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HR as a Business Function

HR Function Growth Path

As the organizations mature, HR practices also mature . The HR function is at three different states in its evolution cycle where it starts as a Business Function, becomes a Business Partner and then a Strategic Partner. Please refer to the following figure that shows the migration.

In each of these cases the role and impact of the HR department becomes progressively more strategic in nature. At higher levels of maturity, the HR function can add tremendous value to the leadership potential, top-line, bottom line and long-term sustainability of the organization.

At each stage the attributes & value add by the Human Resources function change and the tools required vary significantly.

HR as a Business Function

At the very least, when an HR function is available in an organization, it is responsible for managing employee data, takes care of payroll, time and attendance and the setting of company policies.

The role is largely that of Personnel Administration focused on Compliance both internal & external, and on Management of employee records.

The tools that the HR requires are related to management of employee data and include a rudimentary HRIS, Payroll processing software, Time and Attendance systems (could include time-card readers, swipe systems and associated devices). I have found that in many cases organizations even use spreadsheets and shared directories to manage their employee data, policy documents and employee leave applications, contracts etc. In most cases, paper based employee files are the only source of employee data which are managed by the Personnel Administration department of the organization.

HR as a Business Partner

As a Business Partner, the role of HR is to meet the “existing business needs” of the organization so that the organization could grow at a measurable rate.

At this stage of evolution, the focus of the HR shifts to competency based Recruitment, Total Compensation, Employee Development, Communication and Organization Design.

The HR function helps in formalizing the organization structure (who does what and reports to whom). Once that is complete, the next role is that of identifying the skills necessary for different job roles. HR further helps in defining appropriate training programs that are necessary for developing these skills, recruitment techniques to evaluate the skill levels and benchmarking the skill database against industry standards and competitors.

Total compensation (payroll and benefits) also becomes a focus area where the HR helps the organization attract and retain skilled employees by becoming a leader in compensation management.

Using the skill database and the organization structure, the HR function iteratively evolves compensation practices, improves the training function and makes the recruitment function more attuned to the skills needed by the organization.

To facilitate the above functionality, HR uses tools such as Applicant Tracking softwares for recruitment, Employee Portals for communication, Self Services for employees empowerment, Learning Management Systems for training & development and an Employee Database for capturing employee skills & competency profiles. Organizations even have well defined Job Descriptions with details of qualifications, experience, special skills required for the job and job roles & deliverables for each job position.

We have found that at this stage most organizations prefer some degree of automation and are using tools either built internally or procured from vendors. Another characteristic of organizations at this level of maturity is the break-up of the HR function into sub-functions such as Training , Personnel Administration, Recruitment and Compensation & Benefits, each being partly dependent on the other.

HR as a Strategic Partner

Organizations that view their HR as a strategic business partner believe in full maturity of their HR function. Such organizations are focused on attaining leadership positions rather than an year-on-year growth. Bottom-line and top-line growth are expected to be achieved automatically.

At this level, HR becomes responsible for identifying core competencies necessary for their organization to attain leadership position. Further HR facilitates in

  • Aligning employees to a common sets of objectives derived from the mission and value statements,
  • Mitigation of risk by devising appropriate Succession Planning Strategies,
  • Identification of top-performers and non-performers,
  • Continuous measurement of the effectiveness of leadership and employee satisfaction,
  • Increasing employee engagement through appropriate measures,
  • Aligning compensation to performance,
  • Adjustment of recruitment and training to competency gaps,
  • and specifying well-defined Job Descriptions which map to the organization structure . These become the basis of Recruitment, Goal Setting, Training, Performance Evaluation and Career Development.

As a strategic partner HR uses a variety of automation tools for Learning Management, Performance Management, Compensation Planning, Recruitment and On-boarding, Succession Planning, Alignment and Employee feedback.

The largest benefits accrue when employees are encouraged to use these tools as a routine practice at their work place. An integrated view of employee’s life cycle in the organization is visible through appropriate dashboards which are available to the decision makers at all levels in the organization.


Size and age of an organization has no bearing on the maturity of their HR function. Maturity has much to do with the focus of “management on people” which constitute their biggest asset.

Appropriate HR tools can help the organization to quickly mature their HR function and institutionalize best-practices for long-term growth


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