Understanding the Importance of Strategic HR Management

In a fast-paced economy, it is crucial for companies across industries to understand and acknowledge the  importance of strategic human resource planning and management  for business success. This article explains the meaning and importance of strategic HR management  for organizations, and  shares four best HR strategies for implementing it. 

 The importance of strategic human resource planning and management cannot be overstated in today’s dynamic and challenging business environment. We’re seeing a lot of change in the talent demand and supply dynamics, and around 45% of employees in 12 countries, including Singapore, have thought about leaving their organization. How can companies deal with this situation,  improve outcomes, and meet organizational goals? The answer lies in strategic HR management . 

What is Strategic HR Management? 

Strategic HR planning and management refers to all the operations and processes that are put in place by an organization to  ensure their human resources are adequately used, in line with organizational goals, and align people resources with  business goals. 

The traditional HR function concentrates on the daily management of employees, whereas strategic HR planning and management as a process focuses on the long-term stewardship of the workforce. It chalks out how employees can help the organization, and what they need to accomplish its long-term goals. This implies that you need to first understand the company's business targets before developing programs and policies to support them. 

Strategic HR planning and management  can is essential for improving employee performance, developing the workforce, and fostering a positive work environment by aligning HR programs and policies with business strategy. Additionally, it can help companies save costs by minimizing attrition and increasing productivity.

Components of Strategic HR Planning and Management 

Strategic HR planning and management typically involves the following: 

1. The human resources or people of the company

This is the main driver of competitive advantage, derived from the expertise, judgment, right skill sets, and aptitude of your employees. 

Physical assets are also necessary, and comprises the factories or manufacturing plants,  machinery, HR technology platforms, and other such assets. Strategic HR planning involves putting these two pieces together, along with elements  such as a company's ethos,  history (or brand and legacy) to achieve the long-term goals.  

2. Workforce planning

This is usually the biggest component of strategic HR management. It involves labor planning, recruitment, training and coordination, relocation, advancements, compensation, layoffs, and cutbacks.  It also includes performance management,  skill development,, and logistical concerns like employee housing, travel, and other regulatory requirements. 

3 . Goal setting, and measurement 

The main purpose of human resources, procedures, and routines is to fulfill the goals of the company by conforming to its strategies. The business plan integrates organizational human resource planning, with an emphasis on addressing long-term issues. Purpose takes the shape of key performance indicators (KPIs) to track if everything is working as per plan. 

4. Workplace relations management

This component of strategic HRM involves creating guidelines around employee grievance redressal, conflict management, labor relations,  dispute resolution processes,  union representation, and other employee communication issues. 

Learn More: 50 Key HRMS Features That You Should Know Of  

What Are the Objectives of Strategic HRM? 

The importance of strategic human resource planning and management lies in the fact that it fulfills the essential needs of a company. These key objectives of strategic HRM  are to: 

1. Enable workforce mobility for smarter resource utilization

A key objective of strategic HRM would comprise cross-training, which refers to  preparing employees to carry out duties in other business departments or divisions. Cross-training increases employee mobility by expanding their skills and expertise. 

Expanding the number of job functions that employees can perform improves your business's continuity plan. . Workforce mobility enhances profitability; organizations that can fill vacant roles with existing staff members can minimize the costs related to hiring new workers. 

2. Support succession plans through continuous performance management

Among the most important objectives of strategic HRM is to ensure that the workforce can meet future staffing expectations. HR teams and line managers evaluate the current condition of abilities and expertise and decide the optimal course of action. 

This includes conducting more frequent performance reviews or offering learning and development options, and succession planning which involves identifying  employees who exhibit potential and aptitude. It then gives them the necessary training and development to transition them into roles with greater or more urgent/advanced/strategic responsibilities within the company. This makes the best use of existing human resources for future positions. 

3 . Improve productivity, efficiency, and performance 

The core objective of strategic HRM is to help the organization perform better as a profitable business. Improving efficiency and performance is a prerequisite for that. Here’s what needs to be done:  

• Establish performance tracking frameworks and processes to improve employee performance. 
• Create a productive and positive work environment. 

• Reduce employee turnover by creating compensation and benefits programs that attract and retain individuals. 

Learn More: 9 Characteristics of HRM that Makes all the Difference  

Importance of Strategic Human Resource Planning: 10 Key Benefits 

Organizations across industries must give  importance to strategic human resource planning and management, because it offers the following benefits: 

1 . More efficient operations 

 Strategic human resource planning is essential to improve efficiency in operations and improvements in productivity. The strategic HRM planning process outlines organizational needs and devises strategies required to minimize resource waste and boost productivity. Strategic HRM facilitates the streamlining of an organization's processes, such that leaders are able to prioritize and arrange work duties.  optimizes processes, which results in employees being more motivated and prepared to achieve organizational goals. This results in overall financial benefits for the company, including increased profits, decreased resource waste, and a greater return on investment.  

2 . Better preparedness for unexpected market conditions 

In a fast-changing market, the importance of strategic human resource planning is that it increases organizational agility. The process of strategic HR management and planning is centered around being preemptive and proactive as opposed to reacting to gaps in leadership. As part of the process, leaders will evaluate the company's targets and take prompt action to recruit the right people. This crucial distinction between proactive and reactive behavior can have a significant impact on an organization's capacity to recognize change and foster innovation. 

3.  Better employee retention 

Strategic HR management and planning helps ensure that  employee engagement levels are strong and attrition levels are low. This includes planning for employee growth and development, providing exceptional employee experiences, creating compelling benefits and incentive packages, and other such initiatives that help keep attrition rates low.4. Accurate progress tracking 

Strategic HR management is essential to ensure that the plans put in place are being followed through and executed efficiently.  During the strategic HR planning process, systems and procedures have to be put in place to monitor the progress the company is making toward attaining its strategic objectives and targets.  Constantly monitoring and keeping track of process can help course-correct and tweak processes when necessary to maximize business and employee productivity. 

4. Better alignment between skill demand and supply

Strategic human resource planning is important to ensure that the demand and supply of skills are balanced. When you consider employees and talent management in the context of strategic business goals, you can more precisely predict your HR requirements.  You will be able to determine whether current employees can assume the duties of fresh positions and roles. Strategic HRM also assists in determining whether the company’s HR practices can accommodate an organization's expansion plans. 

The importance of strategic human resource planning lies in the fact that the company's HR policies have to be in live with, and evolve with its larger business plan.  Strategic HR management and planning ensures that the organization  changes outmoded or ineffective processes, and puts in place those that nurture a more positive work environment and enhance employee relations. 

Learn More: Why the Right HRM Software Makes Organizations Fare Better  

Understanding the Difference Between HRD and HRP 

Strategic HRM encompasses both human resource development (HRD) and human resource planning (HRP), and it is important to know the difference between the two. HRD can be described as the professional growth of an organization's employees. It seeks to enhance the abilities, expertise, understanding, actions, and mindset of an organization's employees. 

HRP, which is also referred to as workforce planning, is the process of putting a plan in place that  maximizes employee effort and thereby creates organizational value. The importance of strategic human resource planning lies in the fact that it ensures a perfect fit between tasks and the right individuals for these – while preventing surpluses and shortfalls. 

Another difference between HRD and HRP is that HRP aligns HR with business goals in the short and mid-term, while HRD enables long-term alignment and sustainability. 

Learn More: The Evolving Role of CEOs in HR  

Conclusion 

To sum up, strategic HR management is a process that helps companies achieve their goals by better by working more efficiently. By taking the time to strategically plan theHR structure and strategy, companies can ensure that they have the right people in place to achieve their goals. While developing a strategic plan can be time-consuming, the benefits outweigh the costs. Cloud-based software suites like Darwinbox simplify organizational human resource planning and end-to-end SHRM by automating repetitive tasks, digitizing paperwork, unlocking analytics, and using the power of AI. Schedule a demo to learn more!