In today’s labor landscape, creating an effective people strategy is what can elevate your business to the next level. Aligning your workforce with your business goals is what will set your organisation apart from your competitors. The first step in crafting a robust people strategy is to understand what it should include, how to implement it and ensure it aligns with your company’s objectives.
📌 This step-by-step people strategy guide contains everything you need to know about people strategy. Download our free guide to kick-start your people strategy plan.
What is People Strategy?
A people strategy, sometimes called a human resources (HR) strategy or people plan, is a business outline that ensures your workforce is aligned with your business goals. This strategy focuses on how your company recruits, develops, and retains talent, ensuring sustainable success.
People strategy is often confused with HR strategy, but HR management is more operational. HR ensures the actions defined in the people strategy are carried out legally and effectively, while the people strategy focuses on the broader vision and direction of the workforce.
Key Components of a People Strategy:
- Corporate and HR Goals Alignment: The starting point is aligning your people strategy with the overarching business objectives. These might include growth targets, financial goals, or international expansion.
- Strategic HR Priorities: This involves identifying key areas that will support the people strategy, such as leadership development, talent acquisition, and employee experience.
- Target Groups & Workforce Planning: Understanding your current workforce’s capabilities and identifying where gaps exist is essential. This also means planning for future workforce needs as your business grows.
- KPIs & Success Metrics: Defining how success will be measured is key. This includes metrics like employee retention rates, productivity levels, and time-to-hire.
People Strategy vs. HR Strategy
To provide more context and understanding about the difference between a people strategy and an HR strategy, here is an overview that concisely highlights the main differences.
| Aspect | People Strategy | HR Strategy |
|---|---|---|
| Definition | A long-term, proactive plan aligning workforce with business goals. | Operational and administrative side, focusing on implementation. |
| Focus | Talent development, employee experience, leadership, and culture. | Employee management, legal compliance, and operational efficiency. |
| Objective | Ensures alignment between workforce and business objectives. | Implements actions defined by the people strategy. |
| Scope | Broader, strategic, and forward-looking. | Tactical, focusing on day-to-day HR activities and processes. |
| Responsibility | Senior leadership, business strategy integration. | HR teams and managers handling operations and compliance. |
| Action Plan | Focuses on workforce growth, retention, and development strategies. | Focuses on implementing policies, performance management, and compliance. |
Designing an Effective People Strategy: Step-by-Step
Designing an effective people plan requires a deep understanding of the organization’s business strategy and objectives. Often, it involves setting clear goals and objectives to track success. An effective people strategy typically includes a learning and development plan and career opportunities for your team to grow and advance. As your people strategy is closely correlated to business objectives, you want to ensure you’re aligning growth with tangible tasks and objectives to support career advancements while achieving business metrics.
Step 1: Define Company Goals
The first step to creating an effective people plan is to start by defining your company’s objectives. What does your team need to achieve? Is your company trying to expand into new markets? Does your organisation want to reduce turnover?
Take a moment to ask yourself and leadership what the upcoming goal is. Align with your main stakeholders and understand what your part is in achieving these business objectives.
Step 2: Establish your People Strategy Pillars
Now, once goals are set, it’s time to establish your strategic pillars. These are high-level areas of focus that help focus and narrow down your people strategy. Ideally, you should focus on 3-5 key priorities (pillars). You should identify what goals are similar and what HR areas will have a direct impact on your business goals. That way you can come up with your overarching theme or focus area for the next quarter or year.
Step 3: Identify Levers & KPIs
While your people strategy or HR pillars are correlated to your levers and KPIs, they aren’t exactly the same. They serve different functions. To clearly define your levers and KPIs, you need to outline specific actions that need to be taken to achieve each pillar. Levers and KPIs will be more specific and concrete compared to your chosen pillars. For example, talent acquisition, learning and development, or compensation management will drive success.
Get a complete overview of how your pillars, levers and KPIs should work together to formulate your people strategy. 👇
| Pillars | Levers | KPIs |
| Performance Leadership Employee Experience Compensation |
Performance Management (goals, reviews, feedback cycles)
Executive Coaching Employee Feedback Central Compensation & Contract Management Transparent role and career models |
Revenue per Employee Time-to-Productivity Fluctuation rate Personnel cost ratio |
| Recruiting Learning & Development HR Enablement & Governance\ |
International Applicant Management
Learning Management Systems & Career Paths Digital document and deadline management Central Employee Administration |
Time-to-Hire Time-to-Fill (especially critical roles) HR Compliance Cases Data Completeness |
| Recruiting Employee Experience Performance & Leadership |
Standardized hiring pipelines
Digital, role-based onboarding Automated goal and feedback cycles Central architecture of roles & job profiles |
Time-to-Hire Time-to-Productivity Headcount Growth Engagement Score |
💡 Tip: Take a look at our detailed guide to building a People Strategy that includes Factorial’s VP of Talent, Pere Martí, and his expertise.
Step 4: Workforce Planning
Consider the type of workforce you need to achieve your business goals. This includes hiring plans, training and development, and succession planning. Workforce planning also prioritises your team’s professional development, which ensures you are focusing on their career progression while meeting business goals. Additionally, this can create a working atmosphere that promotes a culture of innovation, creativity, and continuous improvement. With a structured talent management plan, your team can always stay ahead of the competition.
Ensure you are utilising performance data to support any training or hiring decisions. You want to set up your team for success by closing any skill gaps or shortages that may be present in your company. This not only empowers your team to reach business objectives but also creates a positive workplace atmosphere that is people-first.
Step 5: Feedback & Continuous Improvement
It is important to note that your people strategy should not be static. Regular feedback, data analysis, and optimization are necessary to ensure the strategy remains aligned with changing business needs. Schedule routine feedback rounds to gather critical information about their needs, concerns, and expectations. Additionally, surveys are a great resource to collect suggestions or employee feedback on how to improve and inform your people strategy decisions.
Ultimately, actively improving your people strategy promotes a culture of transparency and trust and motivates employees. All of which enhances employee satisfaction, retention and employee engagement.
People Strategy Example: Spotify Case Study
Spotify is a big advocate of the people-first approach. In fact, the audio subscription giant has found the perfect balance between prioritizing the needs of the business and those of the people who work there. This is because they understand that each aspect plays an important role in the success of the other.
Spotify has used this philosophy to create its own unique people strategy founded on the company’s values, mission, and corporate manifesto. This has enabled Spotify to build a culture-first, values and purpose-driven company that drives employee and organizational growth and development.
The four pillars of Spotify’s people strategy are:
- Talent attraction
- Diversity, inclusion and belonging
- Learning and development
- Growth
Is a People Strategy really Cruical?
You might be asking yourself, is planning a people strategy really worth it? Think of it this way – a people strategy is just an extension of your overall business plans. It’s a strategy that supports and outlines how to achieve your goals. It also helps you gain clarity into how to prioritise projects and initiatives. To put it simply, Pere Martí, Factorial’s VP of Talent, says,
“We must plan around both.” Martí is passionate about helping organisations sync their people strategy with their business strategy. With the help of our People Strategy guide, your business can reach its goals by focusing on the success of your people.
Software to Support your People Strategy
A solid people strategy is critical for business success. And investing in the right software is equally important. With the right tools by your side, you can craft an effective people strategy seamlessly. Factorial, an all-in-one HR software, can automate your core business processes and quickly gather essential information for your people strategy. You can track performance, send employee surveys for feedback and generate HR reports to analyse business trends.
Factorial offers People Strategy Tools:
- Performance Tracking & Analytics: Get insights into employee performance, retention, and training needs.
- Recruitment & Onboarding: Use ATS and recruitment tools to streamline hiring and ensure you’re selecting the right talent.
- Training Management Systems: Track your team’s growth and ensure they are applying their learnings to their daily work.
