Will blockchain disrupt the HR technology landscape?

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Will blockchain disrupt the HR technology landscape?

Four inspiring examples and three points to consider

As a cross-industry disruptor, blockchain has the potential to reshape the HR technology landscape. In this blog we discuss four HR blockchain examples that aim to change the way we perform core HR processes including payroll, recruitment, competency management and learning.

Gareth Brown & Norman Smit - 13 June 2017

The HR solutions market faces further change

In the last 8 – 10 years, HR Technologies have seen their fair share of change. The market has seen disruption; HR solutions have moved to subscription-based models on cloud platforms; organizations are emphasizing mobile-first strategies; employees expect consumer-grade digital services.
The next 5 years will continue to challenge our ability and agility to innovate - to continually re-invent the customer experience, to embed advanced analytics and social media. At the same time, the next wave of disruption will always loom on the horizon.

As a cross-industry disruptor, Blockchain has the potential to reshape the HR technology landscape

A recent Gartner report “Hype Cycle for Emerging Technologies 2016” (August 2016) ranked blockchain highly in terms of expectations. It indicated blockchain technology has potential to kick-start a platform evolution or revolution within the next 5-10 years.

Blockchain is to value what the internet is to information. Currently blockchain is mostly known as the backbone technology behind Bitcoin and is one of the hottest and most intriguing technologies in the market. Similar to the rise of the internet, blockchain has the potential to truly disrupt multiple industries and make processes more secure, transparent, and efficient.

In essence, blockchain provides a decentralized and secure ledger which gives participating parties a way of validating the information related to a transaction. In doing so, it speeds up the process and cuts out any middlemen. (‘Out of the Blocks’)

What really interests us, and is the purpose of this blog, is to share how innovators and entrepreneurs are using blockchain technologies to improve the exchange of information which forms the framework for the employer-employee relationship.

This blog will look at four examples that aim to change the way we perform core HR processes including payroll, recruitment, competency management and learning, but before we do, let’s take a look at the industry and who is driving this change.

History suggests we cannot look at today’s market leaders for tomorrow’s disruptive technologies

The nature of disruption is that it is most often caused by “outsiders” and entrepreneurs as opposed to those existing as the market leaders.

Twenty years ago, Christensen (1997) proposed that the business environment of market leaders does not allow them to pursue disruptive innovations when they first arise because they are not profitable enough and developing them requires shifting resources away from sustaining innovations which are maintaining competitive position in the market as it stands.

It may be for this reason that we see many young entrepreneurs and modern innovators developing and shaping the emergent market with a new breed blockchain inspired technologies.

Four examples of blockchain inspired technologies

Here is a selection of inspiring examples, picked to demonstrate a range of use cases, without trying to offer an exhaustive list.


Example #1: HR blockchain in payroll

Unlike sending out payroll electronically in a domestic setting, sending overseas is consistently expensive for businesses and can take a long time to process due to multiple intermediary banks and third parties.

The long-term inefficiencies of overseas payroll payments can add up. Currency volatility can have an immediate effect on both the employer and employee. Hourly changes in exchange rates are routinely taken advantage of by intermediaries. So, time is money and an international payroll blockchain solution simply offers a faster solution than existing models.

Bitwage has an interesting solution to look at and to discover what this could look like in practice. By combining the blockchain with mobile and cloud technology, Bitwage is now focused solely on facilitating cross-border payments by using bitcoin as a payments rail; employees ultimately get paid out in their local currency, and Bitwage handles the conversion of bitcoin to local funds.


Example #2: HR blockchain in certification

Employers face a major hiring hurdle when they need to verify information on a candidate's resume. A survey by one of the largest online job finder sites, CareerBuilder, shows that a staggering 58 percent of employers have caught a lie on a resume. A separate report on the 2015 hiring outlook by HireRight, a company offering global background checks, drug testing, and employment verification services, shows that screening uncovered lies or misrepresentations on a resume for 86% of employers. There is no doubt that resume accuracy is a common problem and the effort to verify credentials impacts on the hiring process and costs employers time and money.

There exist a number of start-ups and more established HR vendors that try to bring blockchain technology to solve certification issues, to increase transparency and in turn address fraud in employee credentials. Entrepreneurs are working hard with blockchain in order to offer the future fraud proof solution for certification. We could see this as a leading use-case for blockchain-based technologies as the education industry moves to protect the value of official accreditation in the face of its own disruption through Mass Online Open Courses (MOOCs).


Example #3: HR blockchain extends beyond certification

Some initiatives go beyond certification. Seed funding for projects has increased by a factor of five since 2013 and a few HR tech vendors are exploring its possibilities and benefits. In time the belief is that this technology will relieve HR of the need to validate documents such as qualifications, position history, job experience as well as transactional data such as a medical certificates, address changes and tax file data. As seen in another use cases: once the record is created by the source and stored in ‘a block’, an HR system could link to that record and digitally accept its authenticity.


Example #4: HR blockchain in digital process management

With some imagination you can see this grow even further… For example in digital process management with the use of so called smart contracts. Smart contracting capabilities (policies, benefits, reward) are already a topic of interest for the digital music industry.

This industry has seen significant potential for automation using this technology. Smart contracts are essentially code; rules written into a digital program which determine what happens when money comes in or when certain conditions are met. Virtual marketplaces have been created based on policies which articulate the terms under which artists are willing to allow their music to be used. Commercial and non-commercial contracts can be provided directly to the market. Artists can agree royalties and rights in the transaction without intermediaries. Smart contracting handles these options in an open and transparent way – everybody knows when they are getting paid, under which circumstances and what amount.

It requires little imagination to see how this can shake up the business administration of the growing population of self-employed professionals that offer services to many different clients in the open talent economy.

So where does this leave us?

We suggest three points to consider:

  1. You should keep reading about the Blockchain. Technology leaders have predicted that this technology will radically change the way we run businesses and the way we work together. So, stay tuned, keep reading and make sure you can be an early adopter of this potential big disrupter in the HR profession.
  2. Continue to scan the market leading vendors but recognize that history suggests it will be the smaller entrepreneurs that will signal new leading practice, enabled by Blockchain technologies. They are already providing developing HR solutions to radically transform individual HR use-cases, for niche HR processes. And why would you not experiment? Start with developing a proof of concept for business specific issues that your organization faces. Start small and learn fast.
  3. To see the potential of new Blockchain solutions for HR processes, it is necessary to look at use cases outside of HR, where they disrupt an existing value chain (e.g. Record contracts in comparison to employee contracts, automated validation of resume credentials to avoid manual validation, cryptocurrency transfers to international payroll). It’s arguable that these solutions have greatest potential for growth as their associated benefits are likely to dramatically outweigh their cost of adoption.

More information on HR Blockchain?

Do you want to know more on HR Blockchain? Please contact Gareth Brown at +31 882 88 5178.

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