How algorithmic HR systems impact motivation and wellbeing

Algorithmic HR systems impact employee motivation and wellbeing, and new research explores how perceptions of these systems shape employee behaviour

A range of technological developments, occupational forces, and sociological trends have recently combined to transform the process of managing employee performance and productivity.

From a technological perspective, one of the most significant developments in recent times is “management by algorithm”, which is already standard industry practice for workers in platform-based economies. And with the rise of remote and hybrid working through and post-covid, “bossware” has become increasingly popular as organisations seek to monitor and manage offsite workers. This has been accompanied by a general rise in employee monitoring in certain industries and organisations, with some overstepping the mark in the eyes of many – including regulators.

Algorithms go mainstream in HR systems

In a reflection of these trends, the integration of algorithmic HR systems into workplaces is growing rapidly. However, there is no guarantee that employees will happily accept these systems which boast new technological capabilities – for better or for worse. These systems (such as Oracle, Workday, Peakon and Microsoft Viva) can capture and analyse vast amounts of employee data, ranging from performance metrics to engagement levels. They promise to enhance efficiency and decision-making in HR practices.

However, their impact on employee motivation and wellbeing remains a complex and nuanced issue. As businesses increasingly rely on these technologies, understanding their effects becomes crucial for fostering a productive and healthy work environment, according to a new research paper, Managerial control or feedback provision: How perceptions of algorithmic HR systems shape employee motivation, behaviour, and wellbeing. Co-authored by Frederik Anseel, Professor of Management and Dean of UNSW Business School together with academics from The University of Queensland, including Professor of Management Martin Edwards, Research Fellow Elena Zubielevitch, Associate Dean (Academic) Tyler Okimoto and Associate Professor Stacey Parker, the research was based on a comprehensive survey among employees using algorithmic HR systems across a diverse range of industries and roles to capture a broad spectrum of experiences and attitudes.

Potential challenges of algorithmic HR systems

The research examined the factors that drive positive and negative behavioural change on the part of employees in response to algorithmic HR systems. It found that algorithmic HR systems can either enhance or undermine employee motivation, depending on how they are perceived by employees.

Read more: How Uber drivers revolt against algorithmic management

A key challenge lies in how employees interpret the purpose of these systems, according to the research. When employees view algorithmic HR systems as tools for managerial control, they often experience higher levels of extrinsic motivation. This means they are driven by external rewards or pressures, leading to increased focus on metricised tasks but also higher emotional exhaustion.

Emotional exhaustion is a key feature associated with performance-linked algorithmic HR systems, according to the researchers, who said workers often complain about feeling overextended and exhausted by one’s work because they feel controlled or coerced by “management by algorithm”.

“If organisations consider metricised algorithmic HR systems to be an effective hands-off management tool to deploy in order to control employees and foster high performance, they need to understand that when used for this purpose there is a likelihood that these systems will lead to harm,” the research paper stated. “Importantly, this harm may negate any potential beneficial performance outcomes that such a system could foster.”

The cost of this harm “may well be substantial”, and the researchers advised that the potential harm of misdirected implementation of these systems should not be ignored or downplayed. “This, of course, has important implications that need to be considered when HR is planning the deployment of algorithmic HR systems,” the paper stated.

Potential benefits of algorithmic HR systems

On the other hand, if employees perceive algorithmic HR systems as a source of constructive feedback, they are more likely to experience intrinsic motivation. Intrinsic motivation is driven by internal satisfaction and interest in the work itself, which can reduce emotional exhaustion and promote a more balanced approach to task prioritisation. “When feeling empowered or supported by algorithmic HR practices, more intrinsic motivational states can be fostered, which should make the experience of working more enjoyable (and less taxing),” the researchers noted.

In addition, when these feedback attributions are absent, automated monitoring and metric systems will likely reduce autonomous motivational states. “Importantly, we find that the greater an employee’s sense of autonomous motivation, the lower the likelihood that they will report emotional exhaustion. Thus, employee-centred HR attributions of feedback provision will likely play a key role in determining whether employees go on to experience negative wellbeing states in the context of algorithmic HR systems,” the research paper said.

“Over the past years, HR analytics has become a fashionable approach to human resources management,” said UNSW Business School’s Professor Anseel. “The advent of AI will only further accelerate this trend to metricise and automate traditional HR practices. It can be very tempting for HR people to join that movement, as the promise of efficiency and being seen as technology-advanced is tempting.”

Read more: The productivity divide: how AI will separate the strong from the weak

From dystopian to utopian: 4 solutions and key takeaways

From a business perspective, The University of Queensland’s Professor Edwards said it would be perfectly sensible for organisations to consider the introduction of automated HR systems that monitor and track employee performance; especially when they can then be deployed in a way that helps lead to automated recommendations of action such as reward and career progression.

“But as we show, while such systems may have positive effects, specifically with helping to focus employee priorities and attention, they come with potential pitfalls. If they are introduced and implemented without care, they are likely to do more harm than good. The right conditions need to exist for these systems to lead to positive outcomes on employee motivation, behaviour and wellbeing,” he said.

To harness the benefits of algorithmic HR systems while mitigating their drawbacks, businesses should focus on the following strategies:

1. Transparent communication: Clearly communicate the purpose of the HR system. Employees should understand that the system is designed to support their development and provide valuable feedback, not just to monitor and control their performance.

2. Supportive environment: Foster an organisational culture that values employee development and wellbeing. Ensure that the use of algorithmic HR systems aligns with these values and is perceived as a tool for growth rather than surveillance.

3. Employee involvement: Involve employees in the implementation process of these systems. Gather their feedback and address their concerns to build trust and acceptance.

4. Balanced metrics: Use a balanced approach in performance metrics. Focus not only on quantitative measures but also consider qualitative aspects of employee performance and contributions.

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Beware managerial control motives

Algorithmic HR systems hold significant potential for improving organisational efficiency and employee performance. However, their impact on motivation and wellbeing largely depends on employee perceptions.

From a practical perspective, the research paper said the “neither-good-nor-bad conclusion” should caution organisations to assure the very careful and appropriate introduction of algorithmic HR systems as a key step toward their successful adoption. “The most evident but no less important conclusion of our study is that if the systems are introduced as a form of managerial control of the workforce, harmful rather than beneficial outcomes may result.”

Professor Anseel concluded: “The findings from our research urge for caution when considering HR analytics choices. It is imperative that people clearly understand why you, as an organisation, are doing this and how they will benefit from it.”