The Role of e-HRM in Technology Startups

Abstract

This thesis explores how electronic human resource management (e-HRM) enhances employee performance in technology startups. During their transition phase, technology startups face challenges, such as maintaining effective communication, sustaining organizational culture, and managing growth. These challenges reduce employee performance, threatening the survival and growth of startups. Despite the potential of e-HRM to address these issues, there is limited research on its specific impact within startups. Existing e-HRM studies focus on large corporations or only broadly discuss startups, leaving a significant gap in understanding its effect in the entrepreneurial context. This gap is important because startups, unlike established firms, face unique challenges such as rapid growth, limited resources, and high failure rates. To close this literature gap, the thesis employs a qualitative research design, using semi-structured interviews with HR managers from 32 EU-based technology startups. The selected startups, founded between 2016 and 2022, employ between 35 and 249 people.
This research shows that e-HRM practices in technology startups primarily focus on administrative tasks (used by 94% of companies) and performance management (84%). However, practices related to employee relations, safety, and strategic HR are not frequently adopted.
The findings show that HR managers have mixed opinions on the impact of e-HRM on employee performance. Some argue that e-HRM systems primarily save administrative time and do not directly affect core performance metrics such as sales or primary business outcomes. Conversely, other HR managers report that e-HRM systems can enhance employee performance through employee engagement and feedback/ education. These systems should be user-friendly and reduce complexity in HR processes, and target employee engagement through addressing motivation, offering benefits, minimizing disruptions, and reducing confusion. To improve employee performance, performance management practices like employee evaluations and feedback mechanisms are indicated to be most suitable. Task tracking tools, while potentially increasing performance, often do not enhance engagement and may reduce it, thus their use should be carefully considered.
The study also identifies challenges that startups encounter when implementing e-HRM tools. Predominantly, people-related issues include employee reluctance to use e-HRM, the time-consuming nature, manager hesitancy, incorrect or incomplete software usage, and managing an too many tools. Despite the expectation that these startups, with their technological and innovative focus, would face minimal technological challenges, issues like data integration, system reliability, and user interface problems were also frequently reported.
In conclusion, e-HRM systems can have a positive effect on technology startups if implemented with a focus on time savings, simplicity, and employee engagement. Successful e-HRM implementation requires strategic planning that considers the values of all stakeholders, including employees, HR, line managers, and the founder. Communicating the change in advance helps mitigate challenges and ensures a smoother transition. With these findings, entrepreneurs in the field of HRTech learn which e-HRM characteristics are most important to HR managers (time savings) and which are most relevant to enhancing employee performance (employee engagement and feedback/education). At the same time, founders of technology startups and HR managers of those startups get to know which e-HRM practices are most relevant to improving employee performance (Performance Management tools) and that they need to communicate an e-HRM tool implementation early, including company stakeholders and explaining how the new tool helps the different internal stakeholders in their daily work.
The findings guide the reader on how to effectively use technology to improve HRM, enhance employee performance, prepare a technology startup for scaling, and increase the probability of startup success.