How to create an Effective HR Strategy: Step-by-Step

We are living through unsettling times. With inflation going through the roof, energy prices at records high and house prices increasingly out of reach, everyone – employer and employee – is feeling uncertain about the future and their bank accounts. 

With employers already starting to cut their budgets and strip back to just providing essential services, HR needs to work smarter, not necessarily harder, to keep up.

One of the best ways that you can do this is to create an effective HR strategy: a detailed plan of the priorities, methods, and targets to ensure HR can effectively support the workforce going forward.

Let's explore. 

1) Identify what your organisation needs

First and foremost, one of the things that defines a truly effective HR strategy is a laser-like focus on the needs of the organisation. After all, if you don’t know what your organisation requires when it comes to people management, how can you hope to build a strategy that’s actually effective? 

One of the best ways to do this is to carry out some detailed research into your organisation before you take pen to paper (or fingers to keys) in crafting your strategy. You can do this in a number of ways but one of the simplest and most effective methods is to complete a SWOT analysis.

The SWOT framework is used in business and strategic planning to help organisations understand both internal and external factors that will impact an organisations likelihood of achieving particular goals.

SWOT (if you haven’t already guessed) is an acronym that stands for:

• Strengths: Factors that give your organisation an advantage over others
• Weaknesses: Factors that hold your organisation back compared to others
• Opportunities: Areas that your organisation could engage in to add to its advantage
• Threats: Areas that present a potential challenge to your organisation

In an HR strategy, you can use a format like this to assess the current situation of HR resources within your organisation. This will ensure a good understanding of the current position, which then can inform the rest of your strategy. 

2) Identify your goals

Good strategies are clear about their purpose – in other words, the specific challenges that they are trying to address or the goals that they are aiming to achieve.

By being crystal clear from the outset about what exactly it is you are trying to achieve in your HR strategy, you will stand a much better chance of focusing your efforts in the right place.

This also minimises the risk of adopting a scattergun approach that doesn’t achieve the right results!

To begin with, it’s best to break your strategy down into different sections, based on the specific areas that your strategy will focus on, and then come up with a few goals for each area. Most HR strategies will cover sections like:

1. Recruitment
2. Retention
3. Succession Planning
4. Performance Appraisal
5. Compensation

Using the information you’ve gathered in step 1, when carrying out your SWOT analysis, it's time to identify the key goals that the HR department will focus on in each of the above areas.

For example, a goal for recruitment could be to reduce recruiting overheads by 10% through smarter higher practices.

We recommend listing three rough goals for each area, and then engaging the various teams that make up your organisation to discuss and build upon these focus points. By doing this, HR will be able to collectively use everyone's feedback to refine and cement the final objectives that will make up the HR strategy.

3) Set targets to help you achieve them

Once you’ve created your objectives, you can set specific targets to help you achieve them.

Targets are basically smaller objectives that help you reach your overall goal. By setting them, you’ll be able to outline a clear path towards achieving the objectives, as these can be significant in size, that have been set out in the strategy.

While setting targets can feel overwhelming, there are a few methods to go about creating them.

First, you’ll need to think about all of the key milestones that you’ll need to complete to achieve a particular objective – in other words, you need to break down each area into a beginning, middle and end.

Broad objectives are essentially made up of smaller targets: like pieces in a jigsaw puzzle. Finding out what those smaller targets need to be will allow you to systematically map out how you can actually achieve the overall HR objectives. 

One of the most effective tools for mapping out targets is to use an acronym called SMART, which stands for Specific, Measurable, Actionable, Relevant and Time-Limited.

We’ve explored this topic in depth in a previous blog, where we delved into the fascinating science behind how your brain sets targets and goals, however, here's a refresher for those who missed it. 

A SMART target is:

Specific

What exactly is it you want to achieve? Who is going to be responsible for achieving it?

Measurable 

Is the success or failure of the target able to be measured somehow? For example, can you measure results in pounds saved, people hired, existing employees enrolled on training courses, etc?

Achievable 

Is your target within the capabilities of your team and your organisation to achieve?

Relevant

Is your target grounded in the day-to-day reality of your organisation, and its specific needs?

Time-Limited

When does this target need to be achieved by?

4) Plan and build your strategy

Building an effective HR strategy can seem like an overwhelming task, if you approach it as one massive project that is.

The secret is to plan and build your strategy by breaking it down into manageable pats.

By simply breaking a bigger objectives down into smaller targets, you’re able to better map our the journey to achieve it. Doing so will improve motivation, endurance and efficiency. 

For example, imagine you’re driving a car at night, and you break down in the middle of nowhere. You know the road and landscape well and know there’s a pub about 5 miles away that you can use to get help. You decide to walk back to the pub.

5 miles is a pretty hefty walk, so you decide to think about the walk in segments to help you stay motivated. You know it’s about 2 miles until that weird tree, and from there you know it’s a mile to the loch and from there it’s only another mile until the pub. By focusing on the smaller distances between each landmark, rather than the overall total distance, you’re able to keep yourself motivated and steadily progress towards your goal – even though you might be tired, wet and grumpy.

The same holds true when it comes to building out a large, complex strategy. Break the big project down into several smaller ones and you should find that it’s easier to motivate yourself to complete it.

5) Build your communications strategy

By this point you should have the beginnings of a pretty well developed HR strategy. Whilst it might need some tweaking and some editing, the basics are there.

Now that you have the strategy itself, it’s time to think about how you will communicate and most importantly, embed the changes into your organisation.

A communications strategy doesn’t need to be complicated. It’s literally just a plan of how you will communicate the news that you have a new HR strategy in place.

Communications strategies generally have answers to questions like:

1. Who are you communicating with?
2. Why are you communicating with them?
3. How will you communicate with them?
4. What methods will you use to communicate with them?
5. What channels will you use to communicate with them?

6) Pay attention to retention

Following the experience of living through the last five years, many employees have readjusted their priorities and have fundamentally different visions of work to what many employers are offering.

This disconnect between expectation and reality is causing a lot of employees to search for more fulfilling, better-paid jobs. Add into the mix, the fact that inflation is not keeping up with current salaries and wages, and it’s no surprise that 93% of employees are feeling frustrated in their jobs, with 48% of these individuals specifically citing that this is related to low salary and a lack of pay rises.

As a result, many employers are finding it harder to attract candidates to positions and, more importantly, keep them satisfied in their current positions. Employees are leaving positions, en-masse, in search of those that better align with their new values.

On average, it costs businesses in the UK around £3000 to hire and onboard a candidate for a new position. Even for an organisation faced with calm market conditions, that’s a significant outlay. With the House of Commons Library predicting that inflation will stay above 3% during 2025 and into 2026, it’s clear that HR must do something to encourage employees to stay and develop their careers.

So, by developing employee retention measures in your strategy, like targeted learning and development and better benefits packages, you can avoid one of the main pitfalls that HR professionals are encountering at the moment – having to spend money hiring new people because employees keep leaving.

7) Asses your progress regularly

If you’ve considered the previous points, you should have created a well-founded HR strategy that you can use to update your organisation’s approach to people management in the coming months.

Naturally though, you’ll find that some parts of your strategy work better than others. As a result, it’s a good idea to continually assess how well your strategy is performing so that tweaks and adjustments can be made accordingly.

Pay particular attention to progress towards objectives. Having trouble achieving objectives, even with smaller targets in place usually points to challenges that will need to be addressed. If you catch a small problem in its early stages, you can potentially stop it from turning into a bigger issue further down the line.

Take the Next Step in Creating an Effective HR Strategy

Has this guide to creating a HR strategy in a few steps been useful? We hope it’s given you some pointers for how you can create one by following a relatively simple process of steps.

Let us know how you get on with creating your HR strategies!

Expert-led, student-first: Your success is our focus. Enrol on a 100% online CIPD qualification today.