The Human Capital Dimension

Individual Assignment

BSB20318- 7- HCD

The Human Capital Dimension

Name: Isaac Culas

Student ID: TP024413

Intake Code: UCMF1511MBA

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 The Human Capital Dimension

Table of Contents
Introduction...........................................................................................................................................3

Difference between Human Resource Management (HRM) and Strategic HRM...................................4

The Universalist Approach.................................................................................................................4

The Resource-Based Approach..........................................................................................................5
HR Functions..........................................................................................................................................6

Pay and Rewards...............................................................................................................................6

Performance Appraisal and Feedback...............................................................................................7
Training and Development................................................................................................................8
Hilcorp...................................................................................................................................................9

References...........................................................................................................................................11

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Introduction
This paper will address the Human Resource Management (HRM) and Strategic Human
Resource Management (SHRM) on a general point of view and also implementation in
company. First, the difference between HRM and SHRM will be discussed, followed by a
general explanation of the HR functions and ending with how Hilcorp Company implements
the SHRM to the HR functions. It has been quite some time since companies moved from just
HRM to SHRM. It has been said that the most important assets of any business walk out the
door at the end of each day. Indeed, people and the management of people are increasingly
seen as key elements of competitive advantage (Allen and Wright, 2006). Businesses are
driven by fast paced technology change and increased competition which brings them to find
an understanding on how human resource can be managed to bring about the competitive
advantage for an organisation. This idea of a business has led to a formation for the research
and implementation of SHRM. SHRM in general can bring about competitive advantage.
Highly skilled employees may allow you to offer a superior product for which you can charge
a premium. While it may cost you more to recruit and/or train and retain highly skilled
employees who can add value to your offerings, that cost can be passed to the consumer in
the form of premium pricing (Martin, 2014). IF the source of competitive advantage is
operational effectiveness, these skilled employees may provide an alternative to reduce
internal cost resulting higher operating margins. Hence, bringing about a strong internal
culture which aligns to the business strategy of an organisation improves productivity which
in turn increases profit.

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Difference between Human Resource Management (HRM) and

Strategic HRM
HRM is almost similar to SHRM in a way, but what differentiates them both is the
consideration of business performance in human resource. HRM is related with employee
performance and SHRM is related with business performance. SHRM aims to increase
business performance through individual performance. HRM aims to increase employee
performance so that employees effectively do their task duties in business functions (Uysal,
2013). HRM refers to the process of ensuring that resources provided or available are
sufficient to ensure all HR tasks are carried out efficiently. Strategic HRM addresses broader
organizational issues such as changes in structure and culture, matching resources to future
requirements. The HRM-SHRM relationship can be said as a relationship between employee
performance and business performance. Therefore, HRM is oriented to employees for
individual performance but SHRM is focusing more to the organisations’ performance. Many
theories and practices nowadays are focused on SHRM and being implemented. One of the
best practiced methods is the Universalist approach.

The Universalist Approach

This view of SHRM argues "that all organizations will benefit and see improvements in
organizational performance if they identify, gain commitment to and implement a set of best
HRM practices". In this approach, the ‘high commitment’ concept links with human capital,
as it must have a high level of commitment, enforced by the ‘ideal set of practices’ (Lingham,
2014). This implies that the best HR practices must enhance the efficiency and viability of
human capital, place accentuation on any inspiration made toward human capital, and a mean
to achieve the company's objectives. Rewarding practices must be appropriately set and
actualized, focusing on commitment and also satisfaction of the employees. A key component
of best-practice is consistency between strategies. This idea of an 'all inclusive best practices
set' is debatable as it is a non-precise meaning of HR strategies that must be connected.
Without a doubt, the best practice models are constituted by various arrangements that
change altogether starting with one model then onto the next. Performances of this approach
in organizations are very hard to measure as they are determined by several different factors
because of the difficulty of generalization. Even in the case of Pfeffer, who advocated for a
universal best practices set, it is hard to see if the performances are due to the implementation
of this view of SHRM or not.

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The Resource-Based Approach

Another view of SHRM exists where the internal resources are the principal factor for a
sustainable competitive advantage. In effect, the value brought by human resource is the core
of this approach where flexibility is optimized in order to reduce costs and increase
efficiency. Human resource, by adding value, uniqueness and the most effective way to use
resources, tend to increase the competitive advantage of a company in comparison to another
(Lingham, 2014). To achieve the organizational strategy and goals, HR uses horizontal
integration as a factor for HR strategy, but it cannot be considered a sole factor leading to
achieving the goals. This approach is very much applicable provided the external factors
allow HR to do so, as the resource based theory only takes into account differences of
organizations in the same industry as a competitive advantage, ignoring others. However, it is
from this theory that the output of the organization becomes higher with the existing
resources. Hence it is the way in which the resources are used that creates the competitive
advantage between organizations, not differences.

The two different approaches were discussed in relation to the company performance and
competitive advantage. However, every approach focuses on one common goal which is the
profitability of a business. Even though each method has its own limitations, they have been
proven to succeed in many organizations. The final argument for SHRM is that, in relation to
the different industries and, the most effective way to practice SHRM is to blur the
differences between the models and implement it in the best and most suitable way possible
for the profitability of the organization.

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HR Functions
Pay and Rewards
This function of pay and reward in HR basically means that high performing employee
should be awarded raises and bonuses. The consideration of the use of employee rewards as
performance motivators is considered as part of any organization’s competitive advantage
strategy (Southern, 2013). Pay and rewards ultimately motivates employees which promotes
creativity and other positive outcomes from them, resulting in better organisation
performance that allows a company to gain and maintain a competitive advantage in terms of
human resource from their competitors. There are a few theories suggesting how this sort of
benefits helps the organization. Reinforcement theory states that a response followed by a
reward is more likely to recur in the future. The implication for compensation management is
that high employee performance followed by a monetary reward will make future high
performance more likely (Gerhart et al., 1995). If employees are not given what they deserve,
there is a higher possibility of lower performance. Similarly, the Vroom’s expectancy theory
focuses on the link between rewards and behaviours , although it emphasizes expected
rewards such as incentives. Motivation is also a function of two other factors, expectancy, the
perceived link between effort and performance, and valence, the expected value of outcomes
(Minkof et al, 1995). Both these theories are in fact correlated as they support each other’s
points. The bottom line from these theories is that reward should be given to employees who
deserve it, and also employees can and should expect these rewards as it is a form of
motivation which benefits them and eventually the company. However, these practices must
be carefully looked upon by HR as it is very subjective because the value of outcomes by the
employee is based on the task given. Two employees from the same department cannot be
compared and judged as they may be handed different tasks with different levels of impact to
the company.

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Performance Appraisal and Feedback

This function is defined as a formal, structured system of measuring, evaluating job related
behaviors and outcomes to discover reasons of performance and how to perform effectively
in future so that employee, organization and society all benefits (hrwale.com, 2010). This is
used as a tool to assess the overall development of an employee measured against factors like
job knowledge, quality and quantity of output together with other qualities and interpersonal
skills. To carry out these appraisals, there are many methods used, and the most common is
the 360-Degree feedback. The standard procedure is where performance data are
systematically collected on an individual, derived from immediate supervisors or team
members. This method is used as detailed information of an employee can be obtained from
another co-worker who works closely, enabling proper understanding of the person’s
interpersonal skills. This however, can be easily manipulated as the immediate supervisor
may favour another employee more that the deserving one, leading to false accusations. It is
advised when using this method to obtain feedbacks from more than one source of
information in order to make managerial decisions for the best choice among the potential
candidates. In a more objective approach, methods such as psychological appraisal and
performance test can be more effective but it is very time consuming as well as high cost for
conducting. All these methods use can only be of value in SHRM if it is aligned to business
strategy, or not all the time and resources put into it will be wasted. In the case of the 360-
Degree Feedback, it can add to a firm’s competitive advantage such as providing better
customer service data products and services designed to serve the customer (Shaw et al.,
1995). With this sort of techniques incorporated in SHRM, it is vital to align it with the
business strategy of the company in order for efficient use of this HR function. This then
provides a competitive advantage for the company.

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Training and Development

Training and development is a fundamental function HR. Arranging training programs for
employees and enhancing their skills is the main motive behind these sessions. People in the
HR department schedule training hours, arrange experts and make a note that these sessions
are helping the employees develop their additional skills (Siliconindia.com, 2013). It is vital
to update employees, especially when new technology related to the company is introduced to
the market to further furnish their skill set. For proper and effective training to take place, HR
must conduct thorough analysis on a targeted skill and conduct the learning based on the
objective. Development programs are somewhat different from training. The main difference
is training can be given to employees to excel in their current job position, but development is
for future prospects. Employees are selected on the basis of their skill, attitude, capability and
performance (Siliconindia.com, 2013).This type of leadership program that helps in nurturing
leaders for future responsibilities. This HR function focuses on providing and enhancing
knowledge of the employees as a resource and intellectual property for the benefit of the
company. The longer retention of employee is a critical part for competitive
advantage, because when an employee is retained for a longer period, it will amplify the
performance of the firm and also help in enhancing the firm’s productivity (Gupta, 2014).
According to Dr. Rama Krishna Gupta, several organizations have revealed that one of
the characteristic that help to retain employee is to offer them opportunities for
improving their learning. This itself proves that by carefully planning and conducting
training and development for employees does in fact gain competitive advantage for the
company proving how this HR function is vital in SHRM.

All 3 of these functions are interrelated and slightly dependable on one another. For a
company to provide rewards based on employee performance, performance appraisal must be
conducted first. In order for this cycle to succeed, employees must be given the chance
through training and development to actually produce the results in the performance
appraisal. HR would need to carefully conduct each and every function in a systematic
manner to ensure all employees are always motivated and at the same time aligning them to
meet the company’s goals in the most effective and efficient way.

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Hilcorp
Hilcorp, founded in 1989, is one of the largest privately-held oil and natural gas exploration
and production companies in the United States and is the largest oil producer in Louisiana.
Headquartered in Houston, TX, Hilcorp has over 1,350 employees in multiple operating areas
(Hilcorp.com). The company stands by its formula of leveraging their core competencies and
operational expertise for the growth of Hilcorp. It has been proven over the past few years
that their proficiency in these key areas has resulted in significant growth. Hilcorp has been
recognized for their values, work ethics and also one of the best places to work in America.
All these achievements of the company could not have happened if it was not for the strategic
implementation of the HR department that distinguishes itself from other companies. Hilcorp
has an effective approach to some of the HR functions, mainly, the pay and rewards,
performance appraisal and feedback, and training and development.

The most admired and talked about topic of the company is its pay and rewards. In the year
2010, Hilcorp actually awarded every employee either $50,000 towards a car or $35,000 in
cash for meeting a five year challenge ( Hensel, 2015). This is for doubling the firm’s value,
production rate, and oil and gas reserves. Besides that, in 2015, Hilcorp announced that it
would give all 1,381 employees a year-end bonus of $100,000 after what the company called
a positive year in growth (Foxnews.com, 2015). These sort of bonuses do not come by often
and are rarely, or never given out by companies we know of today. This sort of extravagant
incentive gives employees the reassurance that their contribution to the company is not taken
for granted but is highly valued and treasured. Hilcorp also practices profit sharing and
employee stock ownership plans which focus employee efforts on outcomes that benefit both
themselves and the organization as a whole (Snell et al, 2014). It is a culture and practice that
if the company profits, so shall the employees. This is direct motivation for the employees as
they are able to see the rewards in monetary value, which is what really matters. At Hilcorp,
for performance appraisal and feedback, the HR gets them from the senior leaders. These
senior leaders meet quarterly to conduct several different kinds of assessments on potential
candidates. Hilcorp promoted 30% of their succession candidates in 2011 as the company
believes that while external candidates may have the technical skills needed; Hilcorp’s
current employees have the values alignment that will enable them to rapidly excel (Dishman,
2014). These periodic assessments allow managers to monitor progress in an orderly manner,
analysing improvements and contributions of potential candidates. Once employees
understand the practices of HR and managers, they will be highly motivated as awareness of

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potential career advancement is noticed. These practices in turn help the company in
employee retention as employees are always looking for advancement opportunities. In terms
of training and development, Hilcorp has emphasis on providing educational opportunities
for all employees. The company provides training programs and also adds support for taking
courses putside and self study. Hilcorp allocates 88 hours per year for full time hourlies and
46 for salaried employees (Quiñonez, 2013). Allowing such amount of time away from work
for personal development or skills training benefits both the company and the employees. The
company receives positive output as the employee reinforces the company with their own
development from the training process. Hilcorp is indirectly showing trust to employees by
giving them the freedom of time in hopes of them using it wisely for the company.

The HR functions of Hilcorp has stuck to the traditional way, but was used in a much
extravagant manner or some may say radical. The monetary value received by the employees
is in huge sums, not forgetting other side benefits. In this case, it showed a positive outcome
for the company as those bonuses actually motivated the employees twice in the past few
years as stated. These sort of huge bonuses are deserved by the people working there from the
start. However, this sort of publicity can attract the wrong employees who are there for the
money only, with the expectancy of getting huge bonuses. One employee would not have
much of an impact to the company but he or she will be able to mooch off the success that the
colleagues worked hard for. According to Kohn, extrinsic motivators not only are less
effective than intrinsic motivation but actually reduce intrinsic motivation (Ledford et al,
2103). Wrong employment of people with very little interest in the company may just use this
opportunity to get employed for the sole reason of obtaining high rewards. Fresh graduates,
who are hungry for money more than to learn and gain knowledge, may take this opportunity
to do so, which will not seem fair for the other employees. Little things like this may cause
internal problems leading to more work for the HR leading to less efficient use of resources.
Having said that, the company’s practice of having periodic assessments for potential
candidate will enable the managers to weed out the good employees from the incapable ones.
This career advancement will show the company’s attentions are on productive employees,
potentially eliminating unproductive ones as they would not be given any advancement. For
both these types of employees, the training and development provided and supported by the
company will enhance the employees to be more productive, and for the incapable ones, an
opportunity to rise to the occasion.
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