It is necessary for people in HR to learn some basic business principles in order to become effective partners in the business of the organization.
Modern conditions require that HR people run HR like a business. To help them do this, they need to get a clear picture of the core business of the organization and its processes.
What is being referred to here is not the business arrangement between two commercial entities. One similarity, however, is the reference to customers.
Customers include both external and internal customers. HR internal customers are all the other divisions and / or departments in the organization, and all managers particularly line managers and supervisors.
External customers would include other commercial or business entities having business dealings with the organization.
HR is called upon to provide quality service just as in the case of business entities. HR is supposed to understand HR issues from the point of view of both the employer and employees. And, of course, the customers and other stakeholders of the organization such as suppliers, financiers, and contrators.
Until HR people accept this reality and take the necessary steps to understand the business their organization is involved in, they may continue to "just ride along," with some vague idea how HR can make valuable contribution.
The name change to Human Resource Department may not have involved real transition from being a Personnel Department. The HR department may continue to merely carry out the day-to-day administrative activities performed by the Personnel Department. (Note, however, that in some countries like England, the name 'personnel department' is preferred more.)
Present-day investors look for many things in an organization. One of these is whether the organization has sound HR policies and processes, apart from its strong financial standing. Good governance, effective leadership, low staff turnover are among the things that investors are interested in. If these are missing, investors will know that HR plays a comparatively insignificant role in the organization.
Investors may conclude that a weak HR department means inability to find and engage the talents needed to effectively run the organization within an increasingly competitive business environment.
Going about Making HR as Business Partner
Your organization may have financial experts among its finance executives. They can help employees get a clear understanding of the business of the organization.
People in operations can provide the necessary information on the front line activities of the organization.
These "internal experts" can demonstrate how each job contribute to the achievement of business goals.
Where necessary, engage some business consultants with proven track record to help explain the connection between the core business, departmental functions and what employees do each day. It goes without saying that these consultants are familiar with business activities similar to those carried out by the organization.
This is not mere business advice. The business consultants are needed to explain what it means to run an organization as a business. They need to explain how every employee can become a partner in business.
HR people are not exempted. By attending these sessions, HR people will understand better how the HR function is closely connected to the business goals of the organization. This facilitates better planning whereby HR can align HR activities to help achieve the overall goal. They will know the types of HR strategies that are relevant in every area of business activities.
In this way, HR will enhance its image as a necessary and relevant function in the organization's overall organizational plan. When HR is invited to participate in top management decisions, then it will know that it has began the journey on the road to being a strategic partner.
Business Partner Means Knowing the Business of the Business
Running HR as a business partner means that HR people, its processes and practices are operating smoothly with the other functions in the organization.
HR needs to get an overall view of the entire organization and how each of the different divisions, departments and functions fit into the whole picture. HR people would have to get a clear understanding of the activities carried out under the different functions, particularly those that general revenue for the organization.
HR needs these information for planning. For example, HR needs strategies in recruitment, training programs to develop employees, effective compensation and benefits plans, formulation of incentive schemes, and so on.
This explains in part what it means to be a business partner. HR does not stand apart from other organizational functions.
Scenarios change as the result of changes in stakeholders' perceptions, globalization, a more mobile workforce, workforce diversity, emerging economies, and financial crises.
"Going Green" is another area of concern in the 21st century. What is HR's response in the face of strong objection to the continued use of fossil fuel and the need to introduce green technology, for example? HR can help find the talents to help organizations move in a different direction where necessary.
Whatever happens, whether soon or in the future, HR can hope to remain relevant only if it can run HR like a business concern and effectively play its role as a business partner of the organization.