To view the earlier article in the series – click here:
- Article 1: How will Blockchain, Cryptocurrency and DLT technologies affect the future of Payroll & HR
- Article 2: Will companies start to payroll its employees in cryptocurrency?
Today, I would like to discuss how I think Blockchain may affect Human Resources in relation to recruitment-related administration and storing personal data…
How will blockchain affect HR Recruitment Processes?
A large proportion of time in the life of an HR professional is spent repeating the same actions over and over again. This is especially true with recruitment, vetting and onboarding.
Now, if I was to say that we could automate some of these repeated actions: chasing down references, checking work histories, verifying credentials etc., etc., I am sure you would be very interested in understanding how. Not only would this save time, but it would also save money, and it would allow HR professionals to spend more time on strategy and less time on repetitive HR administrative tasks!
You will soon begin to hear many firms peddling their technological wares claiming
“Blockchain is the answer”.
You will discover how blockchain technology could speed up the hiring and recruitment process, by removing the need to contact third parties to confirm information.
Right now, there are even pilot programs automating such repetitive tasks already. For example, in this group of Greek universities [link], they are experimenting with ways to add student diplomas to a blockchain database.
However, the truth is that despite these pilot projects existing, industry-wide adoption remains a problem for blockchain-based technologies.
There are various reasons for this.
Using Blockchain in Recruitment
There are two major strands of how blockchain systems could affect recruitment. Each relates to a different kind of blockchain: the first is private and permissioned, and the second is public and permissionless. We go into more detail about this in the latest episode of The Payroll Podcast.
However, for now, let’s consider the analogy IBM use of the internet (public) vs intranet (private) to help describe the differences between these two types of blockchains.
- Public blockchains: publicly available, decentralised blockchains – where anyone can view the information on a blockchain without first having to ask for permission, login credentials or a password – also known as permissionless blockchains
- Private Blockchain: private, in-house, centralised blockchain-based databases where only a select few people can gain access – also known as permissioned blockchains
So how does this affect recruitment for Employers?
Firstly, companies who want to be seen as being ‘ahead of the curve’ and ‘technologically advanced’ they may consider employing some form of blockchain solution to help with their recruitment and HR systems.
Why? Because right now it is likely that those who do decide to implement these new types of systems will use it in their marketing in an attempt to attract forward-thinking, technologically-curious applicants to the business. It could also appeal to companies desperate to attract ‘millennials’ to their brands.
However, one of the main issues with recruiting great employees is the fact that we know the references, job successes and credentials can easily be faked or exaggerated. CV ‘padding’ is a significant issue and candidates will often overstate levels of responsibility, inflate or even invent credentials, or use fake or inflated job titles to fill gaps on a CV.
This is a genuine problem for HR departments and recruiters alike, and it takes a lot of time (and sometimes poor hiring decisions) to establish the wheat from the chaff. Sadly, at present blockchain doesn’t really offer a solution to this problem either.
Blockchain would only really work as a solution if candidate information was all available in one place. It would be a dream if there were one place that all credentials, qualifications and career histories were stored that HR professionals could access. If this did exist then this would be the hook for blockchain-based databases. However, this reality rarely matches the dream.
One possibility for blockchain, however, can be found within educational establishments (if indeed they all decide to adopt the technology). If they started to store results on a blockchain database then these would be great, uneditable databases HR professionals could access to easily look-up a candidate’s educational qualifications to see if the results listed on a CV matched those on the block-chain database. As blockchains are uneditable, they would even exist even if the educational institution dissolved.
Interestingly, some educational institutions are already beginning to record qualifications on the blockchain. However, at present, this is far from being universally adopted. Subsequently, until this becomes the process for all educational institutions, it is hard to see how blockchain, at least in the immediate future, will improve recruitment from an HR process perspective
The reality is that vetting candidates correctly remains an extremely time-consuming task for HR professionals and recruiters and there is no “quick-fix” solution. Until an all-in-one place solution exists which keeps accurate records of all aspects of an applicant’s profile, this is unlikely to change either.
While blockchain could, in theory, allow us to check qualifications quickly and reliably, it only really works as a process if all businesses and educational establishments adopt the technology. Even if this part of the vetting process becomes a universal norm, it still won’t change the fact that HR departments and recruiters still would not have one central place to check for CV inaccuracies.
Okay, but what about blockchain databases for storing personal data on employees?
Personal Data and Blockchain
Personal data and blockchains is a tricky subject. While blockchain evangelists may see it as a natural fit, in reality, there is a rather devastating argument against their use.
Personal data on a blockchain cannot be removed. This is in the permanent nature of a blockchain and exactly how it is designed. Blockchains are uneditable.
As a result, blockchain databases containing personal data cannot comply with the UK’s Data Protection Act, nor with the EU’s General Data Protection Regulation (better known as GDPR). This is because the legislation explicitly states the individual’s right to require organisations – including universities and private companies – to delete the data about herself or himself unless it must be kept on record for legal reasons. This is also known as ‘Right to Erasure’ (Art. 17 of the GDPR)
Securing Personal Data
The above applies to public blockchains. Private, permissioned blockchains, however, could be used in their place.
In private blockchains, you need to depend on an individual person to manage access to the blockchain, and this person needs to be a trusted third-party who has the confidence of everyone concerned. Here, inherently lies the problem because this one person also becomes the potential point of failure.
Why would anyone want to use a blockchain-based database instead of a traditional database which already works perfectly well? It is a bit like paying your employees in bitcoin or any other cryptocurrency – why bother when we already have a perfectly useful currency (the British Pound) we can pay people with, that is both more financially stable and more universally accepted.
I love Einstein quotes (for those of you who have previously visited our website you will know this already), and here a good one comes to mind…
“We can’t solve problems using the same kind of thinking we used when we created them” – Einstein.
Also, when we talk about viewing personal data on a blockchain, we are really talking about hashes (the shortened, cryptography-secured representation of that data). To access the personal data in full – in this case, presumably, degree or course certificates, a person’s full name and attendance record, or list of publications – another application outside the blockchain are needed to decode the hashes and provide this information.
I appreciate that following this can be difficult so perhaps Bart Jacobs, Professor of Software Security at Radboud University in The Netherlands who has researched this issue can put it more directly. He writes [Dutch translation: https://ibestuur.nl/weblog/reason-yourself-out-of-blockchains]
“The blockchain only plays a very limited, subordinate role in [decoding personal data]. Besides, the energy consumption of blockchains borders on madness.”
Because a blockchain is an ever-growing list of all the data entered into the database – and the cryptographic proof-of-work required to verify the information on it – the energy and electricity consumption required to maintain them become impractical for most businesses.
“The next time a blockchain guru approaches you with promises, ask ‘Where is the really sensitive data, and how is it protected? How do you regulate how parties are authenticated? And therefore, why is the blockchain really needed?’”
However secure a blockchain-based database – and there is no question that the cryptographic standards used are pretty secure – where that technology is forced to touch down and interact with the rest of the world, there are significant security compromises to be made.
Organisations looking to cut back-office costs may see blockchain-based databases as a cure-all panacea for slow and costly recruitment processes and HR verifications.
In reality, I don’t believe public blockchains are really suitable for hosting personal data. Besides, while using private blockchains may address some legislative concerns, they are redundant because of the need for a trusted third party to maintain them and regulate access.
In this way, they overlap with existing, non-experimental database technologies.
Subsequently, while it is inevitable that we will see blockchain technology begin to infiltrate many business processes, I personally think that when it comes to HR and Payroll, companies should take time to understand if and how products that promise blockchain as a solution really work before jumping in to implement it.
What do you think? Please share and comment – I will try to interact with as many as possible!
Future articles in the series will include:
- What is a smart contracts and how will they affect payroll and HR?
- What benefits could blockchain bring to the payroll industry?
- Blockchain payroll companies
- How to build a blockchain-based payroll system
- When should businesses start planning for blockchain?
- Risks and costs
- Conclusion – is blockchain and crypto the future?
Look out for article 4 in the series: What is a smart contracts and how will they affect payroll and HR?
As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it.
This article was written by Nick Day, CEO of JGA Recruitment – the leading Payroll, HR & Reward Recruitment Specialists.
Nick Day | CEO
JGA Recruitment Group
Payroll, HR & Reward Specialist Recruiters
Tel: 01727 800 377