Blockchain is slowly arriving with the digital advance. It seems to want to revolutionize the world of human resources. What does it really consist of? What impact does the Blockchain have on the HR function? We talk about it.
Table of Contents
What is the Blockchain?
The Blockchain allows to interact virtually through a digital platform with complete transparency. Various forms of digital transactions take place there, only it is impossible to come with false information.
It puts forward the following principles: trust, confidentiality, security, transparency and integrity of data. People with no apparent connection can therefore carry out transactions without the need for a mediator. On the other hand, the actions and transactions that take place in the blockchain are stored in a digital register. This register cannot be falsified by anyone.
The fundamental concepts of the Blockchain
You don’t have to be a computer expert to grasp the fundamental concepts. The new technology has been inspired by five essential elements. Blockchain is based on the precepts that support transparency and integrity within transactions between strangers.
The first principle: distribution
All those who participate in a blockchain must be connected to each other in a distributed network. There they control computers that run “nodes”. These nodes are actually programs that are run for business purposes. These nodes are accompanied by a memory function that keeps a trace of transactions and updates of the latter in a register.
The second principle: cryptography
The participants in the blockchain are generally unknowns who therefore use pseudonyms. The blockchain stores this information to allow participants to keep a certain autonomy and to protect themselves. Only the minimal information necessary for the transaction are shared.
The third principle: immutability
At the end of the process in the blockchain, the transactions are targeted cryptographically and recorded in the digital HR register. Changes that may take place after this stage are only possible with the full agreement of all participants.
The fourth principle: tokenization
Tokenization, or token development, is a mechanism by which the blockchain represents and facilitates the exchange of a currency. These tokens are used during transactions, they can even represent money, identities or values.
The fifth principle: decentralization
This principle regulates the risks of a participant imposing rules. It is not permitted for a participant to have a large plurality of nodes in the blockchain. Finally, it is also forbidden to force other participants to follow its rules. Decentralization avoids the need for a central intermediary.
How could the Blockchain influence the HR function?
With the potential to be used for many purposes, blockchain has been tickling the HR world for some time. Several companies have begun testing this data platform that inspires trust and integrity for the HR function. Indeed, blockchain promises better human resources management through the principles that govern it. What areas could be revolutionized by blockchain?
One of the tasks of HR is to recruit staff, however the hiring process is nowadays very time consuming. Some companies therefore prefer to delegate to recruiters, even if it means paying extra. This approach also calls for a company to spend money.
The blockchain could put an end to this unnecessary expense. All data about potential candidates and their development can be consulted on the digital register. This first asset relieves the HR of a lot of energy-consuming activity. Resumes will be sorted, data can also be verified and recruitment will be facilitated.
Blockchain optimizes HR data verification
Half of blockchain users mobilize it for data verification related to digital identity. In the blockchain, authorized institutes bring authentic data. HR could use this functionality to Ensure the veracity of employee data of the company.
A quality referencing
Hiring processes involve checking professional references. These references are sometimes susceptible to falsification. But the blockchain can put an end to this kind of problem. The records that are inserted into it are authentic, and uneditable. Result: the reference check is more transparent and secure. The HR manager will be able to benefit from the genuine talent that the company needs.
Traditional payment and contracting procedures also require time, energy and thought. Today, there are so-called “smart contracts” that are available thanks to the blockchain. It is up to the payer or HR manager to establish smart contracts listing the conditions as well as the payment frequencies. The activation or deactivation of a contract is up to the manager according to the data stored in the blockchain. The employees will then be paid on the same date and automatically according to the respect of the conditions. It is aboutavoid late payment, falsifications of results. A better organization of the employee payment system in general is therefore proposed.
Employee Life Cycle Management
Employee life cycle refers to the recruitment, onboarding and termination process of employees within a company. This process takes up much of the HR function and can be very cumbersome. It includes file reviews, interviews, employment history reviews, and data verification. This workload is sometimes spread out over time, yet this process is repeated over and over again within an organization.
With blockchain, all of this HR data is first stored authentically in a single ledger that also records chronological updates. Have Access in a single platform of all data greatly eases the experience of managing employee lifecycles.
More secure transactions
Most transactions in a blockchain are encrypted in such a way as to become unforgeable. These transactions can take the form of information exchanges, work data, stock history, financial movements, etc. In a blockchain, these transactions are secure and cannot be modified. The HR function can optimize the security of employee transactions via blockchain. This will result in Less risk of data tampering and errors.
Blockchain enables employee attendance tracking in HR
Blockchain could also improve employee attendance tracking within a company’s HR function. It allows to store biometric data such as fingerprints, iris scans. These techniques can be used for legal purposes for companies that have the right to identify and record their employees’ data. The HR function is the first to benefit from this kind of functionality. For example, the ability to track and record attendance and absence with integrity would solve many problems related to claims and payroll.
Compliance and Audit
Almost half of the companies that have tested the blockchain exploit it for compliance and audit purposes. The ability to store transactions in the blockchain would indeed facilitate these actions, which usually take a long time. In particular, they require the recruitment of experts in the field. This can add cost and time. Whereas with blockchain, data and transactions are stored in an authentic and chronological way. And this register is accessible to everyone, which ensures transparency. Thus, the role of HRDs would be lightened and they could focus on other parameters in order to optimize the achievement of the company’s objectives.
Blockchain, a technology to be handled with care in HR
Blockchain technology seems to promise a poignant revolution in the world of human resource management. It can significantly reduce time and energy wastage for HR. The development of blockchain-related applications as well as operating models are constantly evolving. Logically, it also promises in terms of global business figures.
Its value will be based on its ability to make change the traditional processes within companies. Transactions and values that are exchanged are at the heart of the blockchain. They circulate with transparency and integrity in plain sight. The success of this digital registry lies in the trust and responsible use it promotes.
However, blockchain must be handled carefully in HR. It is still in its infancy and the issues that may arise have not yet all manifested themselves.
On the other hand, the experts are still few to master its use. HR will therefore have to take time to become familiar with the digital register and its functionalities. Other challenges also arise over time, such as the near-present threat of cybercrime, apprehension about universal data sharing, and of course the requirement for compliance. The latter is linked to the European Union’s data protection legislation.