Strategic human resource management

Strategic HRM, or ‘people strategy’, is about creating a coherent framework for employees to be hired, managed and developed to support an organisation’s long-term goals. It helps ensure that the various aspects of people management work together to drive the behaviour and climate to meet performance targets. It focuses on longer-term people issues, matching resources to future needs, and large-scale concerns about structure, quality, culture, values and commitment. It must also be a response to the evolving nature of work itself, which is explored in our Profession for the Future work.

There’s no single HRM strategy that will deliver success in all cases. Organisations must define their own unique strategy according to their specific context, culture and objectives. People professionals are instrumental in applying their expertise to understanding organisational circumstances and designing workforce pipelines that reflect stakeholder demands.

Strategic HRM: the key to improved business performance explains the various definitions and approaches to strategic HRM. They state that strategic HRM is a complex process that’s constantly evolving and a topic of ongoing debate.

The idea of strategic HRM started around the early 1990s, when academics developed definitions such as:

• The undertaking of all those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of business (Schuler).

• The pattern of planned human resource deployments and activities intended to enable the organisation to achieve its goals (Wright and McMahan).

Boxall and Purcell describe strategic HRM as explaining how HRM influences organisational performance. They argue that strategy is not the same as strategic planning:

• Strategic planning is a formal process, usually in larger organisations, defining how things will be done.

• Strategy, by contrast, exists in all organisations (even if it’s not written down and articulated) and defines the organisation’s behaviour and how it attempts to cope with its environment.

Strategic HRM can include a number of individual HR strategies, for example:

• To deliver fair and equitable reward.
• To improve employee performance.
• To streamline organisational structure.

These strategies are not ‘strategic HRM’ alone. Strategic HRM is the framework that determines the delivery of individual strategies, by systematically linking people with organisations by integrating HRM strategies into organisational strategies to deliver organisational success.

A good business strategy is informed by its people. Most organisations today recognise that people are fundamental to sustainable value creation, which is why they are often referred to as a business’ ‘most important asset’. Employees’ knowledge, skills and abilities are assets which the organisation should invest in and use to create sustainable value for the organisation and its various stakeholders. 

Individual HR strategies may be shaped by the business strategy, but it’s too simplistic to suggest that strategic HRM simply follows on from business strategy – the two must inform one another. The way in which people are managed, motivated and deployed, and the availability of skills and knowledge, should all shape the business strategy. Indeed, it’s now increasingly common to find business strategies that are inextricably linked with, and incorporated into, strategic HRM, defining the management of all resources within the organisation.

Our Profession Map is based on key principles that govern how HR and other people professionals behave and deliver value through their work. The principles ‘Work matters, People matter, Professionalism matters’ describe clear pathways to strategic decision making to ensure value is created sustainably for the benefit of all stakeholders.

Links with workforce planning

One important area of people strategy is workforce planning. Workforce planning involves putting business strategy into action. It must therefore be an iterative process - feeding information upwards on the capability and capacity of the workforce to deliver - and acting on forecast need for skills and capabilities to take the organisation forward. Workforce planning helps organisations meet their future skills needs and support their long-term business goals. 

The term ‘human capital’ describes people’s potential to create value for their organisations. Heery and Noon’s A dictionary of human resource management defines human capital as ‘the knowledge, skills, and abilities that workers possess and which have been acquired through education, training, and experience both within and beyond the workplace’. Human capital management treats people as assets and focuses on adopting an integrated and strategic approach to managing people, which is the concern of all organisational stakeholders, not just people management professionals.

Human capital management can complement and strengthen strategic HRM by:

• Clarifying the links between what people do in their jobs, the value they create, and business strategy. One way to demonstrate the impact of the workforce and establish a clear line of sight between HR interventions and organisational success, is through workforce reporting.
• Strengthening the belief that people are assets rather than costs. PrOPEL Hub includes a blog and short videos on how employees contribute to workplace innovation.
• Underlining the importance of using human capital reporting to prove that great people management delivers great results, and to influence the direction of the people strategy.
• Reinforcing the need to base HRM strategies and processes on value created by the workforce to achieve organisational goals.
• Emphasising the role of HR specialists as business partners.

Strategic HRM can be seen the framework for understanding and measuring the value of the workforce and how this converts into organisational value. Workforce reporting is useful in that it provides information about people’s current and potential capabilities to inform the strategy. 

Since around the mid-1990s, the CIPD have been gathering evidence of the impact of people management practices on business performance. Research emphasises the importance of ‘fit’, i.e. the alignment of HR interventions and other organisational strategies, for maximum impact. 

CIPD-sponsored work at Bath University, Understanding the people and performance link: unlocking the black box, emphasises the importance of individual HR strategies fitting together and operating within a strategic framework that incorporates both people and business issues.

This research has also found that individual HR practices alone do not drive better business performance. For example, highly skilled individuals with valuable talent can only generate value if they also have positive relationships with their managers in a supportive, value driven environment. All these factors will promote ‘discretionary behaviour’, i.e. individual’s willingness to perform above the minimum standard or give extra effort. Therefore, strategic HRM should consider employee engagement, motivation and commitment, all of which support organisational performance.

The term people analytics is often used to describe the use of data about people to solve business problems. It is sometimes known as HR analytics or workforce analytics.

The quality of strategic HRM can be measured by key performance indicators that show the impact of strategic practices on both the HR function and the wider organisation. People analytics is crucial for understanding these outcomes, and especially for developing insights to drive strategic decision making. Without people analytics capability, the delivery of effective strategic HRM becomes difficult, and more likely to fail. So it’s important that HR functions are developing their strategic activity build a firm foundation of people analytics practices.

To find out more on establishing effective people analytics practice, take a look at our practitioner guide.

Books and reports

Armstrong, M. (2020) Armstrong's handbook of strategic human resource management. 7th ed. London: Kogan Page.

Farnham, D. (2015) Human resource management in context. 4th ed. London: Chartered Institute of Personnel and Development.

Kew, J. and Stredwick, J. (2016) Human resource management in a business context. 3rd ed. London: Chartered Institute of Personnel and Development.

McGee, R. and Rennie, A. (2009) HR strategy. CIPD Toolkit. London: Chartered Institute of Personnel and Development.

Journal articles

Boxall, P. (2018) The development of strategic HRM: reflections on a 30-year journey. Labour & Industry. Vol 28, No 1, March. pp21-30.

Cascio, W.F. (2015) Strategic HRM: too important for an insular approach. Human Resource Management. Vol 54, No 3, May/June. pp423-426.

Jiang, K,. Lepak, D. and Takeuchi, R. (2013) Where do we go from here? New perspectives on the black box in strategic human resource management research. Journal of Management Studies. Vol 50, No 8, December. pp1448-1480.

Kramar, R. (2014) Beyond strategic human resource management: is sustainable human resource management the next approach? International Journal of Human Resource Management. Vol 25, No 8, April. pp1069-1089.

Reilly, P. (2012) The practice of strategy. Strategic HR Review. Vol 11, No 3, pp129-135.

International Standards

International Organization for Standardization (ISO30414) - Human capital reporting

CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.

Members and People Management subscribers can see articles on the People Management website.