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Blockchain in the human resources domain

Organizations that have adopted blockchain-based strategies in the early going have already deployed them in specific spheres of human resources. These use case provide HR leadership with a perspective of what’s in store. 

Gartner estimates that blockchain will generate 3.1 trillion USD in business value by the end of this decade. Although a considerable portion of these returns will be the outcome of value generation and efficiency enhancements in present operational models and business processes, the actual value will be in the way of the paradigm shift it facilitates with regards to how societies, clients, organizations, partners, and individuals communicate, generate, and exchange value. 

In the most basic sense, blockchain opens up possibilities for participants of a network that might or might not be aware of each other to exchange value in digital settings. Essentially, blockchain imparts trust in untrusted settings, eradicating the necessity for a trusted centralized authority. 

Blockchain is set to influence every single function of organizations, not just information technology. All of the fervor with regards to blockchain is native to technologies in the preliminary, experimental phase. However, organizational leadership shouldn’t downplay the disruption generated by blockchain-based solutions. Blockchain will not just influence information technology, but each and every function in the organizational structure. HR leadership who do not execute adequate scenario planning and experimentation with the disruptive tech are at risk for considerable longer-term disintermediation.  

5 traits of blockchain 

One isn’t required to be an IT SME or go into extensive technical depth to realize the basic principles behind blockchain, but being aware of the fundamentals is the preliminary step to comprehending blockchain’s prospective power in the evolution of critical HR activities. 

Blockchain facilitates trusted transactions amongst unknown participants by bringing together five design aspects to validate users, transactions, and document that data onto a digital ledger in a fashion that isn’t corruptible by an individual participant. It isn’t open to modification after the fact, either. 

Even functionalities that are present today aren’t completely geared to be supportive of the performance and scale that will be required in a blockchain-based world. 

Preliminary blockchain-based experimentation doesn’t consist of all 5 aspects, but in the strictest of terms, all of them are a prerequisite for true blockchain. 

  • Distribution: Blockchain participants connect through distributed networks and take part in the operation of nodes – terminals that execute a program with the intention of enforcing the business rules of blockchain. Nodes also retain a complete copy of the ledger, which undergoes updates autonomously when new transacting takes place. 
  • Encryption: Tech documents information in a secure fashion and semi-anonymously. Participants can manage their individual identity and other data, and share just what is needed for a particular transaction. 
  • Immutability: Successful transactions are authorized through cryptography, have time stamps and are sequentially integrated onto the ledger. Records cannot be altered unless all participants universally concur with the requirement to do this. 
  • Tokenization: Value is exchanged through the medium of tokens, which can denote a broad array of asset variants, which includes “money”, units of information, or an individual person’s identity. The development of tokens, referred to as tokenization, is the method in which blockchain indicates and facilitates a native value that is tradeable. 
  • Decentralization: No individual entity manages a major portion of the nodes or determines the rules. Consensus mechanisms verify and authenticate transacting – eradicating the requirement for a centralized intermediary with regards to governance of networks. 

Current and emergent technologies facilitate blockchains 

A broad array of existing and new tech facilitates these traits of blockchain, which includes encryption and P2P connectivity, but even functionalities present today aren’t completely geared to support the performance and scale that will be required in a blockchain world. 

Basic functionalities already consist of the following: 

  • Decentralized Apps (DApps) – Apps that store information through cryptography, instructions and documentation in DLT-based technology 
  • Distributed business terms and conditions – Automated trust mechanisms with regards to external communications and transacting amongst businesses or persons 
  • Smart contracts – Applications or protocol that enables, verifies, or executes business processes 
  • Smart assets – Digital representations of physical assets with programmatic behavior 

However, for blockchain to drastically modify present operational models or business processes and develop new commercial, societal, and other governmental paradigms, businesses will be required to bring together present technological capacities in innovative ways and acquire new knowledge. 

The implications for HR 

We bet you’re excited by now. Now, contemplate on what these components and functionalities could tangibly mean for the methods in which business taken on engagement with talent in real world scenarios. 

Visualize the next big, strategic undertaking your organization initiates – featuring a blockchain with seamless connectivity across businesses, individuals, vendors, communications, and tasks: the allocated in-house talent, the contractors and 3rd party suppliers, the cross-functional communication, authorizations, budget authentications, stage-gate reviews, pilots, etc. 

With no phone calling, emailing, or paper trails, the correct talent can be authenticated and integrated at each relevant phase in the process, given accessibility to the data and resources they require only for the duration that they need them, with tasks moving in an automated fashion and transparently across the chain. 

Preliminary real-world use cases in human resources provide a future perspective into the blockchain-based future of HR. 

Most promising applications within human resources 

As specified previously, blockchain experimentation at present only integrates a few of the characteristic traits of blockchain – therefore it captures only part of its possible value. These preliminary real-world use cases in HR nevertheless provide a future perspective into what blockchain can do for HR. 

  • Background verification and staff history checks – Within a distributed blockchain network, permissioned applicants can obtain digital credentials; tokenization of their identities, in essence, which imparts an immutable documentation of their employment records. Potential employers who leverage this blockchain eradicate the probability of fraud amongst prospective candidates. 
  • Staff information security and access – Organizations have at their behest massive amounts of personal data with regards to their staff. On a blockchain, such documentation can undergo encryption and be immutably documented; particularly critical for personal records in relation to, for example, medical considerations, or performance records. However, these records can also be shared when needed through tokenization with participants who’ve been provided verified permission. 
  • Smart contracts for the contract or temp labor force – What smart contracts do is that they develop enforceable and immutable rights and duties for all participants. Immutable contracts within human resources can, for instance, release payments on an automated basis from escrow after workers finish allotted activities, which smoothens income for employees and cash flow for organizations. 
  • Compliance and regulatory concerns – Staff can enforce their “right to be forgotten” imparted by statutes like the EU’s General Data Protection Regulation (GDPR) merely through the action of deletion of the encryption key, and rendering their private data unrecoverable. As more strict legislation and regulations crop up, human resources will be capable of leveraging blockchain to make sure staff have autonomy over their own information. 
  • Payment and benefits – Transactions that undergo encryption and documented as immutable information on the blockchain are more reliable, facilitating streamlining of auditing and compliance reports. Payees don’t need to be dependent on intermediaries like banks in processing payments. In much the same way, banks will relinquish control over money flows to the degree that they can presently skew transaction values through trading – and hence introducing variations in the valuation of fiat currencies. 

Direct access to external resources 

Blockchain solutions are already present to enable real-time payments to contingent workers like members of the gig economy labor force. There is no requirement for payroll aggregators, financial institutions, or fiat money. However, this isn’t the complete extent of the advantages for human resources to employees, these developments possibly widen access to talent and resources. 

Payroll administration has so far proven to be the most efficient use case of blockchain in human resources. Critical transactions undergo encryption and are recorded as immutable information on the blockchain. Payroll information is hash protected and leverages vendor key management, which documents the data needed to generate a key over the key itself – therefore, it’s not possible to recover a key leveraging any singular component. However, this new strategy to payments also renders it possible to employ, and make payments to employees in remote locations or countries where payment-related infrastructure is minimal or fiat currencies are prone to inflation, volatile, etc. 

Payments on a blockchain take place in real time, and if needed, via a globally standardized cryptocurrency, which will prove appealing to talent pools that were inaccessible in prior times as they were to far off or their identity and experience could not be authenticated. 

Organizations will additionally obtain access to the 2 billion individuals in the unbanked workforce. Gig economy employees can bypass 3rd parties and obtain their payment directly from source without the need for intermediaries. Organizations can keep an immutable token of the payment history for auditing and compliance reasons. 

Blockchain action plan for CHROs 

There are shorter-term, mid-term, and long-term tasks that HR leadership can undertake to make sure that the HR department is in pole position to track and utilize the progression of blockchain. The following considerations should be integrated as strategies are plotted: 

  • Strategy – Meeting with stakeholders related to your function in addition to IT for reviewing blockchain’s possibilities with regards to how it evolves the fashion in which we work, evaluating its applicability to present and upcoming functional and enterprise business models. Seeks spheres where blockchain will fortify or improve your functional value propositions in a one-of-a-kind way. Determine a viable blockchain adoption strategy on the basis of strategic or tactical relevance to fundamental functional processes. 
  • Capabilities – With organizations beginning to look into and make significant investments in blockchain tech, demand has increased for employees skilled and who possess expertise in the facilitating tech components and capacities. Although, there is a dearth of skilled employees who get both blockchain and its application to prospective business avenues. Lay foundations as early as viable and being working together with exterior resources or upskilling internal talent now. 
  • Test cases – Undertaking measured research and development and innovation efforts with the main objective of determining practical use cases and learning how to support blockchain. Participation in operational risk meetings with risk administrators and CFOs to generate a blockchain SWOT analysis for your organization, domain, or governmental agency. Learning from colleagues and pilot projects in the domains of supply chain and finance, where several preliminary experimentations are currently happening. Exploring the wider use of digital wallets – facilitating staff to obtain a portion of their salaries via digital assets – the precursor to utilizing blockchain capacities. 


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