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Whether you work in a large company or a smaller business, HR strategy is the foundation of everything you do in the HR field. In this article, we’ll define HR strategy, explain how HR strategy impacts day-to-day HR practices, and we’ll end with an example of HR strategy.

HR strategy

What is HR strategy

HR strategy is an overall business plan to manage its human capital to match its business activities. The HR strategy sets direction for all key areas of HR, including recruitment, performance assessment, development, and compensation.

Therefore, a HR strategy is a long-term plan that defines the personnel activities across the organization.

HR strategy has a set of characteristics that provide an overview of what HR strategy includes:

  • It requires analysis of the organization and the external environment.
  • It took more than a year to do it.
  • It shapes the personality and direction of Human Resource Management activities
  • Help deploy and allocate the organization’s resources (i.e. money, time, personnel)
  • Revised annually
  • It incorporates the expertise of senior management (HR).
  • It is controlled by numbers.
  • It leads to a specific behavior.

HR strategy

How to create a HR strategy

The next question is: how do we create an HR strategy?

A very useful model here is the standard causal model of HRM, one of the important personnel models. This model shows where HR strategy comes from and how it affects HR performance and business performance.

The model shows that the HR strategy is the result of a broader (business) business strategy. It shows that the HR activities create value when they match what the organization strives to achieve. When there is a link (match) between the two parties, the HR contributes to the organization’s performance.

The overall business strategy is built on past and present. It is a result of what the company has done in the past and its current internal capabilities. A commonly used tool to achieve this strategy is a SWOT analysis.

In the SWOT analysis, the organization’s internal strengths and weaknesses as well as the organization’s external Opportunities and Challenges are mapped. Strengths include corporate know-how and core know-how. These include production capacity, existing brands, marketing channels, sales capabilities, R&D expertise, and other human capital factors.

The company’s strategy leverages its Strengths to capitalize on opportunities in the marketplace. At the same time, it strives to overcome Threats and minimize the impact of Weakness.

The result of setting this strategy is the company’s value proposition. HR strategy is based on organizational strategy. HR strategy covers all important areas in human resources. These include recruiting, learning & development, performance evaluation, compensation and succession planning.

HR strategy

6 best practices in HR strategy

When creating and implementing a HR strategy, there are a few 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 work if it is clearly communicated. Participating in strategy creation helps with communication and generates buying.
  • Management involvement and HR budget are key elements in implementing a strategy – An HR strategy can never be implemented in isolation. The conditions are purchase managers, budget, highly skilled HR professionals and appropriate digital technology.
  • HR initiatives should align with your HR strategy – This strategy has a reason: it needs to be followed. HR activities and initiatives should follow strategy.
  • Performance incentives need to be linked directly to the implementation of the strategy – The idea of ​​random compensation is as old as HR itself. People will work harder if their goals and incentives match.
  • Strategies need to be monitored and implemented through KPI’s – Strategy will never be effective without consistently implementing and monitoring results. This is done through a KPI (a metric that measures strategic goals).
  • Strategy is a long-term plan – By definition, a strategy is a long-term plan. This does not mean that it cannot be changed. A strategy can – and sometimes should, be tailored to the external environment.

These best practices help create, implement, and execute HR strategies.


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