The major HR challenges facing managers today can be divided into three categories: environmental challenges, organizational challenges, and individual challenges.

The environmental challenges are rapid change, the rise of the Internet, workforce diversity, economic globalization, legislation, evolving work and family roles, skill shortages and the rise of the service sector, and catastrophic events as a result of natural disasters and terrorism.

The organizational challenges are choosing a competitive position, decentralization, downsizing, organizational restructuring, the rise of self-managed work teams, the increased number of small businesses, organizational culture, advances in technology, and the rise of outsourcing.

The individual challenges involve matching people with the organization, treating employees ethically and engaging in socially responsible behavior, increasing individual productivity, deciding whether to empower employees, taking steps to avoid brain drain, and dealing with issues of job insecurity.

When done correctly, strategic HR planning provides many direct and indirect benefits for a company. These include the encouragement of proactive (rather than reactive) behavior, explicit communication of company goals, stimulation of critical thinking and ongoing examination of assumptions, identification of gaps between the company’s current situation and its future vision, the encouragement of line managers’ participation in the strategic planning process, the identification of HR constraints and opportunities, and the creation of common bonds within the organization.

In developing an effective HR strategy, an organization faces several challenges. These include putting in place a strategy that creates and maintains a competitive advantage for the company and reinforces the overall business strategy, avoiding excessive concentration on day-to-day problems, developing strategies suited to unique organizational features, coping with the environment in which the business operates, securing management commitment, translating the strategic plan into action, combining intended and emergent strategies, and accommodating change.

A firm’s strategic HR choices are the options available to it in designing its human resources systems. Firms must make strategic choices in many HR areas, including work flows, staffing, employee separations, performance appraisal, training and career development, compensation, employee rights, employee and labor relations, and international management.

To be effective, HR strategies must fit with overall organizational strategies, the environment in which the firm is operating, unique organizational characteristics, and organizational capabilities. HR strategies should also be mutually consistent and reinforce one another.

Responsibility for the effective use of human resources lies primarily with managers. Hence, all managers are personnel managers. The role of HR professionals is to act as internal consultants or experts, assisting managers to do their jobs better.

Over the past three decades, the number of HR professionals has increased considerably (even though, ironically, HR departments have decreased in size because companies are subcontracting many HR activities to external consultants). This increase reflects both the growth and complexity of government regulations and a greater awareness that HR issues are important to the achievement of business objectives.