Blockchain: The Future of HR?

Blockchain is best known as the infrastructure behind bitcoin and other cryptocurrencies that makes financial transactions safe without a bank or other middleman. But the technology could soon change the way human resources leaders handle all sensitive data.

That has big implications for HR, said Jeff Mike, vice president and HR research leader for Bersin by Deloitte. “The reason it is relevant is that blockchain creates the potential for personal data to be owned by the individual rather than the organization,” he said.

That means every employee could potentially maintain control over their entire academic and work identity, including where they went to school, their grades and degrees, and their work history and training. “It would be more secure and more portable, moving with the individual instead of getting stuck inside the organization,” he said.

What Is Blockchain Anyway?

In a nutshell, blockchain is a peer-to-peer network of ledgers that encrypts and stores blocks of data and digital history, and can be viewed and verified by anyone in the network. Every time new data is added it extends the ledger’s chain of blocks. The public nature of blockchain is what makes the technology unique, said Tim Griffiths, chief technology leader of Xref, an automated reference checking company in Sydney, Australia.

“Every time you add data to a block it is confirmed by the network,” he said. For example, a university might verify completion of a degree, or an employer could confirm dates of employment. Once data is added to a ledger, it is updated across the network. Ledgers can be added to but not altered, ensuring information remains safe and uncompromised — if someone tries to alter a ledger, everyone else on the network is able to see it, Griffiths explained. “It guarantees the data is certified and can’t be manipulated.”

It provides a way for two parties to safely complete transactions — including payroll and contract payments — without a bank or other intermediary. But safety isn’t just useful for financial transactions, said Stacey Harris, vice president of research and analytics for Sierra-Cedar. “Any time you have sensitive data that needs to be verified, moved or shared there is a place for blockchain.”

Health care is a perfect example. Many employees who get health care benefits through their employers don’t want to share their health history with their company. But in order to choose providers and secure services, the employers acts as an intermediary to share that data.

If the employee owns that data via blockchain, it removes the need for a third party, Harris said. “Any time a piece of data is touched by another human it create risk that the data will be lost or used inappropriately,” she said. “Blockchain reduces that risk.”

Blockchain also has the potential to streamline a lot of the drudge work related to employee data verification, said Griffiths. If all of a candidate’s education, certifications and work history were stored in a single ledger it would take minutes rather than days to verify that data. “Education checks are the biggest pain point in the background check process,” he said. “It’s the ideal use case for HR.”

Where to Begin

All that said, the days of instantly verifying an entire work history or streamlining health benefits via blockchain are a long way off.

“This is still a nascent field for HR,” Harris said, though she notes that the influx of venture capital flowing into blockchain startups suggests the industry could evolve quickly. Early adopters such as Bitwage are already using blockchain to streamline overseas wages and secure contract payments, and companies like Xref are exploring the use of blockchain in background checks. But none of these applications have gained traction — yet.

The big challenge is where to begin. Like the internet or the rollout of electronic health care records, blockchain for HR will only add benefit when it achieves scale. For example, if every candidate had a blockchain verifying their degree, it would significantly speed the education background check process — but if only a handful of universities provide that data in blockchain, it doesn’t add much value, Griffiths said. He predicts that we are still two to five years away from seeing any meaningful applications of blockchain in HR.

This doesn’t mean HR leaders can afford to completely ignore blockchain.

“You don’t want to get caught up in the hype, but it is worth paying attention to,” Mike said. He encouraged HR leaders to get familiar with the technology and to talk with their IT leaders about how it works and how it could affect the way they practice HR in the future. “If you no longer need to track down resources to verify records and record transactions, what ramifications will that have on the job?” he asked. These are the questions HR leaders should ask today, to be ready for the future. “It won’t change your life in the next six months,” he added, “but it is going to happen.”

Sarah Fister Gale is a writer in Chicago. comment below or email editors@workforce.com.