Keen to understand why firms make use of the opportunities HR analytics can offer, new research conducted by Barbara Bechter, Associate Professor in Human Resource Management, and Bernd Brandl, Professor in Management, alongside Alex Lehr, Radboud University, has found that 27% of European companies are actively using HR analytics for performance management.
As many factors were considered as to why HR analytics are or are not used, the researchers used a dataset of more than 20,000 firms from all over Europe, i.e. the 2019 European company survey (ECS) to study this. The survey asked both managers and employees in companies whether they use HR analytics to monitor employee performance and obtained many further details of the firms as well as on HRM. The researchers were then able to identify which factors do and do not matter in determining when a company decides to use HR analytics or not.
The researchers found that firms that monitor and manage the performance of their employees using HR analytics are often also the ones that use financial incentives to staff intensively. Hence, there appeared to be a positive relationship on the role financial incentives have on performance of employees and the use of HR analytics. They discovered that the larger the organisation, the more likely they were to invest in HR analytics for monitoring, although this effect appeared to taper off for the largest firms.
From this analysis, researchers also found that firms that operate in very competitive markets are on average more likely to use HR analytics than firms that indicate they operate in uncompetitive markets.
Professor Bechter says,
“Technological advancements and the digitalisation of business and management processes and activities have made it easy for all firms to implement HR analytics. However, we found that some legal barriers make it difficult for firms to use these new technologies as well as there is some organizational resistance to change and the use of new technologies.
In some firms, employees and the management fear that these new technologies might have negative implications on well‐being and health of safety of employees, as they are deemed as controlling. In old firms the resistance to change and the use of new technologies such as HR analytics is strong, despite potentially making management fairer.”
Interestingly, the researchers found no evidence to suggest that managers with a bad or distant relationship with employees increase their use of HR analytics– showing no systematic link between fraught relationships and monitoring. The researchers did also discover that the use of HR analytics increases with the number of hierarchical levels in an organisation.
Firms in which teamwork is important, e.g., where employees work in more than one team, were also more likely to implement monitoring HR analytics, whilst firms without managers are slightly less likely to use analytics than those with managers.
Professor Brandl says,
“This research clearly shows that the structural and managerial capability of firms is also a huge factor in whether or not firms make use of HR analytics for performance management. However, ever-increasing digitalisation of firms and of the economy, as well as the availability of (big) data, means the use of analytics is becoming increasingly attractive and important as a method for managing and monitoring the performance of their workforce effectively.”
These findings have practical insight for firms, showcasing the factors that can affect the likelihood of HR analytics being implemented, but for policymakers too helping them to understand which firms need help implementing HR analytics, the potential sticking points they are face in attempting to do so, and how to overcome these.