Blockchain has enormous potential in the field of human resources. As the technology becomes more widespread and accessible, all employees of the HR department, from recruiters to senior management, will most certainly see it disrupting their everyday operations—making their jobs easier and more efficient.
At its core, blockchain technology is a "trust protocol" that eliminates the need for a third party to authenticate who the counterparties are and certify the transaction's completion when money is exchanged.
It provides the capacity to create trust between two machines, people, or entities and then safely and transparently transfer value between them. While blockchain disruption is more frequently linked with industries such as payments and capital markets, its impact on HR is substantial and broad.
The fundamental difference is that blockchain technology in HR is utilized to verify employee authenticity instead of being transactional or asset-creator in nature.
A report by IBM discussed how companies worldwide are adopting blockchain technology to get past the tedious manual methods of screening work histories, skills, achievements, and references. IBM and its likes are hiring blockchain developers to integrate blockchain into their HR and recruitment processes. The challenges of building a strong corporate culture: where are we now, and how did we get here?
In what ways will blockchain possibly transform HR?
- Verifying potential candidates' education, abilities, and performance to assign those candidates the most relevant jobs.
- Increasing productivity by automating and minimizing the stress of regular, data-intensive operations such as VAT administration and payroll.
- Improving fraud prevention and cybersecurity in human resources, including workers and contractors.
- Accessing entirely trustworthy blockchain-based education records, skills, training, and professional performance.
- Enabling cross-border payments, employee mobility, foreign spending, and tax responsibilities.
Other possible uses:
- Verifying employee security
- Validating employee references
- Tracking attendance
- Compliance and auditing
How does blockchain reshape the landscape of value exchange?
- It eliminates the need for a back-office because blockchain settlement is instantaneous.
- It eliminates the need for a third-party—banks, estate agents, travel agents, and so on.
- It proves beyond a shadow of a doubt that the transaction took place. This record cannot be altered or deleted without all parties' consent.
- It embeds business logic into a single transaction known as a "smart contract." For example, if someone's cost code changes, their permission to access systems and data can also be programmed to change automatically. Blockchain technology enables you to take the written word and codify it.
5 ways blockchain can transform the way we do HR
1. Establishing trust through consensus
Blockchain builds trust through consensus, and records can only be added, not erased, or rewritten.
When a new block is added, the change is visible to everyone who has access to the blockchain, which means that if they disagree, it will not be acknowledged as truth. This means that no single person can change information independently. This kind of agreement promotes openness and confidence.
Another benefit of blockchain is the decentralization of trust. Historically, trust was community-based, but it has grown concentrated with banks and other organizations in recent years. With blockchain, confidence can be restored to the individual level, allowing individuals and organizations to trust one another without central institutions authenticating their identities.
2. The blockchain-based 'value passport' will benefit both employers and individuals
The ability for individuals to track a comprehensive, trustworthy blockchain-based record of their education, skills, training, and workplace performance is seen as having substantial potential on both sides of the employment relationship.
Individuals are converting their skills, training, and experience into genuine value in the labor market by granting potential employers access to this 'value passport.' Furthermore, by applying analytics and artificial intelligence to data, businesses can more accurately and effectively match individuals to roles.
Blockchain technology can also support behavioral and cultural changes in organizations and the workforce. Individuals' highly portable and up-to-date 'value passports' will become even more valuable-both to themselves and employers-as the gig economy continues, and younger people change jobs more frequently.
Furthermore, with the younger generation being more relaxed than their predecessors about sharing personal information, blockchain allows them to do so more securely and trustworthy.
3. Targeting productivity gains
Blockchain is especially beneficial to small and medium-sized businesses (SMEs). For smaller companies, the burden of finding and recruiting the right talent is massive, and anything that can help them do so more effectively will boost their productivity.
Further high-potential targets for blockchain applications include payroll and VAT, where reducing the administrative burden on SMEs helps them focus more on serving customers and growing their businesses.
4. Cross-border payments and mobility
For multinational corporations, the first step into blockchain may be to create blockchain-based corporate currencies that they can use to transfer value globally and transact with their supply chains without the friction and cost of third-party reconciliation.
Central banks worldwide are also becoming involved, introducing their blockchain-based means of exchange to support convertibility into 'official currencies.'
However, this is just the tip of the iceberg of opportunity, with international workforces presenting many potential applications for blockchain. A high-potential area is a cross-border mobility, given the significant data collection required to ensure employees remain compliant with the tax rules across different jurisdictions.
5. Fraud prevention, cyber security, and data protection
Another benefit for HR—one shared with other business areas—is enhanced cyber security and resistance to fraud.
Given HR's involvement in high-volume financial transactions and responsibility for a wealth of sensitive personal data, the benefits of blockchain in these areas are substantial.
The use of consensus in blockchain to establish facts aids in the elimination of fraud. And, because cyber risks can stem from an underlying lack of transparency in systems and data, the threat of cyberattacks is another issue that blockchain can help address.
Again, this may be especially beneficial to SMEs, many of which are unprepared for cyber threats.
Blockchain could also help companies automatically limit employees' access to information and aid compliance with the General Data Protection Regulation (GDPR).
The race to seize competitive advantage through both blockchains has begun, and HR functions must join it now or risk being left behind.
Rather than focusing on the technology's complexities, HR departments should consider the benefits it provides, such as trustworthy verification of counterparties' identities and how these can help with problems or inefficiencies in their current operations.