Impact Of Digital Transformation On HR Practices

Abstract

This Study examines how the digital transformation (DT) affects employee outcomes within the human resource management (HRM). Basing our arguments on the resource-based and dynamic capabilities perspectives, we say that the value of DT is not in the availability of digital technologies but in their incorporation into high-quality HR practices. We test a three-path mechanism using a cross-sectional survey of 139 employees representing a mix of industries and organizations with varying numbers of employees: (a) DT adoption leads to improved HR practice quality; (b) HR practice quality predicts satisfaction; and (c) satisfaction predicts retention intention. Ordinary least squares models, mediation bootstrapping, and structural equation modeling results all indicate an indirect pathway, with a mediated effect of DT on employee outcomes occurring mainly via better HR practices and satisfaction. There were insignificant direct DT-outcome effects. The robustness of results is supported by robustness checks across clustering, ordinal models, and imputation. The study also adds value by explaining the micro-mechanism between DT and people outcomes, and by indicating the quality of HR practices as the immediate catalyst of employee attitudes. To practitioners, the results highlight that DT investments are only effective in providing benefit in terms of retention when incorporated in transparent performance processes, effective learning and development, efficient recruitment and engaging digital tools.