CHAPTER TWO: LITERATURE REVIEW

Introduction

A literature review is a systematic and critical examination of existing scholarly research, academic articles,

books, and other sources relevant to a particular topic or area of study. It helps to understand the current state

of knowledge, identify gaps, and provide a theoretical and empirical foundation for the current study. A

well-conducted literature review demonstrates the researcher's awareness of the subject area and helps justify

the need for the current research.

In this chapter, the literature review focuses on the role of Human Resource Analytics (HRA) in strategic

decision-making. It highlights the theoretical and empirical insights from previous research and connects them

to the current study. By critically analyzing past findings, the chapter aims to position the current research

within the broader academic conversation.

Furthermore, this chapter includes a theoretical review, an empirical review of relevant variables, a conceptual

framework, a critique of the literature, a summary of key findings, and an identification of the research gaps.

Each section supports a deeper understanding of how HR analytics contributes to strategic organizational

decisions.

2.1 Theoretical Review

A theory is a structured set of principles and concepts that explains a phenomenon, guides inquiry, and

provides a framework for interpreting findings. Theories offer predictions and provide structure for the

collection and interpretation of data.

A theoretical review involves examining existing theories relevant to a topic, evaluating how they have been

used in past studies, and determining how they support or guide the current research. Theoretical reviews are

critical in aligning the study with foundational knowledge and providing a rationale for the research design

and variables.

This study draws on theories that explain the relationship between human resource practices and

organizational decision-making. The selected theory must align with the analytical and strategic nature of HR
functions. Therefore, Herzberg's Two-Factor Theory is selected due to its relevance in evaluating employee

performance and motivation-key outcomes that HR analytics seeks to enhance.

2.1.1 Herzberg's Two-Factor Theory

Herzberg's Two-Factor Theory, also known as the Motivation-Hygiene Theory, was formulated by Frederick

Herzberg in 1959. The theory classifies workplace factors into two categories: motivators (e.g., achievement,

recognition, responsibility) and hygiene factors (e.g., salary, company policies, working conditions).

According to Herzberg, motivators lead to job satisfaction, while hygiene factors, if inadequate, result in

dissatisfaction.

The theory posits that improving motivator factors increases employee satisfaction and productivity, while

addressing hygiene factors prevents dissatisfaction. It suggests that job satisfaction and dissatisfaction are

influenced by separate sets of factors and should be managed differently.

Herzberg's theory supports this study by providing a foundation for analyzing how HR analytics can be used

to track and enhance motivator and hygiene factors. For example, HR data can be analyzed to identify trends

in employee satisfaction, retention, and performance, thereby helping organizations make strategic decisions

that boost productivity and employee well-being.

2.2 Empirical Review

An empirical review involves the analysis and synthesis of research studies based on observed and measured

phenomena. It includes the evaluation of existing research findings derived through real-life data, as opposed

to theories or beliefs. According to Creswell (2014), empirical studies provide evidence to support or refute

assumptions, making them essential for validating research models and hypotheses.

In this section, the researcher reviews literature relevant to the main variables in this study-such as training,

performance, and HR analytics-to understand how they have been examined in other studies. The review

outlines the methodology, objectives, findings, and relevance of selected empirical studies to the current

research.

Empirical literature helps identify patterns and inconsistencies in previous research, offering a context within
which the current study can contribute new insights.

2.2.1 Training and Employee Performance

Study 1:

Ngure and Njiru (2014) conducted a study in Kenya examining the impact of training on employee

performance within the hospitality industry. The study aimed to assess how structured training programs

influence employee productivity. A descriptive survey design was used, involving questionnaires and

interviews. Findings revealed a strong correlation between training and improved service delivery. However,

the study lacked a focus on analytics-based evaluation, limiting its strategic insights. Its relevance lies in

highlighting training as a critical performance driver.

Study 2:

Kariuki (2018) investigated the effects of employee development on organizational performance in Kenyan

parastatals. The study used a mixed-methods approach with both qualitative and quantitative data collection.

Results showed that continuous training significantly boosted employee morale and output. A key strength

was the use of diverse data sources; however, it did not account for real-time data analysis through analytics

tools. This study reinforces the importance of workforce development for strategy alignment.

Study 3:

Muriithi and Wambugu (2020) explored the role of HR analytics in evaluating training effectiveness in

Nairobi-based tech firms. The study employed a case study design and used analytics dashboards to track

learning outcomes. Findings indicated that firms using HR analytics for training evaluation achieved better

ROI on training investments. The study is directly relevant as it shows the strategic value of HR analytics in

decision-making processes related to human capital development.

2.3 Conceptual Framework

A conceptual framework is a research tool that illustrates the relationship between the key variables in a study.

It provides a visual representation of how the independent variables influence the dependent variable, guiding

the research direction (Mugenda & Mugenda, 2003).

dependent variable is strategic decision-making. The conceptual framework shows how data-driven HR

practices impact strategic outcomes through measurable indicators such as performance metrics, training ROI,

and workforce trends.

The framework helps organize the study and ensure alignment between the objectives, variables, and research

methodology.

+-------------------+ +--------------------+
| HR Analytics | ----> | |
+-------------------+ | |
| Strategic Decision |
+-------------------+ ----> | Making |
| Training | | |
+-------------------+ | |
+--------------------+
+-------------------+
| Employee |
| Performance |
+-------------------+

Figure 2.1: Conceptual Framework

2.4 Critique of Literature

While the reviewed literature provides valuable insights into the link between HR practices and strategic

decision-making, many studies have not fully integrated the use of HR analytics. Some rely heavily on

qualitative data without leveraging real-time data systems that support proactive decision-making. Theories

such as Herzberg's provide foundational guidance, but they do not explicitly account for technological

advancements in HR practices.

Empirical studies, although informative, often overlook cross-industry or cultural variations in the

implementation of HR analytics. For example, many studies focused on large corporations and excluded

SMEs or public institutions where analytics might be underutilized. Additionally, some researchers failed to

examine the long-term impact of analytics-based strategies.

strategic outcomes across diverse organizational contexts.

2.5 Summary of the Literature

The objective of this literature review was to examine existing theories and empirical evidence on the role of

HR analytics in strategic decision-making. The main variables included HR analytics, training, and employee

performance, supported by Herzberg's Two-Factor Theory, which provides a psychological basis for analyzing

workforce motivation and productivity.

Theories such as RBV and Herzberg's model help explain how human capital and workplace conditions

influence organizational success. The reviewed empirical studies demonstrated the effectiveness of training

and performance evaluation but highlighted a gap in analytics-driven decision-making.

This chapter established a link between the study variables and the theoretical frameworks. For instance, HR

analytics serves as a tool to operationalize Herzberg's motivational factors, thereby influencing strategic

decisions such as promotions, training, and resource allocation.

By integrating theory and empirical evidence, the current study fills a crucial gap in understanding how HR

analytics can be used as a strategic tool in decision-making.

2.6 Research Gaps

A critical gap identified in the literature is the limited application of HR analytics in decision-making

processes within developing economies, including Kenya. Most existing studies focus on traditional HR

practices without incorporating data analytics as a strategic enabler.

Another gap lies in the lack of longitudinal studies examining the long-term effects of HR analytics on

performance and decision-making. Most research captures short-term insights, leaving the sustainability of

these practices largely unexplored.

Finally, while various studies acknowledge the value of training and performance management, few integrate

these elements under a unified analytics framework. This study aims to fill this gap by investigating how HR

analytics aligns with key HR functions to influence strategic outcomes in organizations.