The Janus face of artificial intelligence feedback: Deployment versus disclosure effects on employee performance

Abstract

AbstractCompanies are increasingly using artificial intelligence (AI) to provide performance feedback to employees, by tracking employee behavior at work, automating performance evaluations, and recommending job improvements. However, this application of AI has provoked much debate. On the one hand, powerful AI data analytics increase the quality of feedback, which may enhance employee productivity (“deployment effect”). On the other hand, employees may develop a negative perception of AI feedback once it is disclosed to them, thus harming their productivity (“disclosure effect”). We examine these two effects theoretically and test them empirically using data from a field experiment. We find strong evidence that both effects coexist, and that the adverse disclosure effect is mitigated by employees' tenure in the firm. These findings offer pivotal implications for management theory, practice, and public policies.Managerial abstractArtificial intelligence (AI) technologies are bound to transform how companies manage employees. We examine the use of AI to generate performance feedback for employees. We demonstrate that AI significantly increases the accuracy and consistency of the analyses of information collected, and the relevance of feedback to each employee. These advantages of AI help employees achieve greater job performance at scale, and thus create value for companies. However, our study also alerts companies to the negative effect of disclosing using AI to employee that results from employees' negative perceptions about the deployment of AI, which offsets the business value created by AI. To alleviate value‐destroying disclosure effect, we suggest that companies be more proactive in communicating with their employees about the objectives, benefits, and scope of AI applications in order to assuage their concerns. Moreover, the result of the allayed negative AI disclosure effect among employees with a longer tenure in the company suggests that companies may consider deploying AI in a tiered instead of a uniform fashion, that is, using AI to provide performance feedback to veteran employees but using human managers to provide performance feedback to novices.