How Blockchain Could Work for Staffing: Hint, Direct Sourcing and Diversity

Back in February, I wrote an article called “Yes, HR and Staffing Folks, Blockchain Should Matter to You.” The premise was simple: blockchain has the functionality to emerge as the next technology revolution in the workforce solutions space. The challenge as to why the industry hasn’t embraced blockchain is equally straightforward: nobody seems to know what the hell it is. I attempted to remedy that last part in the earlier article. So now that we know what the hell blockchain is, let’s look at how it would work as a digital hiring platform. And to spice things up, let’s also explore how blockchain could deliver more power to direct sourcing and diversity, equity, inclusion (DEI) initiatives. 

Blockchain’s Building Blocks

Various iterations of digital currencies have been around since the late 1980s, beginning with DigiCash. That venture folded around 1998, when e-commerce began to soar. But it paved the way for the idea of cryptographic financial transactions, where exchanges could be untraceable and anonymous. Some major issues persisted, however. The first versions of block-based ledgers required a trusted authority to validate the transactions. And people like Chase CEO Jamie Dimon or Goldman Sachs legend Lloyd Blankfein were just fine with that—because their banks would still have jobs and lots of income from slowly processing transactions for mounting fees. 

Blockchain and Direct Sourcing Share a Common Goal 

Among proponents of blockchain and direct sourcing, the notion of eliminating—or at least curbing—the role of intermediaries would appear to be a desired outcome. However, those who profit from intermediation aren’t eager to usher in this new approach.

“In September 2017,” CB Insights noted, “JPMorgan Chase CEO Jamie Dimon derided Bitcoin: ‘It’s worse than tulip bulbs,’ he said, referencing the 17th-century Dutch tulip market bubble. ‘It won’t end well. Someone is going to get killed.’ Lloyd Blankfein, senior chairman of Goldman Sachs, echoed that thought, saying, ‘Something that moves 20% [overnight] does not feel like a currency. It is a vehicle to perpetrate fraud.’”

Dimon and Blankfein’s deeply altruistic concern for the welfare of lives at risk is touching, but their sentiments are more likely grounded in worry. And, as CB Insights pointed out, banks have a lot to worry about. Here are a couple of examples they mentioned.

  • If you work in San Francisco and want to send part of your paycheck back to your family in London, you might have to pay a $25 flat fee for a wire transfer, and additional fees adding up to 7%. Your bank gets a cut, the receiving bank gets a cut, and you’re charged exchange rate fees. Your family’s bank might not even register the transaction until a week later. The blockchain process typically takes about 10 minutes, minus the transaction fees.
  • If a trader in Mexico wants to send money to their counterpart in the US, a traditional bank transaction would require that both traders have local currency accounts in the countries they wish to receive their money in. xRapid (an enterprise blockchain service) removes this requirement. The trader in Mexico can simply use Mexican pesos to buy XRP tokens through the exchange to pay their American counterpart. The US trader can change these XRP tokens for dollars. And this entire transaction can happen in a fraction of a second, 

What’s funny about the blockchain debate is that its touted benefits are also the traits that lead detractors to vilify it: transparency, permanence, security, and disintermediation. Every instance of a transaction, from banking to voting, is tracked as it progresses through the workflow, while the blocks prevent unauthorized changes to the ledger. No user needs to rely on any regulator or central authority on the chain because nobody can game the system. Trust and accuracy are inherent. 

For companies that have staked their fortunes on being intermediaries, the notion of blockchain is anathema. And if businesses latch onto the momentum, allowing blockchain to firmly entrench itself as a system of record, then the fear becomes an existential threat. Of course, that’s precisely the same concern that some workforce solutions firms have about the promise of direct sourcing exchanges among employers and contingent staffing buyers.

How Would Blockchain Work in Direct Sourcing?

The blockchain represents the shared, distributed “ledger” that records all actions involved in recruiting, placing, and tracking candidates throughout the talent ecosystem. In theory, blockchain already accomplishes most of the tasks tackled by hiring platforms, applicant tracking systems, vendor management systems, and others. But it delivers a level of visibility, security, speed, integrity, and cost efficiency that surpasses the tools we use today.

Blockchain architecture empowers users with shared records that are updated through peer-to-peer replication whenever a transaction occurs. Every participant in the network acts as a publisher and a subscriber—a producer and a consumer. Users receive and send transactions to other users, and that data is synchronized across the network during transfer. The participants remain the same in traditional and blockchain systems. What changes is that records are now shared and available to all users. Let’s put this in context of staffing. Clients and staffing agencies keep their own ledgers (i.e., databases, financial records, HR documentation, talent pools, etc.).

The Blockchain Direct Sourcing Process

  • A client executive determines the need for new positions or staff augmentation in the organization. She and HR authorize the role, budget, compensation, benefits, and other parameters.
  • The hiring manager prepares a job description and creates a requisition with all profile details for the ideal candidate. This triggers a smart contract—a digital agreement or set of business rules that will govern the process (anyone who read our blockchain post from February will know what this is, just saying).
  • All talent providers in the ecosystem, with privileges to view, can see the requisition once it’s released. They begin sourcing from their talent pools or recruiting applicants. 
  • Talent providers in the future-state ecosystem span an unprecedented array of entities: other businesses with outplacement needs, universities with career support services for new grads, staffing agencies, independent recruiters, individuals with people to refer, professional alumni networks, associations, groups, local chambers of commerce, diversity outreach organizations, state government employment development departments, federal talent exchanges, and many more.
  • Client hiring managers can see “the dealer’s stock and inventory.” All transactions involved in sourcing and submitting candidates, across the entire network, are permanently stamped, recorded, and visible. All past work experience, education, licenses, screening, and references are visible in the candidate profile. A smart contract is validated and executed when the decision is made to generate an offer.
  • Candidates in the system can see available opportunities and apply.
  • When the decision to hire is made, the blockchain provides all the electronic forms required to execute the arrangement.
  • The process continues until a defined termination point, such as candidate retirement, assignment offboarding, temp-to-hire conversion, layoffs, firings, business closures, lack of openings, etc

Blockchain Sourcing and Recruiting Benefits

Process and Cost Efficiencies

  • Lower costs and capital expenditures by eliminating or reducing the presence of multiple intermediaries who charge fees for their services. 
  • Accelerating agreement execution, paperwork processing, and decision making by removing countless approvers from the process.
  • Preventing the duplication of efforts needed to maintain and reconcile individual processes.
  • All parties in the network are no longer vulnerable to losses if the central system (a VMS, for instance) becomes compromised as a result of cyberattack, fraud, or human error. With a single point-of-failure, every participant in the business network continues to confront ongoing risks.

Profile and Risk Management

  • Holistic management of the entire workforce, including contractors, freelancers, temps, SOW and project-based workers, and direct-hires.
  • Robust credentials and profile information, which appear at the discretion of staffing agencies or recruiters. When completing profiles for requisitions, many users opt to provide only basic information for the sake of expediency. So the VMS is not always capturing certifications, accreditations, risk profiles, and more.

Services Procurement

Services procurement suites to support SOW and Master Services Agreements (MSAs). This includes sourcing, contract management, supplier performance management, invoicing, payment, and continuous improvement initiatives.

Better Analytics

Blockchain introduces new intelligence and analytical systems that provide a complete picture of the talent data exchange. VMS solutions have not totally mastered the spectrum of predictive analytics to:

  • forecast talent needs, peaks and valleys;
  • provide real-time recommendations on rates;
  • provide real-time recommendations on time-to-fill and other metrics;
  • generate modeling for labor demand and industry benchmarking.

Blockchain streamlines and enhances the user’s ability to compare, vet, select, and onboard different types of third-party talent side-by-side through integrated systems. Processes that exist today generally exclude freelancers and independent contractors, who are growing to occupy the largest percentages of contingent workers in the marketplace.

Digital Trust

Anyone who has ever purchased a home, rented an apartment, or bought a car understands all too well the cumbersome and painful process. There are multiple agencies involved, little transparency, endless forms to complete, and long stretches of time without communication or updates. And the coffee always sucks at a a real estate office or car dealership. The same holds true for enterprise staffing engagements, except for maybe the coffee. Blockchain goes the extra mile in establishing digital trust.

  • The seller is who he says he is (e.g., the staffing agency, recruiter, or talent producer)
  • The buyer is who she says she is (e.g., the client, the bidder sending out RFPs to prospect, etc.)
  • The asset in the transaction corresponds to what the buyer thinks he’s acquiring (e.g., the candidate is valid, legitimate, and matches the requirements of the job)
  • The seller owns the object of the transaction (e.g., the candidate is truly represented by the recruiter, the candidate is the W2 employee of the staffing agency, etc.)
  • The buyer has the means to pay for the transaction (e.g., the hiring entity commits to the proposed bill rate, the client is solvent, the client can actually remit payment in the established cycle, such as Net 30).

Evolving from Software to Platform

VMS and ATS developers are always on about their evolution to cloud platforms or ecosystems or electronic marketplaces. Not to say they aren’t chipping away at it, blockchain truly expedites the evolution of Software as a Service (SaaS) HR tech to Platform as a Service (PaaS) solutions. VMS remains an island; it concentrates on agency temps as an ancillary element of supplier management. VMS has yet to fully conquer and capture the broader sources of talent, technology, functional capabilities, and market intelligence. Many VMS systems are growing to manage all forms of MSP including SOW, freelancers, and BPO. But blockchain inherently covers every need.

Could Blockchain Finally Help Solve for Diversity?

I suppose it seems weird and perhaps implausible to suggest that blockchain could help overcome the DEi challenges we face, but isn’t it already weird and hard-to-believe that DEI challenges exist in this country, in this day and age? So why not blockchain? Not much else seems to be working in the business world.

As Ariella Brown wrote for Dice in 2018, a company called STEAMRole is using blockchain to foster, propel, and augment inclusion efforts: “That’s the mission of STEAMRole, which uses blockchain and its own cryptocurrency (called RoleCoin) for two purposes: providing STEAM-expert role models and a Diverse Talent Pipeline Platform (DTPP) for companies to use in tracking and hiring diverse talent.”

And yes, three years later, STEAMRole is still rolling.

Both Steamers and role models are awarded RoleCoins for their activities, which not only incentivizes participation and achievement, but also records it on the system’s blockchain, a feature that could be applied to tracking the effectiveness of STEAM program funding. RoleCoins are awarded to Steamers for signing onto a STEAMRole, beginning their own blockchain record. The next step is to offer them role models to choose from; the mobile app algorithmically matches them up, much like Tinder. It takes “gender, ethnicity and interests” into account, pointed out STEAMRole founder and CEO Clarence Wooten: “We cannot be what we cannot see.”

“The role models not only provide inspiration but also direction, telling Steamers exactly what skills they need to qualify for a career, and showing them how to access the required training,” Brown added. “According to Wooten, that is central to “bridging the gap between education and training.” The participants’ transactions automatically update the blockchain, creating a record of their progress.”

The STEAMRole blockchain would show what the teens are doing on the platform to prepare themselves for their chosen careers: how many role models they are following, what skills they are working on acquiring, and so on. That data could track directly to a proof of progress dashboard that TEST could access and then copy over in its report to Give Back. The same tracking also would bring to light which Steamers would be a good fit for particular jobs at companies that partner with STEAMRole.

Blockchain Could Break the Barriers Blocking Our Progress

Imagine the benefits that this kind of system could deliver to anyone involved in HR, recruiting, or contingent workforce management. Blockchain could eliminate the time-consuming and costly chores of screening candidates, verifying their employment histories, and checking the accuracy of their resumes. It could reduce the delays and red tape that accompany timecard approvals. Requisition cycle times become a matter of days or hours, not weeks. Blockchain may emerge as an instrumental force for the next phase of talent acquisition innovation— and I believe it’s worthy. For workforce solutions providers, blockchain could elevate them to new heights of productivity, performance, and service delivery. Or we can keep plugging away at dressing up the status quo, saying things like, “If it ain’t broke, don’t fix it.” Then again, if no one’s looking, how will they know whether or not it’s broken.

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