2:49 PM, November 27, 2022

Why aren’t HR analytics for performance management used more?

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| The European | 2 November 2022

Given how freely available HR analytics are, and how effective they can be, why don’t more companies use them? Bernd Brandl and Barbara Bechter of Durham University Business School look at the reasons.

There is no question that technology has made a rapid advancement in recent years, drastically changing the way in which we work. Firms have become more flexible, more collaborative and more efficient as it becomes easier to introduce innovative digital tools to speed up daily tasks, create new solutions to business challenges, reach new customers, and bring together geographically separate colleagues.

One benefit is the increased ability to scrape, analyse and utilise data in a company and use the information available to not only learn how the company can work better, but to also learn more about the company’s employees and how they can be motivated and incentivised to become more productive.

The collecting and storing of data by a company on their workforce can provide firms with the tools to take a more evidence‐based and therefore also a fairer approach to management and to analyse the information and quantitative data more systematically. Though often these HR analytics are perceived to be a positive for firms and employees too, their use is often accompanied by a lot of scepticism.

From a wider, societal perspective the benefits of the accumulation of data and the possibility for management to increasingly scrutinise it via ever more sophisticated analytical methods are ambiguous. Especially when focused on monitoring employees and using the data and analyses for performance management.

This is because, on the one hand, literature regularly emphasises the negative consequences the use of data‐driven HR practices and tools can have on work autonomy and control. More specifically research has shown that the use of HR analytics as a central mechanism to manage employee behaviour and control their performance more closely can have severe negative implications on their wellbeing, health and safety.

The plus side

However it’s not all negative. Research also suggests that there can be many positives for employees too when firms manage them through HR analytics. This management can positively affect occupational health and safety as well as employees’ perceived fairness in, and satisfaction with, management processes. Whilst for the companies implementing such technologies, they are able to keep closer tabs on their workforce and the productivity of their employees – which of course is a benefit as companies strive to become more efficient and provide a better service than their competitors.

Against this backdrop of ambiguity, it is perhaps not so puzzling that even though the use of HR analytics and the effective “exploitation” of the available information and data appears to offer an advantage for management, and arguably even more for employees, its use is by no means universal and many firms are not making use of its potential. With this in mind, alongside a colleague from Radboud University in the Netherlands, we investigated why some firms make use of HR analytics for managing and monitoring the performance of employees while others do not.

As there are many factors to be considered as to why HR analytics are used, we used a dataset of more than 20,000 firms from all over Europe, by utilising the 2019 European company survey (ECS) to study this. The survey asks both managers and employees whether or not they use HR analytics to monitor employee performance, and for them to provide many further details about their firms and their HRM practices. The survey also delves into the reasons as to why firms utilise these analytics and the benefits, or drawbacks, they see from these.

This provided us with the information that only 27% of European companies actually implemented HR analytics for performance management purposes. A surprisingly small number given the availability of these technologies and the potential benefits that can come from this for management. We also found a number of firm characteristics that affected whether or not they were likely to implement HR analytics for performance management purposes. For example, firms that monitor and manage the performance of their employees using HR analytics are also the ones that use financial incentives to motivate staff intensively.

Another key discovery revealed that the size of firms became a key factor in whether HR analytics were adopted. The larger the organisation, the more likely they were to invest in HR analytics, although this effect appeared to taper off for the largest firms. The competitiveness of a firm’s market also impacted the likelihood of them implementing analytics too. In fact, firms that operated in very competitive markets were on average more likely to use HR analytics than firms that indicate they operate in uncompetitive markets.

“Employees saw the negatives, rather than embrace the potential benefits”

What are the barriers?

But, given how freely available HR analytics are, how effective they can be in managing employee performance, and the potential benefits they can even bring to employees, why is it that so few companies are actually actively using them?

There’s a number of factors that come in to play when halting the implementation of HR analytics into a firm’s practices. We found how some legal barriers make it difficult for firms to use of these new technologies. For many firms, regulatory and legal framework in their location made it difficult for them to introduce such systems and really utilise the analytics for what they want to monitor. As a result, many firms do not bother going through a lengthy legal process to implement, or are too wary of breaking the law in implementation.

This is, interestingly, why we saw differing rates of HR analytics use across European countries. We found that Romania (50%), Croatia (45%), and Spain (43%) had high levels of performance management using HR analytics, whilst Germany (13%), Sweden (17%) and Ireland (19%) had low levels. Overall, firms in Nordic countries and coordinated market economies in general seem less inclined to use HR analytics for performance monitoring and management than their counterparts in Central and Eastern Europe. The reasons for these country differences are found in different legal regulations that allow companies to collect, store and analyse HR related data.

Whilst for others, organisational resistance was found when management attempts to implement these new technologies for performance management. Employees saw the negatives of HR analytics and viewed this as intrusive, as opposed to embracing the potential benefits. Therefore, employees pushed back against the proposed use, halting management from following through on HR analytics.

The idea of causing a rift between management and employees if the former were to be perceived as controlling, also causes many firms to decide against implementation. However, our research shows 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 HR management and monitoring using analytical methods.

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. It is likely that we will see more and more firms implement these tools, and it is important that policymakers help firms and employees to understand the benefits of doing so, whilst also utilising their powers to alleviate the challenges for firms in implementing.

ABOUT THE AUTHORS

Bernd Brandl is a Professor in Management, Director of Research of Management and Marketing Department at Durham University Business School. His research deals with methodological, empirical and theoretical research questions in the fields of employment relations and international HRM.
Barbara Bechter is Associate Professor of Human Resource Management. She is also Co-Director of the Wolfson Research Institute for Health and Wellbeing at Durham University. Barbara is interested in international and interdisciplinary research at the intersection between work organisations, society and economy.

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