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HR Strategy Explainer: Mastering the Fundamentals.

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Wowledge Expert Team
Principal level
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HR Strategy is a forward-looking, comprehensive plan that aligns an organization's human resources activities and initiatives with its broader business objectives. This strategy serves as a roadmap to guide HR processes, ensuring they are cohesive, proactive, and responsive to the evolving needs of the organization. It encompasses a wide range of the HR function's plans and activities related to its structure, governance, programs, policies, and practices. By addressing challenges such as compliance, cost management, diversity and inclusion, and change management, an HR Strategy aims to optimize the function, foster a positive work environment, and ensure that human capital decisions support the organization's growth and success.

The value of an HR Strategy

An HR strategy is often developed in sync with or incorporates other people-related planning processes. These include a Talent Management Strategy, which focuses on creating and improving programs to support the employee lifecycle from hire to retire, and a Talent Strategy, which aids in identifying organizational capabilities and the best ways to access those capabilities, either internally or externally. All of these plans work in tandem to create cohesive strategic HR management efforts aimed at addressing a range of human capital opportunities and challenges commonly faced by businesses.

  • Employee Engagement: Disengaged employees can lead to lower productivity and morale. An HR strategy often includes programs and initiatives to boost engagement, such as recognition systems, career development, or work-life balance initiatives.
  • Cultural and Organizational Alignment: As organizations grow or change, maintaining a consistent and desirable company culture can be challenging. A robust HR strategy can define and propagate desired cultural attributes and ensure they are reflected throughout the organization through company policies and practices, management behaviors, performance standards, and employee programs.
  • Talent Acquisition and Retention: Without a clear strategy, organizations might struggle to attract, hire, and retain the right talent. An HR strategy provides a roadmap for recruiting the "right" people for the right roles, enhancing their management, providing development opportunities, and reducing turnover.
  • Skill Gap Management: As industries evolve, the skills needed can change rapidly. A forward-looking HR strategy can identify potential skill gaps and work towards bridging them through training, development, or hiring.
  • Performance Management: An effective HR strategy defines how performance will be measured, ensuring that assessments are fair, consistent, and aligned with organizational objectives.
  • Compliance and Risk Management: Employment laws and regulations are complex and can vary across jurisdictions. An HR strategy can help in ensuring compliance and in managing potential risks related to employment practices.
  • Cost Management: HR-related costs, such as recruitment, training, benefits, and compensation, can be significant. An HR strategy can guide decisions on where and how to invest, and how to manage costs effectively.
  • Diversity and Inclusion: More organizations are recognizing the importance of diversity and inclusion for both moral and business reasons. A strong HR strategy often includes plans for promoting a diverse and inclusive workplace.
  • Change Management: Whether it's due to mergers, acquisitions, technological shifts, or other reasons, organizations constantly face change. An HR strategy can facilitate smoother transitions, ensuring employees are prepared and disruptions are minimized.
  • Succession Management: To ensure long-term success, organizations must identify and develop current and potential leaders for key positions. An HR strategy should guide succession planning efforts.
  • Employee Well-being: The mental and physical well-being of employees is becoming a priority for many businesses. An HR strategy might include wellness programs, mental health initiatives, and other support structures.
  • Internal Communications: For organizations to function smoothly, clear communication is essential. An HR strategy often encompasses tools, channels, and methods to enhance internal communications.

When organizations intentionally create a robust set of people-related strategies, they not only react appropriately to problems but also proactively address them. This approach minimizes inefficiencies, higher costs, and missed opportunities, ensuring that their human capital serves strategic objectives, adapts to changing environments, and adds value to the business.

Key stages of an HR Strategy

Developing an HR Strategy involves several key stages or elements to ensure it is aligned with the organization's goals, is actionable, and delivers results. The steps are essential to developing a clear understanding of the factors that either support or impede the attainment of corporate objectives and building plans to optimize the opportunities or minimize the risks to their achievement. When developed and executed effectively, an HR strategy can significantly contribute to an organization's success by ensuring that its human capital is optimized, engaged, and aligned with business objectives.

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  1. Environmental Analysis: Requires both internal and external analyses. Internally, assess the status of the organization, its strengths and weaknesses, workforce demographics, skills inventory, and prevailing organizational culture. Externally, look at the larger market and industry trends, competitive benchmarking, regulatory changes, and socio-economic or technological factors that might influence HR needs.

  2. Setting Objectives: Identify the HR-related objectives that will support the broader organizational strategy. This might include goals related to talent acquisition, employee retention, skill development, etc.

  3. Gap Analysis: Compare the current HR status with future needs or objectives to identify deficiencies in the volume or quality of needed skills, capabilities, leaders, or supporting culture.

  4. Strategy Formulation: Develop specific HR strategies or initiatives to address the identified gaps. This can include plans for recruitment, training, leadership development, and more that support projected shortfalls in sales, innovation, productivity, market growth, profitability, etc.

  5. Implementation: Execute the formulated strategies. This might involve rolling out new programs, conducting training sessions, implementing new HR technologies, or any other activities identified in the strategy formulation stage.

  6. Monitoring and Evaluation: Continuously monitor the effectiveness of the implemented strategies. Metrics, KPIs (Key Performance Indicators), and employee/manager/customer feedback measures should be established to evaluate the success of each initiative. Adjust and refine strategies based on ongoing feedback and results.

  7. Feedback and Revision: Regularly revisit the HR strategy to ensure it remains aligned with organizational goals, especially if there are changes in the business environment or strategic direction. Make necessary revisions based on feedback and the outcomes of the monitoring and evaluation stage.

  8. Stakeholder Communication: It's vital to communicate the HR strategy, its objectives, and its progress to stakeholders, including employees, managers, and executives. This helps in gaining buy-in, understanding, and support for the initiatives.

  9. Alignment with Business Strategy: Ensure that the HR strategy always flows directly from and aligns with the overall business strategy. As the business evolves, the HR strategy should adapt to ensure that human resources continue to support and drive organizational objectives.

  10. Continuous Learning and Development: HR strategies should promote an environment of continuous learning and growth, ensuring that the organization remains agile and its workforce skills stay updated.

The specific practices and tools for effectively deploying this process are included in "Core HR Strategy Practices to Define a Foundational Direction for the HR Function" as part of the HR Strategy Program package. This system of best practices and step-by-step guides is freely available to all Wowledge members.

How companies at different levels of sophistication create and manage an HR Strategy

HR Strategy varies in sophistication depending on an organization's maturity and needs. At its core, HR Strategy aligns with the company's primary business objectives while recognizing and addressing the internal and external factors that can influence these goals. As it advances, this strategy delves deeper, harnessing detailed workforce data to fine-tune plans around specific employee groups and efficiently leveraging technology. In its emerging form, the focus shifts to optimizing the overall employee experience, ensuring it aligns with their needs while fostering productive external partnerships. This evolution ensures that HR practices remain relevant, efficient, and in sync with internal and external dynamics.

Understanding the roles typically involved in HR Strategy

Various roles are involved in the formulation, implementation, and evaluation of an HR Strategy. The extent of involvement of these roles can vary depending on the size, structure, and complexity of the organization. The ideal approach is to engage not only HR process experts but leaders, line managers, and employees as well to enhance the effectiveness of the HR strategy and obtain buy-in across the organization.

Chief Human Resources Officer (CHRO) or Head of HR: This individual often has the primary responsibility for overseeing the development and execution of the HR strategy. They ensure alignment with the organization's overall business strategy and goals, the plan's comprehensiveness and relevance, and the integration of inputs from across the organization.

HR Business Partners: These HR professionals ensure that HR initiatives support specific departmental or business unit objectives. As they work closely with business leaders to strategize and guide their people management, they are vital contributors with a deep understanding of the challenges faced in the different functions, business units, and geographic locations below the corporate level.

Talent Acquisition Team: Responsible for understanding future hiring needs (along with the workforce planning team), they help craft strategies for sourcing, recruiting, and onboarding a sufficient number of new and replacement employees to meet corporate needs.

Learning and Development (L&D) Professionals: These individuals help identify skill gaps and create training programs, workshops, educational initiatives, and various skill development programs to bridge those gaps.

Compensation and Benefits Specialists: They define compensation and recognition strategies to attract, retain, and motivate employees. They also design benefits packages that align with the organization's objectives and the needs of the workforce.

Organizational Development Specialists: These professionals focus on the larger organizational structures, cultures, and dynamics. They might be involved in change management initiatives, organizational design, or team and culture-building activities.

HR Analytics and HRIS Specialists: In today's data-driven world, these roles are critical. They support the technology needs by designing and upgrading systems to generate, gather, and analyze data used to assess and interpret HR metrics that provide insights for guiding strategic decision-making.

Employee Relations Specialists: Their understanding of employee concerns, grievances, and feedback can provide invaluable input into the HR strategy, ensuring that it's not just top-down but also considers employees' perspectives at all levels.

Diversity and Inclusion Experts: As organizations focus more on creating diverse and inclusive workspaces, these professionals guide incorporating D&I goals into the HR strategy.

Change Management Specialists: Wherever the business and/or HR strategies involve significant organizational changes, these specialists can help ensure a smooth transition, minimizing disruptions and resistance. They design communications, engagement, and training solutions tailored to the type and scale of the change initiative (s).

Leadership/Executives: Senior leaders, including the CEO, CFO, and other C-suite members, are essential stakeholders. Their input and support for the creation and management of the HR strategy are essential, as is their knowledge of the business objectives and the ability of the HR team to impact those.  Their buy-in, guidance, and championing of the strategy are crucial for its success.

Line Managers and Department Heads: These individuals can provide input on department-specific HR needs and challenges. Once the strategy is implemented, these individuals play a crucial role in execution at the departmental level.

Employee Focus Groups: Some organizations involve employees from various levels to provide feedback, ensuring that the strategy is holistic and considers the needs and perspectives of the broader workforce.

Collaboration among these roles is essential for developing a comprehensive and effective HR strategy. It ensures that all facets of the organization are considered, and the resultant strategy is holistic and actionable.

Key trends in HR Strategy

HR Strategy has evolved over the years, influenced by various factors such as technological advancements, collaboration expectations, changing workforce demographics, global events, and shifts in business priorities. key trends have shaped, and continue to influence, HR Strategy.

  • HR Analytics: The availability and use of data analytics to make informed decisions about talent management, hiring, retention, and workforce planning have become increasingly available through advances in core HR systems (HRIS/HCMS), and expanded employment of advanced analytics experts (statisticians, I/O Psychologists) in HR.
  • AI and Automation: The increasing availability of AI tools for many talent management processes, including recruitment, onboarding, performance management, career development, and learning & development.  The rise in the use of chatbots is impacting the delivery of basic HR information and support (and resulting staffing/operating models).
  • HR Software Platforms: Integrated platforms that handle various HR functions from a single dashboard. The continued growth in technological capabilities drives increased efficiencies, insights, and personalization across HR processes and practices.
  • Employee Experience: Recognizing positive employee experiences leads to higher engagement and productivity. This trend emphasizes the entire employee lifecycle, from recruitment to exit, and using employee feedback and input to reengineer and redesign programs and practices for more accessible, "lower-friction" administrative and work experiences.
  • Flexible Work Arrangements: The rise of remote work, flexible hours, and other non-traditional work arrangements continue to impact employee preferences and decisions to stay or leave an organization.
  • Well-being and Mental Health: A growing emphasis on employee mental health and overall well-being, including introducing wellness programs and other support mechanisms. Employees, particularly those in newer generations in the workforce, are insisting on such support.
  • Continuous Learning and Upskilling: As the business environment rapidly changes and technology creeps even more deeply into the work of so many roles, skill obsolescence is becoming a regular occurrence.  As a result, there exists a need to place a stronger focus on continuous learning, reskilling, and upskilling employees to stay relevant.
  • Diversity, Equity, and Inclusion (DEI): As the global workforce evolves based on geographic mobility and the changing demographics of birth rates, employees are increasingly considering a company's support for diverse workers as a job acceptance criterion.  As a result, more organizations focus on creating diverse and inclusive workspaces and ensuring equitable opportunities for all employees.
  • Employer Branding: Recognizing the importance of a strong employer brand in attracting and retaining top talent in a competitive marketplace has become necessary as global talent shortages continue. 
  • Gig Economy and Alternative Workforces: Adapting HR strategies to incorporate freelancers, part-timers, and other non-traditional employment forms or workers. An increasing percentage of the workforce is either choosing to engage as contractors or are taking "side gigs" to financially support themselves and their families. At the same time, corporations are seeing the value in employing temporary workforces as supplements during output surges or to fill in talent/skill gaps in the shorter term. This includes the need for HR leaders to consider temporary employees in workforce planning and staffing/consulting firms as critical partners in the HR supplier ecosystem.
  • Feedback Culture: Moving away from traditional annual performance reviews to more frequent feedback sessions, promoting a culture of continuous improvement. Younger generations request more ongoing coaching to adjust their performance levels and goals.
  • Sustainability and Corporate Social Responsibility (CSR): Aligning HR strategies with broader corporate sustainability and CSR goals, recognizing that many employees value working for organizations that prioritize making a positive social impact. This has a direct impact on employees' sense of meaning in their work and the attractiveness of an organization to candidates.
  • Globalized Workforce Management: Managing a global workforce, considering different cultures, regulations, and expectations as businesses expand across borders. This includes building talent management processes that flex to meet varying regulations and requirements, addressing talent mobility/deployment and skill-building across geographies, and preparing leaders to be effective across multiple cultures and time zones.
  • Crisis Management and Resilience Building: An apparent increase in natural disasters, global health challenges, socio-political changes, migration patterns, and international resource inequalities highlight the importance of having crisis management plans in place and building organizational resilience.
  • Personalization: Research suggests that a vast majority of consumers now expect product and service personalization, and that is bleeding into employee expectations.  Addressing the diverse needs, preferences, and tastes that an organization's workforce increasingly expects is emerging into a need from the employee experience. Offering more personalized and flexible work location/schedules, leave policies, career paths, benefit packages, compensation structures, learning and development options, etc., based on individual needs and preferences is a rising opportunity.

As the business environment evolves, HR leaders must stay updated on these trends to develop strategies that are both relevant and effective in the current context.

HR Strategy example

A simple HR strategy for a hypothetical mid-sized tech startup experiencing rapid growth that wants to ensure it attracts, retains, and develops the right talent to sustain its growth.

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Considerations and lessons learned in HR Strategy

HR Strategy is crucial for any organization, but its implementation and results can bring a wide range of variability in its application and experiences. Some of these experiences translate into valuable considerations or lessons learned. By being aware of these, organizations can formulate and implement HR strategies that are robust, effective, and aligned with both business objectives and employee needs.

  • Align with the Business Strategy: An HR strategy not aligned with the company's overall business strategy can lead to misdirected efforts and resources. Always ensure that the HR objectives support and enhance the broader business goals.
  • Remain Flexible: The business environment is constantly changing. An HR strategy should be adaptable enough to cater to these changes, be it technological disruptions, market dynamics, or global events.  Regular (e.g., quarterly) reviews of the strategy to ensure it remains highly relevant to the company's needs is an essential measure.
  • Engage Employees: The HR strategy should not be a purely top-down approach. Involve employees in formulating the plan to ensure their needs, perspectives, and insights are considered.
  • Utilize Data: Relying on intuition alone can be risky. Make heavy use of HR analytics and data to make informed decisions. Track metrics and KPIs to measure the effectiveness of HR initiatives on an ongoing basis.
  • Communicate Clearly: Once the strategy is formulated, communicate it to all stakeholders, ensuring everyone understands the objectives, roles and responsibilities, and the expected outcomes. Provide regular updates and progress reports such that all stakeholders are aware of the impact of the direction and initiatives.
  • Monitor Continuously: Avoid a "set-it-and-forget-it" approach - it does not work. Regularly monitor and evaluate the strategy's effectiveness, adjusting it based on progress, feedback, and results.
  • Invest in Technology: Modern HR solutions, from talent management software to analytics platforms, can streamline operations and offer insights that might not be apparent through manual processes. The simplification of access and process execution can pay significant dividends in the employee experience. 
  • Focus on Company Culture: While tangible initiatives like training programs or benefits are essential, do not underestimate the intangible aspects of an HR strategy, such as fostering a positive company culture. Invest resources and efforts into improving managerial skills and behaviors, activities that provide more significant meaning to employees and their work contributions, and community involvement and engagement.
  • Manage Legal & Ethical Considerations: Ensure your HR strategies always comply with local laws and regulations and cultural expectations. Consider the ethical implications of HR decisions to uphold the organization's reputation and moral standards.
  • Create Feedback Mechanisms: Establish a way for employees to provide feedback on HR initiatives. This feedback can offer insights into areas of improvement and highlight what is working well. Create continuous pathways to generate insights into employee perceptions and opinions on topics that matter to them and impact their work lives.
  • Stay Updated on External Influences: Stay current on macroeconomics, technological trends, socio-economic factors, or geopolitical events that might impact your workforce or how you manage talent. Develop expertise on how these can be responded to.

HR Strategy FAQs

What are other terms related to HR Strategy?

Some other terms or phrases can describe similar concepts or are closely related to HR Strategy.

People Strategy: Emphasizing the focus on people, their development, and how they align with the organization's goals.

Talent Strategy: This term narrows the focus to understanding the types of workers (e.g., full-time, contractor, outsourced) needed and how to access or acquire, develop, and retain talented individuals in line with business needs.

Talent Management Strategy: A comprehensive approach to prioritizing improvement initiatives that encompass the full spectrum of programs and processes in attracting, developing, and retaining talent.

Workforce Strategy: Addresses the broader considerations of the workforce, including planning, skills, size, and structure.

Organizational Development Strategy: While this is broader than just HR, it includes considerations for how workers, work teams, and parts of the organization can be developed, and structured to meet evolving organizational needs.

Employee Experience Strategy: Focuses on the entire employee lifecycle and optimizing the experiences employees have from recruitment to exit.

Employee Engagement Strategy: Specifically concentrates on initiatives and activities to engage employees, enhance their job satisfaction, and improve overall morale and productivity.

Diversity and Inclusion Strategy: Targets the development and maintenance of a diverse workforce and an inclusive work environment.

While all these terms have distinct nuances, they all revolve around optimizing the people component of an organization to align with business goals. Depending on the specific focus or emphasis an organization wishes to convey, they might opt for one term over the other. However, many of these concepts often overlap or are integrated into a comprehensive HR Strategy.

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Enabling practices and resources

Core HR Strategy Practices to Define a Foundational Direction for the HR Function.

An HR Strategy defines the process of identifying business-based human resource (HR) tactics that will constitute a comprehensive multi-year approach to the management of the HR function's structure, governance, programs, policies, and practices.

Developing a Base Strategy that Provides Guidance on HR Direction, Initiatives, Objectives, and Goals.

Developing a plan involves leveraging the outcomes of the various discovery activities, organizing them into a logical flow, and translating those insights into HR responses and objectives.

Establishing a Core Talent Management Strategy to Set Priorities and a Strategic Roadmap.

As a company defines its business strategy, each function must align its objectives and actions to support its strategic goals. Talent management strategy is a key process that the HR function follows to accomplish this directive by identifying priorities and setting up plans to advance talent management practices.

Developing a Winning Talent Strategy to Identify Key Capabilities and the Most Appropriate Workforce Mix.

A talent strategy defines the talent needs and associated objectives necessary to meet top business goals. It is both an integral part of the HR strategic plan and a direct informer of the talent management strategy and planning process. 

The Goals & Trends Conversion Tool: Translate Barriers and Enablers into HR Challenges for the Development of Strategic Objectives.

This tool is used in a succession of analyses to take identified external and internal business trends and strategic goals and convert them into HR objectives closely aligned with business strategies and needs.

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