to 3 times the
employee’s salary.

#7 Understanding Benefits Packages

The Affordable Care Act has been a pain point for many small businesses in the past
few years. Rising healthcare costs mean companies must either pass these costs on to
employees, or take a hit to their bottom line. Since good benefits packages can be a
deciding factor for potential hires, understanding them is key.

#8 Recruiting Talented Employees

Attracting talent is a huge investment of time and money. It’s difficult for entrepreneurs
to balance between keeping a business running, and hiring the right people at the right
time. In addition, it’s impossible to know whether a candidate will actually be a good fit
until they’ve worked for you for a period of time.

#9 Retaining Talented Employees

Competition for talented employees is fierce. Startups and small companies don’t have
big budgets for retirement plans, expensive insurance plans, and other costly items that
their larger competitors do—at least, not yet. Employee turnover is expensive and can
negatively impact business growth.

#10 Workplace Diversity

Multiple generations. Ethnic and cultural differences. These are just a few of the many
factors that make workplace diversity a continual challenge for small businesses. The
risk of lawsuits for failing to protect employees from harassment is real.

What is a Human Resource Strategy?

A Human Resource strategy is a business’s overall plan for managing its human capital
to align it with its business activities. The Human Resource strategy sets the direction
for all the key areas of HR, including hiring, performance appraisal, development, and
compensation.

The HR strategy is thus a long-term plan that dictates HR practices throughout the
organization.
An HR strategy has a set of characteristics:

It requires an analysis of the organization and the external environment.

It takes longer than one year to implement.

It shapes the character and direction of Human Resources Management activities

Helps in the deployment and allocation of organizational resources (i.e. money, time,
personnel)

Is revised on a yearly basis.

It incorporates the expert judgment of senior (HR) management.

It is number-driven.

It results in a specific behavior.

These characteristics give a good overview of what an HR strategy consists of

How to create an HR strategy

The next question is: how do we create a Human Resource strategy?

A very useful model here is the standard causal model of HRM, one of the key HR
models. This model shows where HR strategy originates from and how it influences HR
execution and business performance.

The model shows that the HR strategy is a result of the broader (business) strategy. It
shows that HR activities create value when they are aligned with what the organization
tries to achieve. When there is alignment (fit) between the two, HR will contribute to the
performance of the organization.

The overall business strategy is formulated based on the past and the present. It is a
result of what the company has been doing in the past and its current internal
capabilities. An often used tool to arrive at this strategy is the SWOT analysis.
In the SWOT analysis, the organization’s internal Strength and Weaknesses, and its
external Threats and Opportunities are mapped. Strengths include the company’s core
know-how and know-what. These are its production capacity, existing brand, marketing
channels, sales capabilities, R&D expertise, and other human capital factors.

SWOT Analysis

The company’s strategy leverages its Strengths to capitalize on the Opportunities in the
market. At the same time, it tries to circumvent Threats and minimize the impact of
Weaknesses.

The result of this strategy-setting is the company’s value proposition. For example, the
value proposition of Walmart, a discount retailer, is “every day low prices”. This explains
a number of internal HR practices, especially the ones related to worker compensation.
For more unique value propositions, check this article

The HR strategy is based on the organizational strategy. The HR strategy touches on all
the key areas in HR. These include recruitment, learning & development, performance
appraisal, compensation, and succession planning.

An example of an HR strategy is an HR mission statement and HR vision, with

concrete, high-level actions about how to execute on this mission and vision. We will
give an example later on.

The Human Resources mission statement

The result of an HR strategy is often an HR mission statement. The HR mission

statement helps to clearly define where the organization wants to go. All Human
Resource Management practices and decisions can be judged based on that statement.

An example is the HR mission statement of the University of Marquette in Milwaukee,

Wisconsin: “The Human Resources Department creates, encourages, and maintains an
environment that supports, develops and sustains the well-being of Marquette
University’s employees, students, and the broader community.”

This mission statement clearly focuses on the creation of an environment for different
groups. This makes it easier to make decisions and start initiatives regarding HR’s
involvement in different projects. For example, I would be very surprised if this HR
department is not actively involved in (student) community-building projects.
Digital HR plays a pivotal role in enabling the HR strategy. In the final section of this
article, we will explore the role of digital in more depth.

6 HR strategy best practices

When creating and implementing an HR strategy, there are a number of best practices
to keep in mind.

HR professionals should know the strategy and (at least to some extent) be involved in
its creation – A strategy will only be effective if it is clearly communicated. Involvement
in the creation of the strategy will help in the communication and create buy-in.

Management buy-in and HR budget are critical enablers of strategy execution – An HR

strategy can never be realized in isolation. Conditions are management buy-in, budget,
skilled HR professionals, and appropriate digital technology.

HR initiatives should be aligned with the HR strategy – The strategy is there for a
reason: it should be followed. HR practices and initiatives should follow the strategy.

Performance incentives should be directly connected with the execution of the strategy
– The idea of contingent compensation is as old as HR itself. People will work harder if
their goals and incentives are aligned.

Strategies should be monitored and execution measured through KPIs – Strategy will
never be effective without consistent implementation and monitoring of results. This is
done through KPIs (metrics that measure strategic goals)

Strategy is a long-term plan – A strategy is, by definition, long-term. This doesn’t mean
it isn’t subject to change. A strategy can be – and sometimes should be – adapted to
better fit the external environment.

These best practices help to create, implement, and execute the Human Resource
strategy.

Human Resource strategy example

A good example of a Human Resource strategy that worked was how Netflix managed
its people. After the dot-com bubble burst and the 9/11 attacks, Netflix had to lay off a
third of its employees.
It had always been Netflix’s strategy to hire only A players. This was an opportunity. By
letting go of the B-players, the remaining employees were happier and more productive.
To quote one of the engineers: “I’ve learned that I’d rather work by myself than with
subpar performers.

This also had consequences for people who once were invaluable but had become
redundant as the company grew. According to Patty McCord, Netflix’s chief talent officer
from 1998 to 2012, “if we wanted only “A” players on our team, we had to be willing to
let go of people whose skills no longer fit, no matter how valuable their contributions had
once been.”

Working with only A players also impacted Netflix’s holiday policies. After Netflix went
public, there was some pressure to formalize the paid-off-time policy. After some
research, McCord decided to use a system in which employees could take as much
time off as they felt was appropriate – in dialogue with their boss.

For a full overview of Netflix’s unique definition of company culture, check out their
culture guidelines

HR strategy framework

A very useful tool I discovered while doing research for this article, is the Deloitte HR
Strategy Framework. This framework follows a 10-step approach towards defining
strategy and delivering value.

The first phase is about defining human capital value. This happens in two steps:

1. Understand the business strategy – this is about understanding the market forces
and identifying how they impact HR strategy and priorities.

2. Define HR strategy – in this second step, you create a roadmap about how HR aligns
its strategy and how it helps to build a competitive advantage for the organization.

Second, HR products and services need to be aligned.

3. Segment HR customers – not all HR customers are equal. In the third step, you
segment your different (internal) customer groups and identify the most crucial ones.
Different customer groups require different policies and approaches.
4. Prioritize HR investments – your HR budget and other resources are limited. Prioritize
the investments that benefit your key customers and that provide the best ROI. A good
technique to prioritizing these investments is calculating an ROI through HR costing.

5, Design HR services – in this phase, you will go through all the HR focus areas and
analyze and identify all the processes that should be streamlined or re-engineered.

Third, HR practices need to deliver value. This is the right side of the standard causal
model for HRM.

6. Ensure the right HR service delivery model – in this step, you will assess the current
HR service delivery model and assess how effectively it helps to meet the organization’s
goals. You should also analyze the key HR enablers such as HR systems, processes,
and infrastructure. Optimizing these will help in delivering HR services that add value to
the organizational strategy.

7. Establish the right HR capabilities – another HR enabler that requires special

attention are the HR capabilities. By identifying the current skills and competencies and
the ones required to deliver HR strategy, a skill gap can be identified and filled.

8. Improve HR operational excellence continuously – this step is about the optimization

of what we do in HR. By assessing the efficiency of our HR processes, we can
continuously improve them.

9. Build an HR brand – establish the HR department in the wider organization and

obtain information on how HR is and should be performing.

10. Measure the impact of HR products and services – in step 8 we looked at the
efficiency of HR processes. In the end, we want HR processes to be effective.
Measuring the impact of our products and services on the relevant business outcomes
through analytics helps to adapt and improve what we do in HR. This is done through
HR analytics.