IN ADDITION to having a business concept and a business strategy, there are two basic and fundamental needs for starting and running a business: Money and People. It cannot be done without one or the other and they are equally important.

The chief executive officer (CEO) may be responsible for the business overall, its mission, vision and strategy, but needs the support from various competences to transition the business concept and strategy into execution. The competences within organisations representing Money and People are the Finance and Human Resource (HR) functions.

Managements in businesses today are generally formed around a core team of the CEO and the chief financial officer (CFO), where the CFO plays the role of the CEO's 'right hand'. This is logical and makes business sense as 'Money' makes up one of the two main pillars in the business fundament.

However, with 'People' being the other pillar and considering the key role people play in the performance of a business and its long-term success, the CEO should enlarge the core team with the HR director as the 'left hand'.

This management troika will provide the best platform for the organisation to reap the full potential of its people and add financial value to the business. The HR director must, therefore, work closely with the CEO, making sure that HR is driving the business strategy from the people's perspective in the same way that the CFO does from a finance perspective.

Consequently, the HR director should be a strategic business partner of the CEO in the management of the overall business together with the CFO. Organisations need to understand the value of HR as a business driver and this understanding needs to be fully adopted by the line management and applied in the daily activities.

Changing the role of HR

However, there is no automation in results being generated simply because of an organisational structure. It takes more than that. The added value the management troika will have will only be obtained through its implementation and only if the attitudes of line management towards HR as a purely administrative function is changed.

When managements think about the HR departments in their organisations, they often think in terms of administration and staff costs relating to payroll, training, bonuses, annual leaves, etc. HR departments are often organised as a separate support function from the business lines to handle people-related administrative matters. As a result, HR does not play the role of business partner of the management or the business lines as it should.

HR departments have two roles - one is to execute the employee-employer related administration and the other more important role is to manage the implementation of the organisation's people strategy.

While the administrative role consist more of routine work where the administrative tasks follow mostly pre-approved processes and procedures, the strategic role requires an in-depth knowledge of the organisation's business strategies, its goals and objectives. It is in this latter role that HR needs to be much closer to the management and involved in the daily conduct and planning of the business.

The success of an organisation largely depends on the performance of its people and this largely depends on the working environment, which in turn, will be dependent on the management's people strategy and how it is implemented. True success will only be achieved when management understands the full potential of its people and builds a corporate environment which unlocks this potential.

A management that can motivate and encourage its people to continuously perform at their best at all times, towards achieving its corporate goals and objectives, will create a competitive advantage which may be the market differentiator for the organisation's long-term success.

A good example of the importance of people strategy and the impact it can have on business performance can be found in the mergers and acquisitions context. Many surveys conducted over the years have concluded that more than two-thirds of mergers and acquisitions between organisations in the marketplace fail to deliver the synergy and objectives anticipated. The vast majority of reasons given for why these mergers have not delivered what was expected from a business perspective is found in people issues.

Post-merger, the uncertainty, fear and worry employees from both organisations often feel when faced with a new environment can almost take away all their focus on their work, which can have a detrimental effect on the business over the short and long term.

If there is anything certain in today's business environment, it is change and organisations need to continuously prepare for the challenges of a constantly changing market. Measures should be taken to keep the people concurrently informed of any changes in the organisation, what the future plans are and how they are progressing. It is through a transparent and ongoing communication system that organisations can keep their people focused on their jobs during periods of change.

There are sometimes comments from managements that people issues are time- consuming and distract the business focus, but that is only because the people issues are seen as separate from the business. People issues are not only appraisals and one or two coaching sessions a year but a constant coaching of people in their daily work.

People issues are about ensuring that the entire organisation is working together to achieve the same goals and objectives, as well as helping and supporting each other to excel in their roles. When this philosophy is fully incorporated into the organisations' corporate culture, which may require a separate change in management process to achieve, it will carry itself by the people and bring an enhanced performance for the whole business.

Creating a people culture

Organisations must understand, appreciate and acknowledge the importance of people for the generation of income, and the management must demonstrate a true appreciation of people values at all levels throughout the organisation. These people values must be fully incorporated into the organisation's culture and adhered to by management on all hierarchical levels in the daily execution of their responsibilities.

The CEO has to proactively lead the people issues within the organisation with the support of the HR director, who is familiar with the 'technical' aspects of HR, in the same way as support comes from the CFO on the finance side.

However, all of this may be easier said than done. There is a long-standing rapport between the roles of the CEO and the CFO, and it will require a lot of hard work from both the CEO and the HR director to build the same business relationship between them. The CEO must actively participate in and support the HR director in the implementation of people strategies.

This can best be done by involving the HR director in strategic business decision- making. Without active sponsoring from the CEO and the rest of the core management team, the attitudes within the organisation towards the HR function as a strategic business partner run the risk of not being fully absorbed by line management.

More importantly, the HR director must fully understand the organisation's strategic business focus and the HR function needs to be organised such that it can meet the operational demands of line management. This means splitting the HR functions, with one part focusing on the administrative side of HR and the other focusing on operational business matters working hand in hand with line management.

The business HR team must also develop tools to measure the performance of the people and be able to report on the return on investment (ROI) in people for the business' bottom line results. If the HR team can gain the necessary credibility with the CEO and line management of being one of their strategic business partners, they have contributed to the creation of a business platform that can help the whole organisation take a giant leap in achieving its business goal.

The writer is partner, PricewaterhouseCoopers International Assignment Services.