How will blockchain hit HR?

October 22, 2018
Chris Wheal

As an industry, human resources – or HR – is responsive to a host of digital technology changes from cloud computing, machine learning through to artificial intelligence. However, when it comes to the adoption of blockchain everything the industry has outlined so far reads more like a wish list than a to do list.

Blockchain is a decentralised, distributed system where information stored on blockchain is accessible anywhere, any time. It is also secure, authenticated and verifiable. Across industries early adopters are using the platform for digital identity, asset management and tracking, regulatory compliance/auditing, distributed storage, smart contracts and cryptocurrency payments.

The potential for HR is the ability of blockchain to slash costs and time dedicated to labour intensive tasks of verification and record keeping. However, Deloitte and PwC have both published reports about global human capital trends for 2018 and blockchain receives nary a mention on the lists of opportunities, let alone concerns, of HR professionals.

Revolution is digital

To be clear there is a digital revolution underway in HR and currently the two primary drivers are machine learning and data science. A report by Hays exploring the evolution of the recruitment industry details how data science, machine learning, predictive analytics and other digital tools are already complementing human skills to match candidates with organisations.

In its 2017 report, Deloitte too examines what is propelling HR digitally and notes that while HR’s prior responsibilities have remained the same “HR departments today are under pressure to rewrite the rules”.

Those rewritten rules according to Deloitte are primarily:

  • redesigning talent practices, from recruiting to leadership to performance management;
  • experimenting with digital apps
  • building a compelling employee experience

HR professionals are also undertaking these responsibilities in a context of other changes in HR such as in redesigning an organisation around teams; implementing analytics and organisational network analysis as well as a continuing focus on diversity, culture, learning, and careers.

HR shake up

However, blockchain continues its pole position at the top of a wish list of things the industry will explore and its potential to shake up HR is commented on regularly. Nick Deligiannis, a managing director of recruitment company Hays in Australia and New Zealand, said earlier this year in Recruitment International, “Blockchain’s implications for the finance industry are well-known, but the potential to use the technology in the world of work is huge and it will soon transform HR and recruitment.”

The benefits of blockchain are clear to anyone who has been employed, anywhere. Identification is required and stored but accessible across the world. With employees required to be mobile, sometimes globally, blockchain offers the potential to change not only payment transactions but heavy time-consuming HR processes in a more efficient and error-free way.

However, there is an understandable caution to bringing in blockchain onboard to any corporate juggernaut. Is a new platform grafted on or is it weaved in to a new digital strategy that is responsive to what feels like lightning fast technological changes of today?

Blockchain: we’re here to help

CompTIA, the IT industry forum, considers that the options most organisations pursue are “incremental transitions, upgrading or adding technology piecemeal, followed by adjustments to workflows.”

Unfortunately, CompTIA assesses it to be an inadequate approach and suggest CEOs and boardrooms wrap their heads around an organisational mindset that proactively plans for a digital future. But having a digital future also requires individuals with the skills to manage it.

Even as the platform-based structures are built in to organisations that are more digitally empowered, Deloitte’s research shows that the high-performing HR teams will have fewer generalists and more senior HR business partners. Thus, requiring many HR departments to reskill their HR staff and providing new roles as senior consultants to leverage the digital tools in place.

Blockchain is already changing the way payment transactions are carried out and has the added bonus of streamlining key aspects of HR processes with greater efficiency and accuracy. Three chief areas that are likely to be upended are:

  • Talent search and acquisition
  • Travel and expenses
  • Data security, fraud prevention and cyber security

Where there’s talent

Talent acquisition is a key area where HR can leverage the greatest potential from blockchain and provide the greatest cost savings according to PwC. It’s impossible to doctor information stored on the blockchain so a candidate’s details and background information such as educational certificates, work experience and salary will be validated ensuring a higher level of trust and the elimination of a third party to verify information.

Around 51% of early adopters of blockchain use it to verify identities according to CompTIA. Blockchain can be used to verify individuals’ identities, qualifications, credentials and experiences during the recruitment process. Referencing would be a thing of the past because information is stored on the blockchain.

In tandem with machine learning, organisations can winnow swiftly through qualified resumes to accurately identify and verify suitable candidates and complete a search. Currently, this is still a complex and time-consuming task but as Raj Mody, partner in PwC’s HR consulting business says: “Time might not be a luxury you have because speed of delivery might be the only thing that gives you a competitive advantage. If that’s the case, then being able to use blockchain to really understand the power of your workforce could come into its own.”

Equally candidates will have full ownership of their data and can share it securely through the platform. The record of education, skills, training and workplace performance will become a “value passport”.

In addition, PwC suggests this portable and up-to-date “value passport” could encourage “behavioural and cultural change in organisations and the workforce providing greater benefits both to individuals and employers as the trend towards the gig economy continues and younger people change jobs more frequently or opt for portfolio careers.”

Another bonus is that the free wielding of information among the younger “more relaxed” generation would be done in a more secure and trustworthy way on the blockchain.

Have blockchain will travel

For anyone who has ever had to fill in an expense form, the idea that it could go the way of the dinosaur is a big plus. Processing expenses is an area where HR can seize value by tracking expenses and attendance on the blockchain platform easily processing claims in real time.

In a paper, PwC highlights the depth of opportunity available when it comes to international workforces and cross-border payment and mobility with the potential for “many applications”.

One such idea is the potential for multinational businesses to create their own blockchain-based corporate currencies or ‘coins’ to transfer value across their business globally and transact with their supply chain without the need for third party reconciliation.

Instead of the multi-signature processes systems that predominate, what if blockchain could allow for embedded restrictions and the level of spending, approved suppliers and hotels make it a lot simpler process. The same for mobility and data collection where employees need to comply with various tax jurisdictions.

Deal with fraud

HR deals with high volumes of personal data and financial transactions cyber security and fraud prevention are top priorities.

The risk of fraud increased because of the lack of transparency in systems and data. That can be countered by blockchain. A report in 2017 showed that close to 50% of HR departments do not know when their cyber security was last considered.

Long relegated to be a problem of IT departments, HR departments have come under further scrutiny as part of the problem and its potential solution. The average cost of data breaches according to a recent IBM study year’s study is up 6.4% in 2018 over the previous year to $3.86m.

Some of those breaches come as a result of unintended negligence by employees. Steve Herbert, head of benefits strategy at Jelf Employee Benefits commenting on IBM data that showed 60% of ransomware attacks were a result of insider activity said: “It is widely accepted that one of the biggest risks in cyber security is centred on employees, be that because of inadvertent mistakes or direct criminal activity.”

He added: “It therefore follows that human resources professionals have a key role to play in managing and mitigating this risk. It is no longer sufficient to expect this problem to be owned by the IT team alone.”

SMEs in particular who are often unprepared for cyber threats may benefit greatly from the integrity of information on blockchain.

Eyes on the prize

There are other pain points in the industry requiring simplification of processes that are likely to benefit from the added value of blockchain. These include payroll and the use of smart contracts where, for example, once certain conditions are met, employees could receive bonuses or some other benefit.

Because these are pressing concerns and blockchain can fix them, blockchain is inevitable for HR, as it is for other industries. As PwC points out, business processes and data were often treated separately but become unified under blockchain. The tech comes second as HR executives first contemplate the problems they wants to resolve then how blockchain can address them.

It is also likely to become another strand of the digital transformation that many HR departments are using to try to meet a changing workforce’s needs. Business and digital strategies will lead the way then prototypes and proofs of concepts for use cases can be developed.

Steps taken are necessarily cautious, as Jacky Carter, group digital engagement director at Hays states: “In Hays’ case, we would have to be 100% satisfied in the stability and security of any system before we implemented it – we’re dealing with people’s livelihoods and identities.”

She added: “At the moment it’s a case of closely watching it as the technology evolves, understanding what technology is being delivered, how trust is being built and looking at how that could potentially impact our world.”

 

 

 

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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