In American sports, the NFL is having its annual draft to select talent based on extensive physical, social, emotional, and intellectual competence assessments. At the same time, the NBA playoffs have begun where teamwork matters as much or more than talent. In the NBA, only nine times in 78 seasons has the scoring leader won the championship (and six of those championships were won by Michael Jordan who lowered his scoring average 20 percent when he did so).

This focus on teamwork (organization) over talent (individual) deserves even more attention in business settings.

Decades ago I entered this field because a professor (Bonner Ritchie) challenged me (and others) to examine the organizations where I lived, worked, played, and worshipped. I was to figure out how these organizations operated and write about what I learned. I took him up on his challenge, writing a ten-page paper every week of the semester. He encouraged me to keep going, and I have.

At a personal level, my psychologist wife reminds me that I have OCD—not “obsessive compulsive disorder” but “organization compulsive disorder.” To this day, I often observe and comment on how the organizations I experience operate and can be improved. (Often my unsolicited comments to restaurant managers, airline executives, and neighborhood groups are not always received with the same enthusiasm I envision.) At a professional level, over the years I (along with great colleagues) have done research with thousands of organizations, advised hundreds of them, and helped define what organization means and how to improve it . This work has shown up in books (figure 1), articles, posts, podcasts, and talks, and today a LinkedIn post!

I have learned that human capability (talent + leadership + organization + HR function) that delivers value to all stakeholders comes from being clear about assumptions and actions about organizations. Let me share my five assumptions and actions and encourage business and HR leaders to do the same.

 1. Organizations matter.

Organizations affect every part of our lives: clothes we wear, houses we live in, entertainment we enjoy, hobbies we pursue, food we eat, communities where we worship, and where and how we work. Bonner (mentor then and now) taught me, “Organizations don’t think; people do.” I have since added to his mantra, “And organizations shape how people think, act, and feel.” Further, the “people” of an organization include employees inside as well as customers, investors, and communities outside. In our research, we have shown organization capabilities have two to four times the impact on business results than individual competencies.

Action: Pay attention to, talk about, and invest in the organization (team, workplace, and culture) as much as the individual (talent, workforce, and people).

2. Organizations can be both good and bad.

Toxic organizations exist, fostering contention, manipulation, bullying, distrust, contempt, and burnout. Abundant organizations also exist where people flourish because the organization provides value to its employees in four areas (figure 2). Replacing toxicity with abundance can occur intentionally when organization leaders strive to “do good .”

Action: Be committed to creating abundant organizations where people (employees inside and customers and investors outside) flourish by having their needs met.

3. Organizations are less about structure and more about capabilities.

The legacy models of how to define an organization have evolved from a collection of individuals, to a structure with role clarity, and then to an aligned set of systems. Building on this work, we have defined organizations as a set of capabilities that an organization is known for and good at doing that create value in the ecosystem or marketplace (figure 3). I like to ask people what companies they admire and then ask them how many levels of management are in those companies. Almost no one knows or cares. Companies are admired because of their capabilities, for what they are known for and good at doing, and because they create value for stakeholders.

Action: Identify, define, talk about, and develop capabilities that characterize your organization.

4. Organization capabilities can be defined and evolved to match external expectations.

In psychology, the nature/nurture debate suggests that about 50 percent of who we are and what we do is nature and inherent DNA and the other 50 percent is nurtured or learned behavior. People who recognize their nature (dispositions and habits) can learn and change. So can organizations. Often, embedded routines become an organization’s DNA and can be hard to modify. Organizations that don’t evolve their capabilities will likely wither and die. The failure rate of organizations is very high: 18 percent within the first year; 50 percent within five years; 65 percent within ten years; and 75 percent within fifteen years. Even large organizations fail. Of the original Fortune 500 in 1955, only 52 are still in business; of the 500 in 2000, only 52 percent still exist . Often this failure comes because of the inability to adapt to changing external conditions. Many leading companies are wonderful examples of organizations who have evolved: IBM to a service organization, Apple to consumer electronics and retail, Amazon to web services, Disney to cruises and social media, Netflix to streaming entertainment, Microsoft to cloud based information, etc. These transformations respond to knowing and seizing external opportunities.

Action: Perform audits to identify what capabilities will be of most value to customers and investors over time and change the required capabilities to anticipate market needs.

5. Organization capabilities are often embedded in HR practices and leader behaviors.

I have been asked at times why I focus on human resources, which often has a dysfunctional reputation for policy, process, bureaucracy, administrative burdens, and hindrance for change. I believe that the HR practices in a company deliver and evolve organization capabilities. HR practices may be grouped into four practice areas (figure 4). When these HR practice areas create value to customers and investors, align with strategy, integrate with each other, deliver the right capabilities, and are simple and adaptable, they become key levers for changing an organization.

Likewise, leader behaviors signal what the organization stands for and values. When and how leaders respond to different situations communicates to people inside (employees) and outside (customers, investors, communities) the priorities of their organization.

Action: Business leaders and HR people can identify and use HR practices and leader behaviors to shape and evolve an organization.

 Conclusion and Implications

These organization assumptions and actions have shaped my work. I have expanded my thinking about “human capital” with a focus on people to “human capability,” which includes people and organization. I pay less attention to the initiatives or activities of HR and more to the value these efforts create for stakeholders outside the organization. I realize that the organizations where I live, work, play, and worship are not static but dynamic and can be reimagined and reinvented for sustainable impact.

What are your assumptions about organizations and how do those assumptions affect your work?

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Dave Ulrich is the Rensis Likert Professor at the Ross School of Business, University of Michigan, and a partner at The RBL Group , a consulting firm focused on helping organizations and leaders deliver value.