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Management and
Technological Challenges
in the Digital Age
Manufacturing Design and Technology Series
Series Editor
J. Paulo Davim
PUBLISHED
Edited by
Pedro Novo Melo and Carolina Machado
CRC Press
Taylor & Francis Group
6000 Broken Sound Parkway NW, Suite 300
Boca Raton, FL 33487-2742
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Preface..................................................................................................................... vii
About the Editors....................................................................................................ix
List of Contributors.................................................................................................xi
v
Preface
vii
viii Preface
Carolina Machado
Braga, Portugal
About the Editors
Carolina Machado
School of Economics and Management
University of Minho
Braga, Portugal
ix
List of Contributors
xi
xii List of Contributors
CONTENTS
1.1 Introduction..................................................................................................... 1
1.2 What Is Big Data?............................................................................................ 5
1.3 Big Data Opportunities for HRM.................................................................6
1.4 Big Data Challenges for HRM.......................................................................9
1.5 What Is HR Analytics?................................................................................. 11
1.6 HR Analytics Opportunities for HRM...................................................... 13
1.7 Challenges of HR Analytics for HRM....................................................... 16
1.8 What Is Artificial Intelligence?................................................................... 19
1.9 Artificial Intelligence Opportunities for HRM........................................ 20
1.10 Challenges of Artificial Intelligence for HRM.......................................... 23
1.11 Conclusion..................................................................................................... 24
1.11.1 Partner in Strategy Execution......................................................... 25
1.11.2 Administrative Expert..................................................................... 25
1.11.3 Employee Champion........................................................................ 26
1.11.4 Change Agent.................................................................................... 26
References............................................................................................................... 27
1.1 Introduction
Digital technology, that is, virtually everything connected with comput-
ers, the internet, mobile apps and other related things (i.e., ‘the internet of
things’) that allow the sending and receiving of data, has had a profound
effect on the workplace. While the roots of this change occurred during the
end of the twentieth century, the pace has accelerated since the beginning
of the twenty-first century. Work and the workplace will be fundamentally
changed.
Many of the characteristics of the workplace that evolved to adapt to the
Industrial Revolution and the rise of large corporations in the 1900s no longer
1
2 Management and Technological Challenges in the Digital Age
fit with the needs of a workplace that has radically changed as a result of new
technologies. In the early 1900s at the beginning of the Industrial Revolution,
business owners and managers faced the challenges of marshalling large
numbers of employees under one roof to perform various parts of a process,
oftentimes in an assembly line (e.g., the early automobile manufacturers).
Coordinating these employees, many of whom spoke different languages
and came from different countries, posed additional challenges to organisa-
tions. One problem they had to solve was how to teach farmers and crafts-
men from an agrarian society, who were used to working either alone or in
small groups, to work together in a coordinated fashion in an urban environ-
ment in one large central location.
Taylor (1911) and the other purveyors of scientific management provided a
compelling answer: break jobs down into smaller chunks, teach employees
how to do specific tasks and then have them do those tasks repetitively to
develop proficiency. At this point in the evolution of industrial work, the
employees’ attitudes (e.g., job satisfaction, engagement etc.) were considered
only secondary, as the prime focus was on mass producing manufactured
goods cheaply and efficiently to meet the growing demands of consumers in
the marketplace.
As organisations grew larger, and the corporation became a dominant
business form, bureaucracies developed to do on the administrative side of
business what technologies such as the assembly line and scientific manage-
ment were doing on the operations side of the business. The classic hierarchi-
cal functional organisational structure evolved to efficiently handle the large
volume of information and decision making that occurred on a daily basis.
Specialised functions enabled specialised expertise that led to efficient func-
tional operations, albeit sometimes at the cost of sub-optimisation.
The need for a human resource (HR) function to handle the people side of
business operations grew as the size of organisations grew. National Cash
Register Corporation is reported to have been the first company to create
an HR department in 1901 (Jacoby, 1985). Other corporations were soon to
follow. Early personnel departments, as they were known at the time, were
given the task of bringing order and harmony to what could otherwise be a
place of employee unrest. Unions grew in response to workers’ unmet con-
cerns, and personnel departments developed tactics to dilute their influence.
In fact, many progressive policies and practices were implemented during
this time period that were precursors to modern human resource manage-
ment (HRM) practices (Kaufman, 2002). Sub-functions of HRM developed
to address the needs of employees across their entire tenure with a firm:
recruiting, selection, training and development, performance management,
compensation and benefits, and employee/labour relations.
The dominant form of employment during the twentieth century was the
full-time job. A full-time job meant that work was performed on a fixed sched-
ule at a firm’s place of business and under the firm’s control, and there was
a mutual expectation of continued employment (Spreitzer et al., 2017). Other
Human Resource Management in the Digital Age 3
The chapter is organised as follows. First, we describe each trend and the
necessary concepts and jargon that accompany it. This provides a general
introduction to the topic. Second, we describe how each trend has the poten-
tial to impact HRM. In many cases, we provide contemporary examples
of how organisations are exploring the use of a new practice related to the
trend. Third, we identify some of the challenges for HRM associated with
the trend. We conclude the chapter with a discussion of how the HR function
and HR professionals will change in the future.
some structure to help manipulate and analyse it, but it requires analysts to
fill in the gaps, such as data collected from the email accounts of employees
used to study interaction patterns. Unstructured data, on the other hand,
places the burden on the analyst to make sense of it and impose a struc-
ture, such as hours of continuous video, recorded human speech and so on.
Unstructured data is anything that cannot be put into relational databases
in such a way that it relates to other data via tables. Variety also refers to the
different sources from which data may originate: internal to the organisation
vs. external to the organisation, publicly available vs. private, actively gener-
ated vs. passively generated.
Big data provides new opportunities for HRM. Rather than guessing,
using intuition or simply copying what other companies are doing, big data
makes it possible for the HR function to become more data-driven. These
opportunities for HRM will be discussed next.
can now be replaced by big data availability. As McAbee et al. (2017) point
out, big data also can be used to pre-populate job application forms in the
initial stages of selection, changing the role of applicant from ‘information
provider’ to ‘fact checker’. This will put increasing pressure on organisations
to verify information that is obtained in this manner, and for applicants to
have opportunities to verify information they do not supply themselves.
With large amounts of personal information available on virtually every-
one on the internet, there is much potential for illegal discrimination. For
example, if a photo has ever been shared, an employer could easily use illegal
information (e.g., race or sex) in making employment decisions. To counter
this possibility, companies are emerging to ensure that hiring processes do
not include potentially biasing information. Blendoor (blendoor.com), which
has been described as a reverse Tinderlike app, takes candidate information
and hides photos, name, age, employment history and criminal background,
passing on only qualifications to potential employers. Presumably, this helps
ensure that only job-related information is considered in the employment
process.
Large data clearinghouses also are emerging that allow applicants to have
their qualifications tested and then sent to employers, similarly to the way
that high school students are tested for college entrance and then results are
sent to specified colleges and universities. Redfash tests and interviews can-
didates once, and then results are sent to employers of their choice (Lindzon,
2016). This type of platform has the potential to eliminate time-consuming
and costly pre-employment phases for employers, and candidates going
through basically the same pre-employment interview over and over again
in the pursuit of employment. While Redfash is tailored to the high tech
industry, undoubtedly other industries will follow.
Biometric data (unique physical or behavioural characteristics such as
fingerprints or voice patterns) obtained from wearables such as Microsoft
Band 2 and the Jawbone UP3 provide unobtrusive measures that could be
useful for hiring and other purposes. Mundell, Vielma and Zaman (2016)
found that by using galvanic skin response, or measuring ‘sweat’ under
low stress conditions, they were able to predict which participants in their
study would perform well under high stress conditions. Over 130 million
people track this data through wearables, making it an efficient data collec-
tion source (Zaman, 2016). Furthermore, while employers cannot ask appli-
cants about their medical history, fitness trackers are not considered medical
devices, so they represent a legal source of employee data (of course, assum-
ing informed consent and ethical use).
The National Basketball Association (NBA) uses biometric data collected
through wearables on players to manage their performance and prevent inju-
ries (Knowledge at Wharton, 2017). They track player movements both on the
basketball court as well as off the court, monitoring information about their
diets and assessing potential indicators of fatigue such as saliva. Because
there is a correlation between fatigue and injury, these biometrics provide
8 Management and Technological Challenges in the Digital Age
valuable data for managing player minutes and resting them for maximum
performance. Similar measures could be used in other occupations where
fatigue plays a role in accidents and loss of life (e.g., long-haul truck driv-
ers, airline pilots and so on). Companies such as Deloitte are using travel
data, billing hours and other human performance data to help employees
improve their levels of energy, wellness and business performance (Collins
et al., 2017).
Real-time performance management and feedback are now possible due
to the availability of big data. For example, Delta Air Lines uses a system to
provide many of its pilots with objective feedback regarding their level of
flying skills almost immediately after takeoff and touchdown (Pasztor, 2017).
Because of the length of some of their jets, the planes’ tails are vulnerable to
damage if the nose is raised too quickly or too high or if landing speeds are
not precise; consequently, this type of performance feedback is extremely
valuable. Since feedback that is objective and timely has the most impact on
improving performance, this type of technology holds promise for jobs that
have similar human–machine interactions.
Analysing large volumes of unstructured data, such as employees’ emails,
online calendars and chat logs, as well as capturing employee physical
movements (like the NBA) helps some employers better understand com-
munication patterns and the flow of information, making it possible to
improve operations by changing both social as well as physical structures.
Companies such as BCG have asked employees to voluntarily wear sensor-
laden ID badges that track who they talk to, how much time they spend
in conversation, and other data that allows them to improve team perfor-
mance (Gee, 2017). This helped the company to cut down on time-consum-
ing meetings, vague emails and unnecessary training sessions. In addition,
BCG designed a town-square style lounge area, provided free breakfast and
lunch, and encouraged employees to stop for coffee and snacks throughout
the day, all in order to create more random commingling opportunities to
promote efficiency.
McAbee et al. (2017) report a study in which unstructured data in the
form of videos was collected as part of a training intervention to improve
safety at an organisation. In an attempt to improve the efficiency of ware-
house operations, the company developed a training programme teaching
employees the best ways to handle various operations. After the training,
efficiency did indeed improve. As part of the study, video cameras in the
warehouse recorded employees’ behaviours during their shifts, and later
analyses revealed that while the employees were working more efficiently,
they were doing so by taking shortcuts and increasing safety risks. These
analyses led to further training to ensure that efficiency was not obtained at
the expense of safety.
Clearly, these examples represent only the tip of the iceberg when it comes
to the possibility of big data use in HRM. These uses have the potential to
increase both efficiency and effectiveness in operations, and can have an
Human Resource Management in the Digital Age 9
big data produces uncannily accurate results; that every single data
point can be captured making old statistical sampling techniques obso-
lete; that it is passé to fret about what causes what, because statistical cor-
relation tells us what we need to know; and that scientific or statistical
models aren’t needed because … with enough data, the numbers speak
for themselves.
(Harford, 2014)
Big data does not guarantee good inferences. Tim Harford describes
how several years ago, Google attempted to predict the spread of influenza
based upon individuals’ searches on the Centers for Disease Control. Using
algorithms that scoured search terms such as ‘flu symptoms’ or ‘pharma-
cies near me’ looking for patterns, Google tracked the outbreak by finding a
correlation between what people searched online and whether they had flu
symptoms. After several winters of good predictions, their estimates of the
spread of flu-like illnesses were overstated by almost a factor of two. With no
underlying theory and no hypotheses, Google Flu Trends was bound to fail
at some point. Correlation is not causation.
While big data provides virtually limitless possibilities for collecting and
using data for HRM, both researchers and practitioners are cautioned to con-
sider a set of criteria for judging what data to use. Data can be classified
as (1) ‘can get’, meaning it may be possible to obtain or acquire the data,
(2) ‘useful’, meaning the data is useful for decision making or a manage-
ment purpose in HRM, (3) ‘legal’, meaning it is legal to use the data for HRM
decision making and management and (4) ‘ethical’, meaning the data has
been acquired with informed consent and is used appropriately in an organ-
isational context. Although the data may be available, this does not mean
you should use it. Before obtaining and using data for decision making and
management in HRM, it should pass all four tests.
10 Management and Technological Challenges in the Digital Age
Useful data in an HRM context means that it should have some relation
to improving job and operational performance. Wright (2008) presents a
strategic HRM model that gives researchers and practitioners guidance on
deciding what data is useful. First, data regarding characteristics of HR pro-
grammes, practices and policies that cover the basic functions of HR is useful
data (e.g., recruitment, selection, training, development, performance man-
agement, rewards, communication). Second, data regarding ‘what employ-
ees have’, meaning knowledge, skills, abilities, competencies and social
capital, is useful data. Third, data regarding ‘what employees feel’, meaning
attitudes such as motivation, commitment, engagement and satisfaction, is
useful data. Fourth, data regarding ‘what employees do’, or behaviours such
as task behaviour, discretionary behaviour, counterproductive behaviour,
attendance and turnover, is useful data. HRM data can then be linked with
databases from other areas of the organisation (e.g., customer outcomes –
satisfaction, retention; operational outcomes – productivity, quality, shrink-
age, accidents; financial outcomes – expenses, revenues, profits) to provide
insights into causal relations that lead to organisational/business success.
Legal data in an HRM context means that it complies with various equal
employment opportunity and labour laws. While there are myriad laws
providing regulations on how data is used in HRM (and they should be
consulted for specifics), one general rule for guiding researchers and practi-
tioners is to determine whether it is (1) job-related and (2) necessary for the
successful functioning of the business (Grover, 1995).
Ethical data in an HRM context means that it is collected with consent
and used appropriately to manage people and make business decisions.
Universities require their researching faculties to submit proposed stud-
ies to an institutional review board (IRB) to ensure that the potential for
harm to participants is minimised. Researchers are trained in what prac-
tices are acceptable, and their proposed research studies are subjected
to peer review before receiving approval. However, organisations rely
more on professional behaviour and self-monitoring when doing simi-
lar research, but focused on organisational needs. With more access to
personal data, even medical information provided by such devices as
Fitbits that monitor health status, the potential for abuse seems large.
Three issues are extremely important in collecting data from employ-
ees: (1) privacy/confidentiality – individuals should have the ability to
manage the flow of private information used by organisations, (2) trans-
parency – individuals should be able to see how their data will be used
and (3) informed consent – individuals should have the ability to either
opt in or opt out of data collection on them. Guenole and Ferrar (2014)
summarised these requirements of HR data collected on individuals:
(1) providing feedback about the data from those who are affected, (2) giv-
ing individuals the option to share personal data or relying on an opt-in
policy, (3) recognising the benefits to those affected and (4) ensuring trans-
parency in data collection (or FORT for short).
Human Resource Management in the Digital Age 11
analytics provides data and insight into what has happened in the past.
Examples of descriptive HR analytics include monthly, quarterly, or annual
turnover rates, hiring rates by department, number of promotions and so
on. Descriptive analytics can be used to answer surface-level questions
such as: What is the average time it takes for employees to be productive
in the entry-level management job? Diagnostic analytics provides data and
insight into why something happened. Diagnostic analytics can be used to
answer deeper-level questions, such as: Why is turnover higher in our Iowa
stores? Predictive analytics provides data and insight into what may hap-
pen in the future. Examples of predictive HR analytics include predicting
which employees may leave the organisation, which applicants will be good
job performers, how changes in incentive systems will affect product sales,
which employees may be injured on the job, and so on. Prescriptive analytics
provides data and insight into what actions should be taken. For example, an
internal organisational study might demonstrate that one method of training
is more effective than an alternative and should be used with line workers.
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