Block-what? Understanding blockchain and its potential for HR

Posted on 08 December 2017 by Tim Griffiths in Human Resources

HR is probably not the first industry you’d associate with blockchain technology, but if the various HR tech-focused conferences we’ve attended this year have taught us anything, it’s that blockchain, among many other disruptive technologies, looks set to impact the way the HR industry operates in the not too distant future. 

While it was originally introduced, and is most widely recognised, as the technical backbone of digital currency, Bitcoin, other uses for the technology are now emerging. According to technology market intelligence giant, IDC, blockchain can be defined as, “a data store that is distributed across a network among participants that are able to come to consensus on the validity of transactions”. Essentially it’s a shared database that stores irreversible data that’s accessible to a certain group of people and is duplicated across a number of computers and servers globally (for a fantastic layman’s terms description, check out this LinkedIn post from blockchain entrepreneur, Jamie Skella).

But, beyond all the technical jargon, what does blockchain mean for the HR profession?   

A recent report from PWC outlined four areas of HR that will be most heavily impacted by the introduction of blockchain: 

  • cross-border payments and mobility; 
  • talent sourcing and management; 
  • productivity gains;
  • cyber security/fraud prevention. 

These are all familiar and relatable challenges for HR professionals globally and, during the HR Technology Conference & Exposition in Las Vegas we attended in October, we heard experts predicting the technology could be in use within 18-24 months. 

So, it may be just around the corner but for the many professionals still trying to get their head around it, understanding the potential benefits of it will be the first step to accepting its introduction. 

Here are my predictions for the top three:

Streamlined processes 

Beyond the widely touted recruitment applications of the technology, there are a number of HR processes that could benefit from the introduction of blockchain. This is particularly true of the tasks that can be relatively straightforward in a domestic setting but come with challenges when conducted internationally, such as payroll - as reference by the PWC report. In this case, blockchain could assist with managing the complexities of differing tax obligations in multiple countries and potentially, in the future, even open up the opportunity for organisations to create their own corporate currencies. The technology can also offer organisations data integrity, via a digital ledger, that cannot be guaranteed with other data sharing methods. This means that as information moves through a process, HR professionals have peace of mind that they are meeting governance requirements at every step without the chance of data having been altered.   

Safeguarded agreements 

Typically, a certain amount of back-and-forth around approvals and discrepancies will get in the way of a personnel agreement or contract being signed by all parties involved. Blockchain could replace  the mediator role and convert contracts into computer code, stored and replicated on the system and overseen by the network of computers in the blockchain. These so called smart contracts will be similar to a traditional contracts, in terms of the conditions and penalties involved, but could simplify the process, eliminate the need for lawyers’ agreements, lower costs and increase speed of completion. 

Secure data

As the issue of protecting our organisations from the threat of a cyber attack becomes increasingly important, it weighs heavily on the shoulders of HR teams globally. It is, after all, an organisational department with access to a significant amount of personal data around potential and existing employees. The decentralisation of information on the blockchain database means records are public - albeit with a level of identity security - but crucially means there is no centralised version for hackers to corrupt. It will allow the transparency and ease that will enable us to make use of the employee data we collect, while eliminating any potential security and privacy threats.

Of course, as is the case with all disruptive technologies in their infancy, while there is great promise in the use of blockchain for recruitment and HR professionals, the reality is a little more challenging. The likelihood is that, in the short term, we will see blockchain applied in its simplest form, in order to just verify, record and document employee details. 

However, there are a number of legalities and compliance issues that are still to be ironed out before it becomes a universal reality for organisations - the fact that information around an employee’s previous salary, or personal information such as their age, for example, could become accessible via blockchain without their permission, could come up against data laws in certain markets. Of course this depends on the wider roll out of the technology and the privacy regulations that are eventually applied to it, but it’s difficult to fully understand those factors at this early stage.

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