The missing link: Blockchain in HR

Blockchain technology could benefit the HR function by streamlining and protecting data processes

It all began a decade ago with the Banksy of Bitcoin. Satoshi Nakamoto, an unidentified man, woman or perhaps even shadowy group of collaborators from Japan (who could just as easily be American, Australian or European), created the ‘reference implementation’ – a standard specification that improvements for the now world-famous cryptocurrency are built on. In the process they introduced the first ever blockchain database.

Hardly a day goes by without a story about fluctuating cryptocurrency values, investment bubbles, fortunes made and lost, right through to the gimmicky and strange. Take the six-storey Notting Hill mansion put on the market for £17.5 million last October, for which the owners would purportedly only accept payment in Bitcoin.

Reading about such excesses is fun and doubtless Bitcoin will continue to make headlines, whether its value soars or plummets. Yet cryptocurrency aside, what can be said with certainty is that blockchain – in one way or another – will transform and possibly revolutionise certain aspects of doing business in the years to come.

Also referred to as Distributed Ledger Technologies (DLT), blockchain is both powerful and enormously versatile. Its power lies in offering greater transparency, improved security and heightened efficiency (with which comes the potential for cost reduction) over older technologies. Because it is a distributed ledger, everyone with access to the network shares the same documentation instead of having individual copies. The shared version can only be updated if the parties involved give their permission and any changes made are time-stamped, encrypted and linked to the previous transaction. A simplistic comparison that helps beginners gain a basic understanding of how it works is with Google Docs – where all users can have access at the same time.

Changing a single blockchain transaction record calls for the alteration of all subsequent records, making it very difficult to commit fraud. A further security advantage is that with information stored across a network of computers rather than on a single server, it is harder for criminals to hack into transactional data.

In the last two to three years blockchain’s rollout beyond cryptocurrencies has gathered steam, with organisations piloting its use in areas such as managing an organisation’s supply chain (see box-out p35). Management consultancy Bain & Company has projected that implementation of blockchain in financial markets could save between $15 billion and $35 billion in annual costs by superseding manual, redundant and error-prone processing methods. Meanwhile, technology analyst Gartner forecasts that by 2022 there will be a blockchain-based business worth $10 billion.

Given the obvious business potential, blockchain is now on a growing number of HR teams’ radars. And there is a burgeoning expectation that HR-focused blockchain solutions will be deployed in the not-too-distant future.

“We do have a digital agenda in HR and, as with all enabling technology, we’re keen to see what blockchain can do to support, streamline and automate HR processes and data,” says Sandra Cameron, HR systems and services director at mobile satellite services company Inmarsat. “We understand how invaluable this could be to facilitate and further automate the transactional processing side of HR.”

But take-up has been slow. “We partner with some big technology providers for our HR systems but we have not seen ‘blockchain for HR’ emerge in any planned development cycles. As we are yet to see true ‘use cases’ of where this technology is being deployed to support the HR function, for the time being we remain cautious,” Cameron adds.

David Balls, group HR director for the Rank Group, adds that because HR as a whole has been “pretty late coming to analytics,” he is unsurprised that blockchain has failed to flourish within the function just yet. “If blockchain could decouple itself much more from cryptocurrencies and people better understood the blockchain process over and above the financial aspects, I think there could be more innovation around how it could be used,” says Balls. “I think too many people are fearful of that Bitcoin mentality. People haven’t quite understood how the technology works and how it could benefit them. And as [due to Bitcoin] it has negative connotations to some extent, people are not embracing it as much as they could do.”

However, its possibilities with respect to secure employee data do resonate with him. The advent of the General Data Protection Regulation (GDPR) is pushing that agenda harder and he feels blockchain could play a role in anonymising data and where it comes from.

Linda Kennedy-McCarthy, group HR director at specialist building products distributor SIG, agrees. She takes the view that the GDPR will be significant in driving safe storage of employee data and that in years to come blockchain, with its cybersecurity advantages, will be key to ensuring compliance.

She believes blockchain can bring a number of other benefits. First, however, HR will need to identify problems and areas of inefficiency in existing operations that could be addressed through use of the technology. “I think these are likely to be those that are slow, labour-intensive and expensive, and those that require a lot of data collection and/or third-party verification,” Kennedy-McCarthy adds.

Clearly HR is receptive to what blockchain may have to offer. But what’s happening now? And what other areas of HR could blockchain solutions play a critical role in?

Raj Mody, head of technology investments for PwC’s HR consulting business, argues blockchain is a promising area not just because of its automation possibilities, but because it redefines and speeds up the way resources can be allocated to the relevant needs of an organisation. “Some observers might see this as a resourcing challenge, but I’m interested in it more because I see it as a way of linking up talent with the problems that talent could solve, in a much more optimised way than can happen currently. So it’s about talent and productivity, not just the more mundane aspects

of automating processes. If you can truly understand in an immediate, intelligent and verified way what skills and experience your people have and match this up with the work that needs to be done, you can begin to see how the future of work and teams could be reinvented.”

Recruitment is an area that Kennedy-McCarthy also points to as an opportunity to deploy blockchain. It could help to verify and assess the education, skills and performance of candidates, and as such allocate recruits to the most appropriate roles, she says.

These are bold ambitions. But as things stand the situation remains confusing. According to Haydn Jones, founder of blockchain strategy consultancy Blockchain Hub, there are more than 1,500 different platforms, all of which have their own coins.With so much choice anyone thinking of embarking on their own blockchain project should work with an advisor, cautions Francesca Hesling, business development manager at NashTech, who is currently working closely with Jones.

One project NashTech is involved in aims to take on the complexity around using blockchain in recruitment, and has developed a blockchain-based recruitment platform called Recruitd [sic]. “The platform sits on top of an already-established social platform and pulls together an individual’s basic employment-related details – identity, right to work, education, references, experience and work history – into one block,” says Hesling. “That block is automatically validated by the network and indelibly associated with their electronic signature, meaning candidates, recruiters and employers are spared many of the arduous touchpoints in the screening process.”

When combined with peer-to-peer ratings and reviews, she adds, this has the potential to create a decentralised ranking of jobseekers per skillset, job type and industry. “While the initial focus is on recruiting, businesses could extend the scope of the information covered in each block: security access, payroll, insurance, expenses, work performance and so on could all be included to create a complete HR solution,” Hesling continues.

But it faces competition from a wave of blockchain start-ups. Among the interesting players to emerge are Australia’s ChronoBank and Appii in the UK. The former is not a bank at all but a software company that, via blockchain, connects suppliers of labour hours (both businesses and individuals) to the users of the workforce and ensures they are paid. Appii meanwhile describes itself as an online verification, career management and recruitment platform. The CV credentials of Appii members are placed on ‘smart contracts’, a computer protocol that allows verification between member and verifying organisations to occur programatically.

“There are a number of providers operating in this space but we may be years away from mass implementation across industries,” says Lisa Lyons, leadership and assessment market lead at Mercer. “If and when this technology becomes ‘enterprise ready’ one of the first applications would likely be the external verification of certification and professional achievement records. A time-consuming process, which can be tarnished by cases of falsification, could be transformed by blockchain and reduce overall time to hire. In the longer term, there is scope to validate micro-credentials for employees and gig economy workers. In light of the trend towards the specialisation of work, this will help organisations verify and secure the most appropriate resources quickly and efficiently for projects.”

Payroll, as one of the largest expenses for service-based organisations, could also make good use of smart contracts that leverage blockchain. Smart contracts would help organisations and employees establish contracts with each other faster and cheaper. This is especially relevant given the expansion of the gig economy, adds Lyons.

For Leigh Lafever-Ayer, HR director UK & Ireland at Enterprise Rent-A-Car, data collection could be transformed thanks to blockchain. She points to the success of a recent project using Google Docs. As a decentralised company, Enterprise found that data collection exercises sometimes fell short when measuring something out of the ordinary.

For example, for years the business has tried to track diversity initiatives in all of its UK regions but enjoyed little success through manual means. “Diversity and inclusion is a big part of our culture and we knew lots was happening, but we needed a way to understand what exactly that activity was and to try to measure the impact and its ROI. Last year we tasked one of our interns with helping us create a solution and she made a space on Google Docs called RADAR (Reporting All Diversity Activity Regionally).This means all of our operating groups could report their activity at any given time and the data would automatically be refreshed.This tool has given us the insight that we wanted.”

Although employees still need to key in the data, Enterprise has found the approach to be much more agile than spreadsheet management by a lone employee. “It allows our communications team, HR data analyst and me to make analysis at any time and be confident that we are up to date,” says Lafever-Ayer.

Colin Cooper, EVP, Sage Business Cloud People and payroll product engineering at Sage, suggests one of the most obvious uses of blockchain for multinational companies could be transferring currency between offices and suppliers. But he feels the impact on HR teams regarding international staff could be massive too. “Blockchain could eliminate the complex system of approvals and signatures into one system across offices to exchange data, with built-in procedures for making expenses claims,” he says.

Clearly there are many potential applications for blockchain. Yet adoption in HR remains at a nascent stage. So what kind of timescale are we talking about? PwC’s Mody is of the opinion that blockchain is still several years away from making a serious impression on HR.

“While people talk about how adoption of new technologies seems to accelerate, blockchain is such a novel technology that I think we will see a long period of experimentation and organisations becoming gradually more comfortable with applications, as they learn through experience and usage about its potential,” he says. “This won’t happen overnight. Even when you look at the time it took organisations to embrace cloud-based HR systems that’s unfolded relatively slowly, perhaps over a decade.

“I think it will take another decade for blockchain to become widespread and commonplace in HR practices. It’s not something that will happen in isolation; instead it will happen alongside shifts in working practices and a redefinition of the relationship between an organisation and a worker.”

These are big shifts. But they are shifts that HR should strive for if the function doesn’t want to be the weak link.