Is HR Ready for Blockchain Technology?
Recruiters would likely be thrilled by the arrival of a faster, more efficient way to verify the credentials of job candidates, a system that could save precious time and dollars in confirming the education, certifications, work experience or skills of applicants, particularly those in the gig economy.
Payroll managers would undoubtedly welcome a new technology that makes international payroll less complex and costly, allowing for more timely and efficient cross-border payments to global employees.
Those are two applications of blockchain technology likely to impact human resources soon, industry experts say. Blockchain is best known as the backbone technology for the digital currency bitcoin; it is an encrypted, digital ledger of public records organized into groups of data called blocks and distributed over networks, said Kevin Wheeler, founder and president of Global Learning Resources, a talent strategy consulting firm in Fremont, Calif. Blockchain is a type of decentralized database that allows everyone in a “chain” to see and verify the details of every record.
How Blockchain Works
“Blockchain is a way to store personal information about candidates or employees in a secure, confidential manner and make it available to anyone with permission from those individuals,” Wheeler said. Such a system could automate and speed the process of verifying job candidates’ credentials, saving recruiters from having to contact multiple sources to confirm historical information; could reduce resume fraud; and could improve time-to-hire, experts believe. Blockchain also could one day transform global payroll by cutting out the banks—the “middle men”—that add time and costs to the process.
Experts at Human Resource Executive’s 20th Annual HR Technology Conference & Exposition in Las Vegas in October said they expect blockchain to come to HR within the next 18-24 months.
More than 40 top financial institutions and a growing number of companies across industries are already using blockchain, according to The Wall Street Journal, and companies like Microsoft and IBM have made huge investments in the technology. Organizations are using blockchain for financial transactions, for supply chain management and to create “smart” legal contracts.
The data in a blockchain cannot be deleted or changed, only added to, Wheeler said, and it is required that everyone connected to each block must agree before new information can be added into a chain. Job candidates or companies are assigned a digital ID and can add specific types of data to the chain, such as college grades or degrees, Wheeler said.
”Blockchain has the potential of helping recruiters verify candidate credentials in a highly secure way and reducing chances of credentials being altered or faked,” said Stacey Harris, vice president of research and analytics at IT consulting firm Sierra-Cedar, which conducts the annual HR Systems Survey. “It takes a lot of time and resources to do that kind of background checking on candidates today, particularly in areas that go beyond regulatory or legal matters.”
Harris said blockchain may have value when applied to the gig economy, where verifying the skills, knowledge and past assignments of contingent workers can be challenging. “I’ve seen some movement and discussion about using blockchain to validate vendor credentials, and I think we could one day see that expand within HR to the full contingent workforce,” Harris said.
Self-Sovereign Digital IDs
Daniel Roddy is a senior manager with Deloitte Consulting, headquartered in New York. Roddy specializes in human capital products and innovation, and he sees “significant opportunities” for blockchain technology in HR. “It is early days for the technology, both in terms of its maturity and the creation of the kind of large consortiums needed to gain alignment on how blockchain systems will work,” Roddy said. “But there is considerable potential for human resources.”
For example, blockchain may make the concept of a “self-sovereign identity” for employees a reality, Roddy said. “It’s the idea of individuals being able to fully control data about themselves,” he said. Blockchain systems would reduce the chances of third-party companies providing inaccurate historical data about a candidate or existing employee, since those individuals would have greater input and control over data that’s already been verified by multiple parties.
For example, if a recruiter used blockchain to verify a job candidate’s claim of achieving a certification, the candidate would first have to release access to a blockchain entry cross-signed by the certifying body, Roddy said. Once the certification is confirmed within the blockchain, the candidate controls who can access it with a digital “key.”
Similarly, job candidates would hold the power to release a blockchain entry cross-signed by universities to verify degrees they earned or specific classes taken. “That also eliminates the need for the potential employer to have to contact the school to verify the degree and classes taken, saving considerable time,” Roddy said. “That potential employer also wouldn’t need to see personally identifiable information around that entry, it would just be ‘green’ or ‘red’ in terms of the candidate’s decision to release the information, making it more secure.”
The Massachusetts Institute of Technology (MIT) is piloting a diploma system that can be accessed by such a digital key. The system allows MIT students to access and “own” a secure and certifiable digital file of their MIT diploma; the digital diploma is provided in addition to a standard physical diploma.
Some start-up blockchain companies also have begun operating in the recruiting space. Last year Recruit Technologies and Ascribe announced a partnership to develop a prototype blockchain resume authentication service for job hunters. The service would enable the digital verification of official certificates and resumes, previously done on paper. The two partner companies claim the effort of collecting multiple official certificates would be reduced for job hunters, and recruiters could handle confidential official certificates safely and without worry of fraud.
Experts believe blockchain also could have advantages for payroll, particularly for payments made internationally. Global payroll can be costly and often delayed because of the many intermediary banks and third parties involved in the process. Blockchain’s ability to simplify and standardize payments by eliminating the middle man may make it attractive to payroll managers.
“As a practical matter blockchain for payroll is not that difficult,” Roddy said. “Money today can be moved around the world instantly to bitcoin wallets for reasonable costs. What’s holding up use are the many statutory requirements and legal entities that govern how pay can be delivered, what currencies it can happen in and related regulatory issues.”
One company already operating a blockchain-based payroll system is Bitwage, a San Francisco-based organization that uses the technology to facilitate cross-border payments through use of bitcoin. Bitwage allows employees or contractors around the world to be paid by organizations in their preferred currency, handling the conversion of bitcoin to local funds.Workers can use 25 different currencies to receive wages, and Bitwage promises to pay out within 48 hours regardless of where workers are located.
Australian company Chronobank also uses blockchain-type technology to allow employers to pay contract workers without going through banks.
Other Potential HR Uses
There eventually may be other valuable uses for blockchain within HR beyond recruiting and payroll, experts say. “Blockchain has the potential to keep employees’ health records and make them available to anyone with permission, while keeping that data secure,” Wheeler said.
Blockchain also could be used for employee learning records or other information kept in HR databases, since it promises a higher level of security than many existing technologies. Harris said some vendors in the learning and development space are exploring the potential of blockchain to verify skill sets and capabilities.
“There are some current challenges but, once the network effect kicks in, the growth of blockchain technology could be exponential,” said Jeff Mike, vice president and HR research leader for New York City-based consulting firm Bersin by Deloitte. “That makes now a good time for HR leaders to become familiar with blockchain. They should be thinking about how processes could change in their worlds with the existence of a secure, validated digital identity ‘owned’ by candidates or employees, not by third parties.”
Dave Zielinski is a freelance business writer in Minneapolis.
This article was first published on SHRM.