Bridging the Digital HRM and Business Performance Gap: Exploring the Mediating Role of Employee Digital Literacy in the Banking Sector

Abstract

This study examines the role of Employee Digital Literacy (EDL) in mediating the relationship between Digital Human Resource Management (DHRM) practices and Business Performance (BP) in the banking sector. The research hypothesizes that DHRM practices positively influence EDL, which, in turn, positively impacts BP. A quantitative approach was adopted, surveying 180 employees across various positions (administrative, IT, senior management) in banks in Manama, (the capital city of Bahrain) with 145 valid responses, yielding an 80.55% response rate. Data were collected through a structured questionnaire, with scales for DHRM, BP, and EDL adapted from previous studies. The results indicate that DHRM significantly enhances both EDL (O = 0.447, T = 6.132, P = 0.000) and BP (O = 0.448, T = 6.295, P = 0.000), aligning with existing research on the positive impact of digital HR practices on performance outcomes. Furthermore, EDL positively influences BP (O = 0.418, T = 6.394, P = 0.000). Significantly, EDL mediates the relationship between DHRM and BP (O = 0.187, T = 4.183, P = 0.000), emphasizing its critical role in translating digital HR practices into improved business performance. These findings contribute to understanding digital HRM's impact on organizational success by highlighting the importance of developing digital competencies among employees.