What HR leaders must know about blockchain for recruitment

Blockchain as a recruiting tool

A blockchain is a distributed, shared digital ledger made up of a trail of validated facts. These facts can be anything from money to information. As part of this digital system of record keeping, each transaction and its details are validated and then recorded across a network of computers. Everyone who has access to the distributed ledger receives this information, and the parties agree on the accuracy before the block is replicated, shared and synchronized among the entities. A blockchain is virtually impossible to tamper with since each block of information references the block before it.

In an age when trust is both elusive and held at a high premium, blockchain's appeal is soaring since it presents a way to confirm, validate and authenticate both values and events. This is why multiple verticals (such as banking, manufacturing and insurance) and multiple business horizontals (departments such as accounting, fulfillment, supply chain and shipping) are drawn to -- and very excited about -- using blockchain in their work.

Why blockchain appeals to recruiters

"It is easy to see how the idea of being able to ensure [that] the details of one's educational or work experience -- and potentially more personal facts -- are immutable could be very attractive to HR offices," said Carol Van Cleef, partner with law firm Baker & Hostetler, which regularly advises clients on fintech issues, including blockchain.

"Costs associated with repetitive verifications of the same information could be reduced significantly and confidence in the results increased, assuming the original input was accurate," she said.

That's no small task -- or small expense -- given how much the nature of work has changed recently.

"Ten years ago, a job candidate may have had a degree from one or two universities and clearly defined long-term roles with two or three previous employers," said James Cross, director of learning product strategy at Workday, an enterprise software vendor that offers cloud-based human capital management and financial cloud-based applications. "Even then, verifying an employee's experience and education was time-consuming and expensive, typically happening right at the end of the hiring process and through an outsourced background check provider," he said.

Cross points out that in today's business landscape, recruitment is quite different than in the past. "A candidate is likely to have had more jobs and a more diverse tapestry of career, personal and learning experiences than previously," he said.

Findings from the U.S. Bureau of Labor Statistics bear this out. In 2016, the average job tenure for millennial workers ages 25 to 34 was 2.8 years. This is significant. According to Pew Research Center, millennials now make up the largest generation in the labor force. Education, too, has changed drastically and now is much harder to track and validate.

"Candidates may have worked for an employer that operates a talent marketplace or have completed several rotational 'tours of duty' -- gaining skills, knowledge and feedback along the way," Cross said. "They may also have completed on-demand online training, and been awarded badges or digital credentials. And they may even have worked 'gigs' for several employers."

And that's just for starters. Considering HR is a data-intensive function, blockchain could have many more applications within the department's scope.

Baker & Hostetler's Van Cleef offers some caveats on blockchain's future use in recruitment. "We are at a very early stage in the build-out of blockchain technology and all that the term involves," she said. "For data-heavy functions like HR, the potential may not be truly unlimited, but practical uses will be numerous."

Education checks likely first blockchain in recruiting use

Because people and their backgrounds can be so complicated, using blockchain in the recruitment process has some tricky elements. For blockchain technology to work as a solid resume or unquestionable employment history, the question of who contributes and who verifies the data in each block is key. In some uses, such as education verification, the answers to those questions are relatively straightforward. So much so, that some universities are already providing these data blocks for their students. And it isn't only grades and degrees you'll find there.

"In a blockchain world, the transcripts would be tamperproof and, basically, signed by the issuing institution. We already do this for our students at the University of Calgary by allowing them to put volunteer positions on their 'cocurricular record,' which we then certify for them," explained Thomas P. Keenan, M.A., professor of Computer Science at the University of Calgary and a presenter on nonfinancial uses of the blockchain at RSA 2017 in San Francisco last week.

Time worked, goals met, and resulting pay and bonuses due and paid are useful records for both the employer and the employee, and a record of earned bonuses could be a plus for future employment opportunities, too.

The sharing of education data between institutions is potentially straightforward, too.

"Another great advantage will be cost reduction," Keenan said. "We spend time checking the credentials of applicants from foreign universities, and the universities themselves. A blockchain registry to validate institutions would go a long way to eliminating this onerous task," he said.

Recruiters, however, are likely to want this information in blockchain form as much to combat fraud as to cut costs in the verification process.

"While college transcripts usually carry a high level of authentication, I can tell you that we have seen some totally bogus ones, fabricated in faraway countries and submitted as authentic," said Keenan.

Indeed, fraudulent education claims were rampant at the height of outsourcing and still pose problems for companies operating in multiple countries where it is sometimes difficult to sync information across geographies and to equate differences in degrees and schools.

Blockchains could be helpful in establishing this information and then preserving it for companies that may need this information in the future. In addition, a blockchain has the potential to follow an employee from job to job and provide a fast and reliable means for that employee to present education credentials and get hired quicker.

Blockchain to document work history riddled with issues

Verifying education is one thing, documenting the nuances of employment history is quite another.

"While you can check off boxes on specific things like if the applicant has a degree, it's harder to have a definite formula for things like experience in independent consulting or a contract job, or a clear understanding of what titles for jobs mean when they can even vary from one business to another, even if it's the same industry," said Paul Ardoin, senior director of product and partner marketing at Saba Software Inc., which makes cloud-based talent management applications that rely on machine learning.

There are problems with validating historical data to contend with, as well.

"Companies or educational institutions that have gone out of business or been gobbled up in an acquisition may simply not have the information available, or it may be a challenge getting to the right person," explained Ardoin. If we attempt to document career paths retroactively, "it will cause headaches for decades for both HR departments and the people [who] they try to recruit," he said.

In short, this indicates that it is more practical to build blockchains for employment purposes from this point forward than it is to backtrack and build a complete past record. In turn, for many employees, a blockchain would only be a partial employment record.

Another thorny issue is the widespread use of applicant tracking systems, or more specifically, HR's reliance on keywords to sort applicants. While automation is helpful to HR, it's often an obstacle to applicants, who then resort to writing multiple versions of their resume to trigger specific keyword searches in various jobs. It would be unlikely that applicants could do that in the current conceptions of blockchain, and hiring companies may miss out on great talent.

HR's use of blockchain vs. legal, privacy issues

"Of course, this [long-term employee record keeping] would be something to consider in context of laws and data privacy," said Bianca McCann, vice president of HR at SAP.

Right now, for example, it's illegal in some places to ask a candidate their past wages or current age. But such information could be stored in a blockchain and, depending on how its employment-related use develops and how concepts of privacy surrounding that develop, the jobseeker's private information could potentially be accessed without his or her permission. This raises a number of questions. For example, if a hiring organization views certain information in a blockchain, is it taking a legal risk? Or, could a potential employer's access to this information pose a real risk to the employee who did not wish to indulge it?

On the other hand, blockchain being used in the recruiting and hiring process could be win-win in certain scenarios.

"The trusted security of blockchain can additionally assist both employers and employees when it comes to international hiring scenarios where there is a need to ensure proper work permits and facilitate secure payments overseas," said Hannah Curtis, principal consultant at Keyrus, a technology and management firm that recently released blockchain connectors.

Time worked, goals met, and resulting pay and bonuses due and paid are useful records for both the employer and the employee, and a record of earned bonuses could be a plus for future employment opportunities, too.

"After candidates are hired, blockchain smart contracts could have an impact on employee wages, benefits and retirement packages, as well. As an example, any benefit contingent on another event, such as receiving a bonus based on hitting a set target goal, could be encoded and automatically triggered via a smart contract," said Curtis.

Smart contracts -- computer protocols that help to facilitate and manage the transfer of digital currents are assets -- are stored in a blockchain.

 "This is particularly useful in the case of freelance and contractor positions where smart contracts could ensure payment only for completed work," she said.

Blockchain for recruitment starts with the obvious

While most experts agree that blockchain will be used by HR for hiring and managing purposes at some point, it's not a common -- or even a trending -- practice yet. There are still many details to be ironed out.

"Unlike financial applications, recruiting, resumes or job histories don't have any current scenarios in which the history is currently trusted," said Saba Software's Ardoin.

What this means is that HR's use of blockchain technology will likely be confined to verifying and documenting education and training -- at least, at first.

"The black-and-white distributed ledger approach can still be a useful model when tracking corporate and informal learning and training," Ardoin said. "We're already seeing this kind of functionality within Learning Record Stores (a form of digital education repository). Again, there are challenges -- such as supporting a new type of content, and making sure that informal learning is properly valued --but the implementation of a blockchain for learning applications is much more straightforward than dealing with the nuances of resumes and job histories."