How Blockchain will impact your HR Department
Dennis Hauck Apr 26, 2019 11:00
How can your HR department benefit from blockchain technology today? Check these 3 use cases to find out
How Blockchain will impact your HR Department
The success of blockchain technology has already turned a number of industries upside down in recent years. Not only Fintech, insurance, banking and capital markets have long been overrun by disruption. Traditional business areas such as supply chain management are also experiencing a technological renaissance. The blockchain technology, barely 10 years old, offers enormous productivity advantages due to its immutable nature once third parties are involved in business processes.
While Blockchain is still mainly associated with crypto currencies and is seen by some as a short-term phenomenon, the technology will establish itself. Let's just remember that the internet was also called a hype 25 years ago that will never break through. But back to the topic, back to the basics. What is this blockchain?
Blockchain – Simply Explained
A blockchain can be seen as a distributed ledger. A ledger is a way for people to record transactions. Ledgers have existed for thousands of years in different formats. Traditionally, ledgers were extremely centralized and controlled mediums to recording transactions of some value between two or more parties. However, a blockchain is a distributed ledger which is a database shared and synchronized across a network of people with no central owner. Each node of the network has access to all the transactions recorded in the ledger and has a copy of the full list of transactions. Any changes to the ledger cause the entire ledger to be updated and the new version is sent to participants rapidly. Distributed ledger technology is what Bitcoin, the world’s first cryptocurrency, is based on. Distributed ledgers have the capacity to store huge amounts of information in a decentralized and immutable way. Information can be added to the ledger in a decentralized way, ensuring full traceability and auditability.
Comparing Centralized to Decentralized Ledgers
In order to understand what a decentralized ledger is, it’s good to understand an example of a centralized ledger. An example of a centralized ledger that’s used on a regular basis in business is a Microsoft Excel workbook. A Microsoft Excel workbook can, for example, store customer account numbers, balances and transactions from one customer account to another with the flexibility to add and delete data by the workbook owner. However, unlike a distributed ledger, a Microsoft Excel workbook is completely centralized. It is a permissioned system, in which only owners or those granted permission can update the ledger.
A blockchain by comparison can be updated and shared much quicker than a centralized ledger. A blockchain is a permission less system, meaning anyone can update the ledger, but no one can delete anything from it. Transactions in a blockchain are like flies trapped in amber. The fly is perfectly preserved for anyone to see, but ultimately cannot be altered in any way once the transaction has taken place. Ultimately this distributed ledger technology has many applications in the workings of everyday society.
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How can your HR department benefit
Let's take a look at 3 major areas of a HR department´s daily work and the potential impact when implementing blockchain.
Recruitment
Hiring new employees is one of the areas that benefit most from the new technology. A living resume in which candidates store their academic and professional qualifications and experience, making this information available to companies as necessary enables completely new approaches. According to experts, one in two HR managers caught an applicant cheating and the number of fake academic awards is increasing every year. With the help of blockchain, this behavior would be significantly more difficult if not completely curbed.
In addition, for applicants the costly creation of nice CVs and application letters can also be dropped. Since HR managers only spend an average of 30 seconds on application documents, this is a questionable high effort anyway. In combination with other technologies such as AI evaluation systems and application tools, suitable candidates can be identified earlier and the essential part of the application process can be started.
References
Today, obtaining and checking references is a very cumbersome and time-consuming process. Not only since the introduction of the GDPR regulations, enterprises are very careful with sharing data of former employees. If the reference giver may have changed the job, or the enterprise was transformed in the course of a takeover or M&A process, a check of references is getting very difficult.
With the implementation of BC based reference systems this process can be automated and almost totally replaced. Once a reference has been issued, it can be shared at any time due to its immutability and accessibility, and it can be acknowledged as legitimate without verification. A huge step forward for all parties involved.
Payroll
Early adopters in the field of payments are using cryptocurrencies to quickly handle worldwide payments of employees and contractors. Without the need of middleman this payment methods limits error sources while, at the same time, speeds up the hole process. In combination with Smart Contracts an automated payment can be implemented which takes action when certain conditions are met. With the rise of remote freelancers and external workforce in enterprises a payment scheme using Smart Contracts based on project milestones to distribute money in any choosen currency, FIAT and crypto, with a risk and fraud-free supply chain is a great use case for the advantages of blockchain technology.
Although we are still in the early days of HR blockchain applications, their positive impact will forever change the way we work in HR departments in the future. Let's therefore start today with the technology, whose full potential is by no means being fully realized.
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