The Relationship Between Human Resource Practices And Business Strategy In Organizations

The relationship between human resource practices and the company’s business strategy is harmonized in many ways. The ultimate goal of alignment is to use human resources as an instrument to maximize organizational assets for the benefit of stakeholders. Below are some of the relationships between human resource practices and business strategy.


Human resource practices create processes to develop the knowledge and skills of employees throughout the organization to promote their core competencies that support and sustain their competitive advantage in the industry. The term “strategic HRM” is a new pattern in modern organizational management anchored in the concept that the most valuable asset an organization provides itself is HR, as it is the tool responsible for the coordination and implementation of other factors. production that spurs the company’s performance journal

The business strategy adopted by an organization is intended to show how it intends to succeed by using the factors of production at its disposal to build a competitive advantage, business strategy. Business strategy helps identify the direction the organization wants to go in relation to its environment. Human resource strategy manages human resources so that the goals set by the organization can be achieved. The focus is on what business intentions are related to human resource policies and practices.

Therefore, how human resources are dispersed across organizational units and departments, motivated, managed, and retained will affect the performance results after the business strategy is implemented. The relationship between business strategy and human resource practices will also determine the competitiveness and performance outcomes of organizations.

A brief overview of ‘BUSINESS STRATEGY AND HUMAN RESOURCES STRATEGY – INTERACTIONS’ Oya Erdil & Ayse Gunsel show that there is a relationship between human resource management practices and organizational business strategies, which can also be referred to as business environment and organizational development.

Another defining aspect of the relationship is the overall acceptance that the organization’s human resource management practices have a relationship with the company’s decision-making process, in other words, HR practices are closely aligned with the overall business strategy. While there is not much disagreement regarding the relationship between HR practices and business strategy, there is a tendency to ignore the deeper nature of the relationship.

Human resource management theory argues that if employees are considered and managed as a valuable strategic asset, the organization in practice will be able to achieve competitive advantage, and the result is superior performance. Again, this means managing human resources in such a way that it fits the business strategy, because the goals and processes of each strategy profile are different.

According to Oya Erdil & Ayse Gunsel, this relationship is rooted when you look at how human resource practices are selected based on the competitive strategy adopted by the organization. An organization that coordinates its business strategy and human resource policies and practices achieves superior performance results than one that does not.


As explained by Rob Gray’s ‘Aligning performance management with business strategy,’ some entrepreneurs may be missing a key factor linking performance management to strategy and culture. Because it is the prevailing organizational culture and practices that will determine the optimal use of its valuable assets (people) when its business strategy is aligned with its human resource practices.

The right tools are needed if entrepreneurs are to successfully align their human resource management with their business strategy. The era of using performance review and appraisal as the only tool for performance, management solutions have since been replicated by a comprehensive set of competency measurement tools.

These tools can help employees to understand the learning tools and resources through which they can effectively develop their skills and talents. Technology is one of the enablers but it requires a top-down commitment which is essential for a high performance culture.


Edward E. Lawler III, ‘What HR Leaders Should Focus on In 2014’ provides deep insight into how business entities can achieve superior results for their shareholders. While technology is a valued enabler that spurs performance that leads to superior results for an organization, another thing that HR should focus on is the talent management aspect which assesses the skills each organization needs to implement its business strategy, plans for recruitment and management of critical talent.

While talent has long been considered important, it has recently become even more important as many businesses perform more complex knowledge-based work, and with operations in global markets. This causes the talent performance situation to have a major impact on the bottom line of the organization.

Google, Amazon, Apple, and other technology and service organizations have done an outstanding job of recruiting and managing people around the world who have the critical knowledge-based skills needed. Their talented workforce has been able to perform well, distinguishing their company from competitors across the industry which has translated into communication patterns that convey the types of employees they have and the jobs they offer.


Innovation is another standard of performance management,, which when coordinated effectively with the organization’s business objectives leads to superior performance results. When an organization devotes a great deal of time to innovation and business strategy, and both are equally valued, thoroughly promoted, and well communicated, a culture will naturally exist that will foster the relationship between the two.

The culture that is fostered creates top-down business goals that are communicated throughout the organization, allowing all units to focus on addressing the short-term and long-term goals of the organization. Since then, it has been the task of the innovators to align their activities in support of the organization’s goals.

Ways to naturally coordinate the two camps are technology/product co-development, and business roadmaps that encourage discussion and debate, forging links that guide action. Successful performance results are highlighted through internal business and exhibitions, using avenues to increase visibility for long-term opportunities.


Diversity within an organization plays an important role in establishing the link between performance management and business strategy. There is a business case for diversity in organizations based on evidence and arguments that both believe that when diversity is harnessed within an organization, it can contribute to the achievement of company goals and priorities. To understand the relevance of diversity to the achievement of business objectives, the type of diversity considered must be relevant to business performance and innovation.