Article: Here's how blockchain is going to impact human resources

HR Technology

Here's how blockchain is going to impact human resources

Blockchain, with its decentralized system, promises to change lives in many different ways its potential applications being quite rich, varied, and extensive across a host of functional domains, and one such domain being the HR
Here's how blockchain is going to impact human resources

From shopping for goods and tracking banking transactions, to renting cars and protecting critical assets, Blockchain technology has veritably become the final word in ensuring secure, efficient and smooth operations of an enterprise. Originally leveraged and popularized by the digital currency, Bitcoin, this technology now seems poised to become the backbone of the new-age Internet, with new and novel potential uses for the technology designed.

Most of us often perceive Blockchain as a secure Payment option, and use it interchangeably with Cryptocurrency (Bitcoin, for example), when, in fact, there’s much more to this technology than just being a secure payment technology. For the uninitiated, Blockchain refers to a digital, decentralized ledger of anything that can be digitally represented and verified. It is essentially used to track all kinds of information and is largely immune to fraud, falsification, and modification.

Blockchain, with its decentralized system, promises to change our lives in many different ways, its potential applications being quite rich, varied, and extensive across a host of functional domains. One such domain is Human Resources (HR), the custodian of the most valuable asset an organization possesses – its People. While Blockchain will continue to draw attention and application in managing finances and supply chains, HR could be an amazing fit as well – the key difference in HR being that organizations would be validating the authenticity of their employee information, rather than general assets and transactions.

Knowing and understanding employees is much more important for organizations today than ever before. With rapid globalization of economies, organizations face unprecedented challenges in the global marketplace. Employees, being the crucial bearers of knowledge, technology, and service, represent the core component of enterprise management. While nothing can substitute the strategic value and significance of human resources for the continuing development of enterprises, it is needless to say that the authenticity of human resource information assumes paramount importance in ensuring cost and efficiency of human resource management. With the expansive prevalence and usage of Internet technologies and mobile devices, the resulting information asymmetry could trigger human resource risks, and potential economic losses, to enterprises. Here is where Blockchain could come to the rescue — it can combine the conventional encryption technology with distributed Internet technology to establish an HR information management model that addresses the risk concerning the authenticity of human resource information.

This Blockchain-based model could solve the issues concerning the authenticity of human resource information and provide authentic and effective decision support information to the human resource management of an organization. This operating model driven by Blockchain could be used to certify the human resource documentation as well as to bind the information and the documentation. What’s more, the HR information could be recorded in an HR Ledger (call it a specialized HR Accounting book) based on Blockchain technology – any modification may then be difficult in the entire network since that would require a validation from each certifier. In case of employees, the certifiers could range from Universities and Employers to Certification bodies and Security agencies.

Potential applications of Blockchain-based HR Information Management model



Typically, Blockchain can be applied to processes that are time-consuming, unwieldy, involve much human effort and costs owing to the need for significant data collection and third-party validation. That would make the following tracks of the employee lifecycle potential candidates for such a transformation:

  • Recruitment and Selection

  • Employee Onboarding

  • Compensation Management

  • Performance Management

  • Employee Exit

In recruitment and selection, for example, Blockchain could identify who is visiting your recruitment portal in real-time, effectively engage with them and present them the right set of jobs and competencies to tag against. Personalizing the job profiles for prospective candidates will ensure that you attract the people for the jobs published on your site.

Furthermore, the interview process for assessing the behavioral and technical competencies could be put on the Blockchain. By doing so, the competency for the prospective employee can be stored for future references in case the prospect reapplies for the job. This would result in the organization only assessing the previous pitfalls pointed out in the assessment, leading to a better-structured interview process for selection of a role. In case the prospective employee is selected, then the competency results mapped in the interview process would become the base competency set for career progression and learning development activities for the employee in the organization.

While an employee is being on-boarded, most organizations have a background check policy, verifying the credentials of the new employee against what is mentioned in their CV. This background check process primarily still follows checks by e-mails, references, and physical location checks to judge the employee’s CV veracity. By having schools, colleges, and organizations on larger Blockchains that speak to each other, an individual would have a series of immutable records which would act as the background check against the CV. The organization that would want to have a background check to be conducted for an employee, would contact the administrator organization for the required information. Such a process would result in a reduction in TAT required for completing a background verification for an employee and would also ensure lesser heartburn in cases where the employee has joined the organization and is then found to have a dodgy result in the background check, resulting in termination of employment or souring of relations at that point, resulting in a poor onboarding experience.

Consider an example - John has worked in ABC org. for 5 years prior to applying to a new organization. In the current setup, an email would be sent to ABC org. for a background check on John to verify his credentials and experience details. The organization may or may not respond to placing John’s candidature at risk. In many cases, ABC org. may cease to exist – this is especially true with myriad start-ups, which either wind up operations or are acquired in a few years, losing their identities. Now, think about how this could have been checked directly by raising a request to the central Blockchain administrator. Similarly, validation of educational qualifications would normally require a long validation exercise through outsourced firms for months on end. But with Blockchain, this exercise could be accomplished through the central Blockchain administrator.

If there are large Blockchains for school boards, college boards, and organizations of a related industry, these Blockchains can then be accessed via a central repository for background verification of all new hires. In this kind of a setup, the data feed to the Blockchain could be via the HRMS system used in the organization. The HRMS system would have to be integrated with the distributed Blockchain, of course, from where the Blockchain would pick up the necessary parameters. This kind of data validation assumes more relevance in an ecosystem where jobs are not going to be of a permanent kind anymore – a vast majority of them would soon become ‘on demand.’ In such a mutable scenario, where jobs are not necessarily fulltime, and companies appear and disappear at a quicker rate than ever before, a central repository of authenticated, genuine data source would ensure quicker and easier background checks.

Such a Blockchain-driven model has great relevance for internal job mobility as well, with hundreds of thousands of internal jobs being posted and fulfilled on an organization’s Internal Job Portal (IJP) on a regular basis. The traditional model runs through a long and arduous litany of checks and validations before someone is eventually selected for an IJP position, leading to delays in deployment. In most such cases, it’s often difficult to validate the contributions of the employee on the past projects, especially when the Project Managers concerned have left the organization. 

For large project and services organizations, internal job placement of employees on a new project is a mini exercise in recruitment itself. The project manager or the internal recruiter has to vet a multitude of CVs, interview them and cross verify them against the references from the previous project managers. And even after doing all this, there is no guarantee of success of the employee.

With the Blockchain-driven scenario, however, the validation process becomes automated, with most validations happening by way of the IJP integration with the industry Blockchains. For all validations, such as the duration spent on a project for an external client, nature of work performed, and client awards and citations, the necessary information could be sought from the distributed HR ledgers from various organizations via the central Blockchain administrator. Consequently, the internal recruiter can simply access the Blockchain and either look up the profile by searching for a few keywords or going through the profile saved on the blocks. These blocks would hold various pieces of information from previous projects, client citations, employee competencies, and project citations. This lends veracity to the candidate’s CV.

Compensation management has been an irritant for HR, especially when it comes to managing the benefits and payables for employees deployed globally – accounting for local taxation, benefits computation, adjusting for exchange rates, and other works. It takes a significant amount of time today to complete the validations via third-party banks, accounting firms, and other financial intermediaries. With Blockchain, however, this situation could be simplified immensely by converting money into “virtual corporate currencies (call it “CorpCoin,” if you will), with provision for convertibility into multiple currencies, and also direct payment to employees without passing through the host of intermediaries. Additionally, assuming an employee becomes eligible for a certain benefit coverage at the end of a designated probationary period, the certification of the closure of the probationary period by his/her People Manager will trigger the associated Blockchain for benefit workflow, resulting in the release of the concerned benefits. This could easily apply to contingent (temporary) workers as well and could be leveraged to manage their wage computations and validations.

As of now, managing expatriate compensation, their payout, and taxation of the compensation is a complicated process, involving multiple parties, and a complex set of forms to be processed for the compensation to be paid out. This process and documentation hound expatriates long after they have completed their tenures. At times, expatriate compensation involves as many as six agencies, government agencies included. The data sharing amongst these agencies is often lost among the paperwork and takes ages to settle and reconcile the differences. Having the entire compensation management process on Blockchain, along with the associated taxation laws and codes, encoded into a smart contract, the process can be simplified to no ends. Linking the employee tenure using the appropriate HRMS and Travel Management systems, the period of stay for the expatriate can be ascertained and the payout to everyone involved appropriately calculated and executed. This would ensure that the employee faces few hassles, ultimately resulting in an elevated employee experience. The added benefit of having such a process would be the tax compliance with government agencies, reducing risk exposures for the employee, as well as the employer from future tax litigations/penalties.

Managing employee competencies has been another aspect of performance management that continues to bedevil HR, given that employees do not necessarily learn and enhance their skills and competencies within the limited context of their organizations. Today, they frequently enroll, complete courses as varied as MOOC (Coursera, edX, Udacity, etc.) and Social Learning (Udemy, LearnCentral, etc.) and Game-based learning (Lynda, Kaggle, etc.) – and acquire badges and certifications through third-party institutions. However, it takes ages for them to get their credentials validated and updated in the organization that an existing employee has a change in their competencies for career progression repository. With Blockchain, however, it can all change, given that the credentials acquired over the world wide web could be stored as blocks and culled together via an authenticated and orchestrated set of web services to update the employees’ credentials, certifications, and skills enhancements in the organization’s skills repository in real-time and the same can be captured on the employee record, maintaining a record of all the time the employee has taken to progress from one level to another or from one set of competencies to another. Also, in cases of mergers or takeovers, all this information about the employees can be collated and published via competency dashboards to the incoming management as evidence of their competency history.

As regards managing employee exits, feeding the separation inputs into the Blockchain could trigger feedback into the employee onboarding process for another firm, creating a series of immutable, verifiable records with respect to the employee. 

Despite the positives, there can be challenges for Blockchain-based HR Information model. The potential downsides of having such a large Blockchain-based HR operating model could be:

  • Government Data Privacy Regulations

  • Human Error in entry

  • Possible malaise in the data treatment, if the data is non-transparent to the individual

  • Leaving the possibility of reform out, since it may lead to bias against an individual basis prior history. Would affect and affirm the belief that a human cannot change over a period, leading to increased prejudices

Additionally, there could be pitfalls, such as:

  • Fear of exposing competency systems on the Blockchain to competitors

  • Resistance to putting employee data out in the open in fear of 1984 big brother style of surveillance by rogue entities

  • Need to have a culture of system and process driven organization

To accurately validate Human Resources information, organizations need to adopt a calibrated approach to adopting a Blockchain-based HR operating model that tracks and validates the disparate streams of HR information, ensuring disintermediation, and separating authentic data from background noise. We are still in the early stages of Blockchain deployment; therefore, the potential for things to fail still exists in few areas. Adopting an agile approach for a Blockchain setup that meets the essential requirements of HR operations, evolves progressively, and is more user-friendly and verifiable, is, therefore, imperative before it becomes as entrenched as some of the other technologies, such as Cloud and Social. 

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Topics: HR Technology, Technology, #HRIndustry

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