It may come as a shock that the "N" needle on your compass doesn't always point north. Not true north--the north marked on a map--anyway. The compass needle does always point to magnetic north, however. The problem is that magnetic north--the northern pole of the earth's magnetic field--is in constant motion and doesn't always match up with the true or "assumed" northerly direction on a map. If you can calculate the difference between magnetic north and true north--known as magnetic declination--you can figure out where you are on a map; but the first step to doing this is using your compass to determine magnetic north.
Rotate the your compass bezel (if it is adjustable; not all are) until the 0/360 degree mark, or the letter N, lines up with the indicator arrow or sight line.
Hold the compass in front of you, horizontally oriented, indicator arrow or “N” pointing straight ahead of you.
Turn to the right or the left, as necessary, until the compass needle lines up with the indicator error or the “N” indicator and the 0/360 degree mark on the compass bezel. Most compass needles will have a small “N” on the end of the needle that points toward the north (the other end, obviously, will point toward the south).
Compass needles are typically either red and white or red and black. If the compass needle has two colours, the end that is the same colour as the indicator arrow on the compass body will typically be the one that indicates north, with the differently coloured end of the needle indicating south. So if the "North" indicator arrow on the compass body or baseplate is red, the red end of the compass arrow will indicate north, while the other end indicates south. If you can't determine which end of your compass needle is supposed to indicate north, use a map and landmarks to orient yourself facing northerly direction, then hold your compass directly on front of you, horizontal, and check which needle is closest to pointing straight ahead. That needle indicates magnetic north. Note that it may not be--in fact probably will not be--pointing straight ahead, because magnetic north can sometimes differ from the true north displayed on maps by dozens of degrees. Magnetic declination varies depending on where you are on the planet. The best way to determine magnetic declination in a given area is to consult a recent map, which will have local declination marked on it, or to use the NOAA declination calculator (see Resources).