HR Business Partner

What is an HR business partner?

HR Business Partner (roughly: the HR partner of a business unit) describes a role in the HR department that is permanently assigned to a business unit. It advises the unit's leadership on staffing needs, the filling of positions, leadership, compensation and organisation. HR stands for human resources (in German Personalwesen). The role is advisory and shaping in nature; contracts, payroll and certificates are handled by other units.

The term comes from the three-pillar model, which divides HR work into advice, expertise and administration. As a separate position, the role is in practice usually found only from around 100 employees; below that, the head of HR or the management takes on the task as well. Investors and buyers encounter it when reviewing the organisation, in due diligence, that is, the examination of the company before an investment or a purchase, and in integration after a company acquisition.

The three-pillar model of HR work

The model divides the HR function into three areas of responsibility with different orientations:

• HR Business Partner: advice to managers by business unit, close to the business and to planning.
• Centres of expertise: specialists for topics such as compensation, recruitment, personnel development or employment law, referred to in the model as a Center of Excellence.
• HR service: pooled administration of contract drafting, payroll, time recording and certificates, often organised as a shared service centre, that is, a central unit that carries out these tasks for all areas.

The business partner translates the requirements of the unit into orders to the centres of expertise and the HR service. The business partner works across topics for a few managers, while the other two pillars work topic by topic for the whole company.

Tasks in the business unit

• Staffing needs: determining with the unit head which positions will be needed in the next 12 to 24 months; the result feeds into the headcount plan.
• Filling positions: sharpening job requirement profiles and supporting selection procedures for key roles, for example with a structured talent assessment.
• Leadership advice: support in cases of performance problems, conflicts and separations before they turn into legal disputes.
• Compensation and development: keeping to salary bands, that is, the defined salary ranges per level, justifying deviations, implementing development paths from career planning.
• Change: supporting restructurings and growth spurts, in interplay with organisational development.

Employment law framework

In Germany, individual personnel measures such as hiring, transfer or dismissal are often prepared by the business partner. Where a works council, that is, an elected representation of the workforce, exists, it must be consulted before every dismissal (Section 102 of the German Works Constitution Act, Betriebsverfassungsgesetz, BetrVG); a dismissal given without consultation is invalid. In companies that as a rule have more than 20 employees entitled to vote, hirings, classifications (the assignment to a pay group), reclassifications and transfers require its consent (Section 99 BetrVG). It may refuse consent only on the grounds named in the statute. Questions of operational pay structuring, for example the design of a commission system, are subject to co-determination under Section 87(1) No. 10 BetrVG.

In a company sale by way of an asset deal, the transfer of undertaking under Section 613a of the German Civil Code (Bürgerliches Gesetzbuch, BGB) is added: the employment relationships pass to the acquirer, the employees must be informed beforehand in text form and may object in writing within one month of receipt of the information. The legal assessment lies with the employment law firm; the preparation of the facts and communication within the unit often lie with the business partner.

Significance for investors and buyers

Investors regard the organisation as a separate field of review. They ask about spans of control (how many employees there are per manager), about dependence on key persons, and about open positions and turnover per unit, that is, the share of the workforce that leaves in a year. A company that can evidence these figures shows that it can steer the build-up of positions after the round. In due diligence, employment contracts, works agreements, compensation and participation commitments, and pending disputes are added.

After a company acquisition, the HR function is among the first tasks of integration planning: compensation systems are compared, key persons retained, duplicate functions merged. The business partners of both sides are the contact points for the unit heads.

Practical example

A software company with 140 employees wants, after a Series B financing, the second larger growth round with external investors, to expand sales from 30 to 45 people within twelve months. After nine months, 16 people have been hired, but only 34 work in sales (30 plus 16 minus 12), because twelve have left. The unit's HR business partner analyses the exit interviews: nine of the twelve departures come from two of the five sales teams.

Both teams work with a commission plan whose targets were raised after the financing without adjusting the commission scale. Target attainment there has been around 60% for months, and variable pay has fallen accordingly. The problem is therefore a compensation question, not one of recruitment. The business partner presents the analysis with a proposal to the management and coordinates the costs with the finance function. The works council is involved because changing a commission plan is subject to co-determination. In parallel, the revenue plan is adjusted, because every departure triggers a new ramp-up period.

Distinction from related terms

• Head of HR: is responsible for the HR function as a whole, with strategy, budget, systems and legal issues. The business partner is responsible for the impact in one unit.
• HR administration: handles contracts, payroll and certificates for the whole company. The business partner hands such tasks over to this unit.
• Organisational development: shapes structures and change processes for the whole company; the business partner implements them in the business partner's unit.

Common mistakes

• Administration not handed over. If administrative handling stays with the business partner, day-to-day business displaces advice.
• No seat in the leadership meeting. Anyone who does not take part in the unit's leadership meetings learns of decisions instead of helping to shape them.
• Span of coverage too large. If one person supports several large units, there is time only for consultation hours instead of advice.
• Speed measured instead of impact. Time to fill is useful; more telling is the retention of new employees after twelve months.
• No data basis. Without evaluable metrics per unit, advice remains an opinion and persuades neither the management nor investors.

Frequently asked questions

How does an HR business partner differ from an HR officer (Personalreferent)?

In emphasis. In many companies, HR officers look after one employee group including administration, while the business partner concentrates on advising managers. In practice the boundaries are fluid.

Does a company with 50 employees need an HR business partner?

As a separate position usually not, as a function yes. At this size, the head of HR or a member of the management often takes on the task; what matters is that it is expressly assigned to someone.

Which metrics is an HR business partner responsible for?

The metrics of the unit, typically turnover, early turnover in the first year, time to fill for key roles and dismissals during the probationary period. Four to five figures are enough if they are evaluated regularly.

What role does the HR business partner play in a company sale?

A supporting one. The business partner helps prepare HR data for the data room, answers questions on the organisation and supports integration after closing. Personal data is disclosed in early phases only in summarised or anonymised form.

The Roemer Capital view

After a funding round, the workforce often grows faster than the structures behind it. In planning the use of proceeds, we therefore include the HR function as a separate item: recruitment, onboarding and support for the units. Anyone who wants to double sales within a year needs capacity in HR work, and its costs belong in the financial model before the round.

In the sale process, we prepare with the head of HR the metrics by which buyers assess the organisation: turnover per unit, spans of control, open key positions. If they are available early and free of contradictions, the discussion about the organisation stays factual and does not end in a flat risk discount on the purchase price.