Lets talk about one of the basic concept of Oracle Application which is so called "Business Group" , part of Multi-org architecture. Understanding this is important for non HRMS consultant as in R12 Finance the new legal Entity architecture  is equally important.
Business Group in HRMS Shared Mode
A business group is a basically Human Resources organization to which you assign employees. You assign each operating unit to a business group in the financial options setup. You can assign the same business group to different operating units including to operating units in different financial sets of books. You can setup a separate business group for each operating unit if you want to segregate and maintain each group of employees separately. Oracle provides one setup business group you can use.
In case of not having HRMS (Full mode),what you have to do is ,to create at least one business group to cater requirement for Oracle Financials and Manufacturing, so that only the employees can perform some of application functionality , which are as follows:
- Entry and approvals of purchase orders and requisitions require requisitioners, buyers, and approvers to be setup as employees.
- Purchasing receiving staff must be setup as employees in order to use receiving screens.
- Engineering change order approver lists use the employee database to validate approvers.
- AP expense report features allow you to create suppliers from employee information and to generate expense report coding using employee default account numbers.
- iExpense requires users who enter or approve expense reports to be setup as employees.
- Fixed Assets allows you to optionally assign assets to employees for tracking purposes.
- Standard Workflow approvals of GL journal entries in Release 11 require approvers to be setup as employees.
- Standard Workflow approvals of AR credit memos in Release 11i require approvers to be setup as employees.
- AP may add invoice approval through AME , which will likely require approvers to be setup as employees.
There are few exceptions, where you have to understand when your installation site is having HR and Projects modules installed, as there are significant implications of business group and HR organizations.
Business Group is part of MultiOrg model of Organizations
The Multi-Org model provides a four level hierarchy that dictates how transactions flow through different business units and how those business units interact
- Set of Books- GL- Balancing Entities/Funds
- Business Group
- Legal Entity -HR- Fin- Legislative Reporting
- Balancing Entity
- Operating Unit- AP, AR, PO, OE -Bal Segment 1, Bal Segment 2,Bal Segment 3
- Inventory Org MFG, INV, Ship
There is one confusion between Oracle Financial and HRMS consultant, as they simply assume SOB is more meant for non HRMS module and BG is more for HRMS, in certain extend this is true.Lets investigate this on GRE\LE and OU as follows:
Know something more for SOB
- As covered in earlier post  ,a set of books is a financial reporting entity that shares the three Câ€™s that is Chart of accounts(accounting flexfield structure), functional currency and calendar.
- Oracle General Ledger secures transaction information (journal entry),When we use General Ledger, we choose a responsibility that specifies a set of books. We then see information only for that set of books.
- In the multiple set of books, the concept of â€œglobalâ€ item master Organization exist, since the item master organization is used for item definition and not item accounting information.
- More over all accounting activity releated to the item master can be controlled at the item or organization level. Example is consolidation at the corporate office or Head office.
Is SOB linked to HR module?
Yes,. Once SOB is created from GL setup part, this can be linked in HRMS by such navigation
Work structure => GL organization Description ==> Business Group
What is a Business Group/Legal Entity?
- Represents the consolidated enterprise, a major division, or an operation company.
- Human resources information is secured by business group.(For example, when you request a list of employees, you see all employees assigned to the Business Group of which your organization is a part. )
- This is true in all applications except the Human Resources applications themselves, which support more granular security by a lower-level organization unit.
- Multiple sets of books can share the same business group if they share the same business group attributes, including Human Resources flexfield structures.
- Business Groups separate major segments of a business. Each can have it's own set of books.
- Each Group will also have a structure of other organizations classifications assigned to it.
- Till Release 11i Legal Entities post to a
- Set of Books
- Operating Units are part of a Legal Entity
- Inventory Organizations are part of an Operating Unit Ã‚Ã‚Ã‚Â·
- Inventory Organizations define and maintain items used by other manufacturing modules (Order Entry,Purchasing, MRP, etc.). They also collect and pass data to the Financials modules.
Operating Unit vs Business Group
- With Multi-Org you can define an owning Operating Unit and associate this with a profile option -MO:Operating Unit. When you define data or execute a business process within Oracle Financials, then the system automatically attaches the id of your Operating Unit organization to the data or transaction.
- With Business Group security model in HRMS  you can secure data and processes by id of the Business
Group.However, in HRMS, the Business Group id is closely related to the country of operation, and not simply a division or line of business.
- Both look the same but it is important to realize that these are distinct and different mechanisms for two different functional areas. This is especially true for any global implementation of HRMS where the data for each country exists within a single business group but Operating Units exist across many countries, and business groups.
Setup Business Group
As per standard User Documentation: A â€™Setupâ€™ Business Group is supplied with Oracle HRMS. This business group is used by the default responsibility. You can use this business group with all of its default definitions as the starting point for your own Business Group, or you can define other business groups to meet your own needs.
A business group enables you to group and manage data in accordance with the rules and reporting requirements of each country, and to control access to data.
The critical factors for deciding when to use a separate business group, or an international business group, are based on the following factors:
- If you use Oracle Payroll
- The number of people you employ in a country
- If you require legislative support for Oracle HR
Generally the laws are so different in each country that to be compliant, there must be a different business group for each country in which an enterprise has employees.
BU in HRMS and other Integration
The need for cross functional integration cann't be denied as most of the base information is pulled from HRMS to Oracle Finance , Manufacturing as well as CRM Modules. A typical integration aspect with some of the core module can be best understood as figure below:
- Letâ€™s Talk About â€˜Security Groupsâ€™ functionality available within Oracle HRMS 
- Understanding Multi-Organization Structure in EBS(Technical) - Part II 
- Understanding Multi-Organization Structure in EBS - Part 1