Human capital analytics: Exploring a contingency model of executive decision making effectiveness, human resource capabilities, organisation culture and organisational performance

Decisions about human capital (HC) are high stakes for most businesses. These critical choices should be informed by accurate, timely and predictive information to solve strategic problems, reconcile dilemmas and evaluate progress (Boudreau, 2010; Fitz-enz, 2010; Rasmussen & Ulrich, 2015). In contrast to the enthusiasm shown for human capital analytics (HCA) by human resource practitioners, and the consulting and technology firms that work with them (Rasmussen & Ulrich, 2015), HCA remains a relatively new and slowly evolving science that has yet to develop metrics or analytics to explore key business challenges and strategic choices (Rasmussen & Ulrich, 2015; Wolfe, Wright, & Smart, 2006). In practice the use of predictive HCA appears low (Lawler & Boudreau, 2012; Marler & Boudreau, 2017). Access to big data continues to fuel the interest in analytics (Angrave, Charlwood, Kirkpatrick, Lawrence, & Stuart, 2016; Rasmussen & Ulrich, 2015), as has the development of strategic performance measurement and reporting tools that link ‘intangibles’ (i.e. HC, information capital and organisation capital) to strategy execution and performance, for example, the Kaplan and Norton (1992) balanced scorecard. Despite this interest, there is limited evidence that demonstrates the value of HCA (Johanson, Eklov, Holmgren, & MÂrtensson, 1999; Marler & Boudreau, 2017; Rasmussen & Ulrich, 2015). This study builds on the resource-based view (RBV), human resource accounting (HRA) and persuasion theory – in particular, the elaboration likelihood model (ELM) – to develop and test the mediators and moderators of the HCA effect on organisation performance (OP) and, in private-sector organisations, market performance (MP). The aim of the study is to empirically investigate how HCA impacts executive decision-making (EDM), OP, and in private-sector organisations, MP. Data were analysed from a sample of 383 executives from large public and private sector organisations in the United States of America, India and Australia. Statistical procedures included an exploratory factor analysis to confirm the measurement model, confirmatory factor analysis to validate the structural model, and structural equation modelling to test the theoretical or inner model incorporating hierarchical regression analysis and bootstrap analysis to test for mediation and moderation. Results reveal eight key findings that provide support for theoretical predictions that HCA provides the means to realise the benefits of HC. First, HCA that forms part of an organisation’s strategic performance measurement and management system is likely to predict OP and MP. Second, EDM and analytics system effectiveness (ASE) mediate the positive relationship between HCA and OP and between HCA and MP. Third, in private-sector organisations EDM, ASE, and OP are linked in a causal chain to mediate HCAs positive relationship with MP. Fourth, human resource executive ability (HREA) positively moderates the mediation effect of OP on MP and positively moderates the mediation effect of ASE on OP. Fifth, HREA and human resource role in strategy (HRS) interact such that HREA positively moderates and HRS negatively moderates the relationship between HCA and EDM and the relationship between HCA and ASE. Sixth, HREA and HRS interact to moderate the mediation effect of both EDM on OP and ASE on OP. Seventh, conditional indirect effects indicate that HREA and HRS interact such that the mediation effect of EDM on OP is stronger except when HREA is low or moderate and HRS is high, and in private-sector organisations, except when HREA is low and HRS is high. Eighth, market cultural type negatively moderates the positive relationship between HCA and EDM, and the relationship between HCA and OP in private sector organisation, such that the relationship is weaker when market culture is higher rather than lower. These findings offer several theoretical contributions and extend the theories of the RBV, HRA and its derivative human resource costing accounting, and ELM persuasion theory. These findings provide further support that HCA may provide a sustained competitive advantage as a dynamic capability that allows the rapid response to changing market conditions. While this study makes several contributions to theory and practice, there are some limitations. This study used a single-respondent cross-sectional survey approach that some argue contains significant measurement error (Gerhart, Wright, McMahan, & Snell, 2000), and others posit that respondents might base assessments of human resource practice on assessments of an organisation’s performance (Gardner, Wright, & Gerhart, 2000). To address these concerns, further research would benefit from longitudinal or historical approaches to understand the time compression diseconomies of competitive advantage, and qualitative approaches would likely contribute to the understanding of the social complexity aspect of HCA. In conclusion, this study makes several significant contributions for theory and practice in this emergent field of research.