Leveraging HR Analytics for Financial Performance: The Mediating Role of Data-Driven Decision Making

Abstract

This paper examines how adoption of HR analytics affects organizational financial efficiency using a mediating variable of data-driven decision making. With more and more organizations becoming dependent on the digital tools to derive HR capital management, it has become important to understand how HR analytics is translated into quantifiable financial results. The quantitative, cross-sectional research design was adopted to gather data of HR managers and middle-to-senior level employees working in the organizations where HR analytics systems have been deployed. The hypothesized relationships were tested using structural equation modeling. The findings suggest that the adoption of HR analytics has a positive impact on the financial efficiency, either directly or indirectly, due to the use of data to make decisions. The concept of data-driven decision making appeared as a powerful mediator, with the accent on two points: the analytics-based insights can be applied best when they are implemented into the decision-making processes in the organization. The results indicate the necessity of both implementing HR analytics and promoting a culture of evidence-based decision making to enable maximum financial performance. The research paper makes a contribution to HRM and finance literature by showing how HR analytics can be a strategic facilitator of financial effectiveness, which provides practical implications to any organization interested in enhancing resource distribution, cost control, and employee output.