Human Resources guru and author Dave Ulrich  is a professor at the University of Michigan's Ross School of Business. He's also a partner at the RBL Group, a consulting firm that helps organizations build capability by leveraging their human resources. Ulrich is co-author of the recent book "Victory Through Organization: Why the War for Talent is Failing Your Company and What You Can Do About It."

Ulrich’s book explains that an effective organization of talent can be much more impactful than individual talent alone. Or, as Ulrich puts it, a fist is more powerful than five fingers. We recently caught up with Ulrich to discuss trends in HR, including how middle market firms can access and effectively organize their existing talent.

Why is an HR focus on winning “the war for talent” failing middle market companies?
Ulrich: Because to compete in today’s changing business world, it’s not just talent. You need a lot of things -- access to financial capital, strategic agility, and technological and digital insight. But you also have to have a great organization and people. Your competitors can match your access to capital, they can match your strategic and customer focus, they can even match some of your digital focus. It's the organization and people that really differentiates companies.

Companies can win by building an organization that effectively focuses all their resources [including people] in better serving customers and investors. HR provides the insights and the capacity to manage talent, leadership, and organization in a way that helps the company win. A focus on talent alone won’t do this.

Are you saying that the way middle market companies organize and integrate their talent can offer competitive advantage?
Ulrich: Sure. As a company grows from startup phase into a middle market company, HR professionals not only do the administrative stuff, which is often done through technology, but they also become strategic advisers who ask “what is the talent we need to go forward? How do we build the right organization and culture to leverage our talent? How do our leaders evolve their skill sets?” It's often very difficult -- you see in the news that sometimes leaders who are great entrepreneurs simply don't have the skillset to sustain that company as it grows. A good HR person would help this leader recognize the skills he or she needs to build and/or the skills they need to bring into the organization.

How can middle market HR leaders become effective strategic partners who get a “seat at the table”?
Ulrich: The really good HR people don't even make it an issue, they just go to a business leader and say, "We're trying to grow in this marketplace, let me give you some thoughts as we partner and muse and co-create what we're going to do to win in the particular marketplace." HR doesn't ask to be invited to the table, they don't seek to be invited, they're simply a partner in the business’s success. The bad HR people, well, they lament, they plea, they wonder "What am I going to have to do to get invited to the discussion?" If you have to ask the question "How do I get invited?" then you never will be. 
What's the impact of having a strong “organizational focus” versus focusing on just pulling in top talent?                       
Ulrich: There's a simply exercise I do when I teach groups. I say hold up one hand with five fingers, that’s talent, you've got five great people. Hold up the other hand with a fist. That’s the organization. Which one matters more in helping a business win? We did research for “Victory Through Organization” about what matters more. It's amazing that it's actually four to one favoring the impact of the organization versus the individual fingers. When the fingers come together into a good system, a good organization that has four times the impact on results. Individuals can be great, yes, but it's the team that wins championships.

How, then, can HR professionals at middle market companies help bring those individuals together to make that impact?
Ulrich: What HR should do as an adviser to a business is help build the right culture. When we talk about culture we don't talk about values, norms and behaviors, the roots of the tree, we talk about the leaves of the tree and we say, what is it we want to be known for by our key customers in the future? That “identity” question in the marketplace is often called the firm's brand. What is Google known for? What's Amazon known for? That external identity should be the basis of our internal culture. A good HR person partners with others, asking, "What is that identity we're trying to be known for? How do we bring that external promise to customers into a set of disciplines for internal employee behaviors?” HR is focusing on the key outside metrics and driving behavioral changes internally to achieve them.

So if you've got a senior leadership team of ten who are running your middle market company, you should ask them “what is it we want to be known for by our key customers?” One of the exercises we love is to have everybody write down three things, so you have a team of ten and you get 30 answers. How much overlap is there in those 30 answers? That becomes an indicator of whether you have a consensus about what you want to be known for. There's lots of measures you can consider: customer net promoter scores, customer focus, internal cultural unity, and more. 

How do you see technology changing the role of HR at middle market companies?
Ulrich: Most folks in HR look at digitization and technology as a source of efficiency: they can now be more efficient in how they hire, train and pay people. Where technology needs to go now is beyond innovation and efficiency to offering connection and information. Ultimately, the power of technology is that it provides a source of information from outside to inside the company, and it provides a source of connection. So that even as technology isolates people, we need to find ways that technology shares information and builds connections, inside and outside the organization.

What else would you like to tell middle market HR leaders about “Victory Through Organization”?
Ulrich: That HR is not about HR. It's about helping the business win. A good leader, in HR or anywhere,  is somebody who make others better.

To illustrate the point, we've looked at what financial investors consider. We found that only 35-40 percent of what they consider is financial performance. Another 30-35 percent of what they look at is the intangible stuff: your strategy, your brand, your market position, your industry. And the remaining 25-30 percent  is what we call “leadership capital.” It's the individual talent of the leaders and it's the organizational systems they’ve created. So If I'm a middle market manager,  I don't want to just make money, I want to build confidence from investors. And you know what? The quality of leadership is a key piece of what those investors are looking at.

Listen to "Dave Ulrich Interview" on Spreaker.