Blockchain in HR: Real-World Use Cases and Examples

Mar 9, 2022 3:04:32 PM / by HR Tech

Human Resources has access to a lot of data. Using blockchain technology and techniques can help with data management and other human resource functions.

In human resources blockchains can be useful for aiding in data storage, enhancing record accuracy, and preventing loopholes. Blockchains ensure accuracy in ways that no other data storage technique can. They provide absolute privacy and file protection.

This article is by no means an exhaustive list, but we’ll cover some key HR functions that could be enhanced by blockchain implementation.

What Is Blockchain Technology?

how blockchain can be used in human resourcesBefore we dive into how blockchain technology can be used in human resources, let’s first discuss what blockchain technology is.

A blockchain is a distributed database that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. The innovation with blockchain, as opposed to other databases like Excel or Access, is the way the data is structured.

A database usually structures its data into tables whereas a blockchain structures its data into chunks known as "blocks." Each block holds sets of data that, when complete, form a linked chain for all the blocks – hence the name “blockchain.” Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block. All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled.

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When implementing a blockchain, data blocks are strung together to form an irreversible timeline. Once a block is filled it is set in stone and becomes a part of this timeline. Each block in the chain is given an exact timestamp when it is added to the chain and inherently creates a permanent record.

Blockchains were originally intended to keep records of transactions from being altered or deleted. They have since evolved and are used to provide a secure foundation for other types of information. Blockchains serve as powerful engines capable of recording and distributing any type of data with complete accuracy. In this way, a blockchain is the foundation for immutable ledgers, or records of transactions that cannot be altered, deleted, or destroyed.

Now that we’ve discussed a little about the basics of blockchain, let’s dive into how they can be implemented into some HR functions.

How Blockchain Can Help in the Recruiting Process

Blockchains have a large range of applications, but perhaps where they currently have the most potential is in the recruiting process.

As an example, let’s say an applicant has a good resume with good referrals, extensive job experience, and a great education background. It's rather time-consuming for an employer to manually check referrals or to make sure the applicant is being honest about work experience and education. Blockchain technology could change the way that this is handled.

Today, if a recruiter wants to verify a candidate’s education history, the recruiter will need to contact the candidate’s schools to confirm the dates of attendance, the date of graduation, and any degrees awarded. If the recruiter has 30 candidates, that means at least 30 of these calls.

In a world where education certificates are on a blockchain, that all changes. Once a student graduates from a school, the institution could issue a sort of “digital degree” that would be accessible via a blockchain. Remember, each block of the blockchain is given an exact timestamp and can’t be changed or altered. Once the degree is added to the blockchain, it’s instantly verifiable. All the candidate would need to do is add the blockchain address of their “digital degree” to their resume. A recruiter could easily verify the information, essentially eliminating the need for calls to the school.

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This could certainly expedite, or potentially even eliminate, the need for an application process entirely. When degrees and resumes are on a blockchain, a recruiter could submit a job posting and a search engine could find available resumes that match specific criteria and compile those resumes into a candidate list. A recruiter could then contact those qualified to ask if they are interested in the open position instead of the recruiter posting job listings on a dozen job boards and waiting for qualified candidates to respond.

Blockchain technology would allow employers to effortlessly search through and identify qualified candidates who may be a good fit for the company from resumes of graduating students, the unemployed, and people looking for career change or promotion. This would also help eliminate unconscious bias from recruiters manually sorting through resumes.

How Blockchain Can Improve Learning and Development

blockchain in hrHuman Resources is responsible for helping employees grow and develop in ways that help both the employee and the company. However, it can be difficult to keep track of how each employee is progressing. This is where blockchains can help.

Basically, the learning history and training achievements of an employee can be saved on a blockchain by using smart contracts. Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met.

That allows approval flow and distribution of learning to be streamlined. Here’s an example:

An employee is getting promoted but needs to complete some training before their new role takes effect. Traditionally, a series of steps must be completed for the employee to be approved for the new role. The employee would need to be assigned the training, complete the training, have their new manager sign off on the training, have their new manager’s boss sign off on the promotion, and then HR would need to update the new pay and benefits information for the employee.

With a smart contract on the blockchain, this entire process can be mostly automated. Once the training is assigned, a smart contract is used that contains the conditions of the promotion such as a new title, new pay and benefits package, among other items. The smart contract could also be used to include terms like updated organization charts, W-2 information, new benefits based on the new position, and more.

Once the training is completed, the completion certificate is sent to the blockchain and verified by the network. The smart contract would then be executed, and all the changes would be made for the employee without the further involvement of the employee’s manager, HR or anyone else. This allows organizations to implement change quickly and effectively.

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How Blockchain Can Help With HR Function Evaluation

Function evaluation could also really be enhanced by using a blockchain. This is because of how blockchains store data and allow people to access it.

Function evaluation is when an HR department goes over data to assess how well a particular HR function is performing. The department will examine past data and assess how that function needs to change to better provide for both the company and the employee.

Blockchains store every block individually and build encryptions off of previous encryptions to ensure a history that cannot be changed. Then, if some data is lost, it double-checks each block with everyone else on the network and deletes any data that isn't part of the majority.

What does this mean for function evaluation?

It ensures that the data being evaluated is 100% accurate since the data is verified by all computers on the network. The total accuracy of the data and quick access to the data means that performing function evaluation and analysis becomes less guesswork and more effective. The clear view of history that blockchains provide makes it easy for HR to see how different changes in the past have performed and compare them against the present standards. It makes seeing increases or decreases simple, even over incredibly long periods of time.

How Blockchain Can Help Strengthen Security in a Business

HR teams are responsible for handling a wide range of financial transactions, often in high volume and with sensitive data. HR also handles things like sensitive employee data related to pay, healthcare, finance, banking, disciplinary records, performance reports and expense reimbursement, to name a few.

In today's world, where data breaches are becoming more frequent and companies face increased security risks, it is imperative that we find new ways to protect ourselves against sophisticated attacks. This is where blockchain can come in.

Implementing blockchain can help counteract both internal fraud and external hacks of sensitive employee records. Access to the blockchain is limited, controlled by a privileged few. These individuals cannot make arbitrary changes – limiting potential vulnerabilities in your company's data assets which can lead to identity theft or payroll skimming attacks from malicious actors.

Blockchain is a powerful cybersecurity tool that spreads data across many computers. It’s like placing your most valuable assets in various locations to mitigate risk of being severely impacted or wiped out by one hacking event. In this way, blockchain serves to effectively decentralize data as a key defense against hacks and fraud.

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As you can see, blockchain has its uses in Human Resources. Though blockchain technology is still in its early stages, companies are starting to take notice of this powerful technology and implement it into their business.

If you’d like to stay up to date with the emerging technology in the HR space, join us for the next HR Technology Conference and Expo.

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Topics: Blockchain, Emerging Technology

HR Tech

Written by HR Tech

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