Smart Contracts: People Development (UK)
There are a lot of routine decisions made within HR, simple transactions which require time, but in themselves are not particularly value generating. Could a mechanism designed to execute certain actions, when an effect occurs or fails to occur be the answer? If so, that answer could be in the form of SMART CONTRACTS.
A smart contract is a computer rule which acts, verifies or enforces an agreement based on the performance or non-performance as detail in a contract.
The concept was put forward by Nick Szabo, a legal scholar and academic writer; in 1997 in his blog post: The Idea of Smart Contracts. He has since expanded on it, stating the idea behind smart contracts is for “contractual clauses… [to be] embedded in the hardware and software we deal… to make breach of contract expensive” – Formalizing and Securing Relations on Public Networks. Complex definition and original purpose, but it has other more simple day-to-day uses too.
The simplest example of this would be if two people were to bet on a game. One believes team A will win and the second person believes Team B will win. The smart contract – having taken both these bets – releases the monies to the winning part having independently verified the game’s result. You will still need someone to write the rules/protocol, input the basics of law, but once these have been done, then the instrument may be easily purchased as a ready-made “bundle”. It is already being used within cryptocurrencies – bitcoin with companies like BitHalo.
It is easy to see how this system might prove hugely useful for SMEs and contracts; it’s cost effective, allowing them to forgo the use of lawyers, negotiators or various other middlemen. It is quicker and simpler too. Most importantly of all, it instils trust and builds security within the working relationship.
Within HR/ People Development, smart contracts can be used right from the start of employee’s lifecycle. We already use them, in a crude form in application screening processes. There are some hitches, namely applicants parroting adverts or the system rejecting great candidates. Moreover, employers need to know that they have an obligation under the Data Protection Act (1998) to continually monitor the system for its accuracy, assess applications alongside other methods, and must inform applicants of its use.
However, there are still a number of ways where the smart contacts can prove useful in the function. Here are just a few of them:
- Annual Appraisals: Any employee given a poor or worst rating being automatically put on a list for possible capability measures. Highlighting which areas were given those poor ratings and forcing diary entries between the manager and employee to discuss the matter.
- Compensation reviews: Employees given high scores being selected for higher bonus payments. It’s advisable that these are implemented in 360 degree assessments (evaluations coming from not only the person’s manager but also peers and juniors) to avoid pressures on managers to always reward positively.
- Absence management: Poor or excellent attendance records of a certain thresholds leading to automatic rewards or extensions of probation periods, triggering absence meetings, or a re-calculation (up or down) of bonus amounts.
- Learning and Development: Automatic notifications and restrictions on duties for failing to complete vital training sessions or automatic verifications being made to governing bodies to prove employee membership.
The list is endless… There are several areas where smart contracts can be used to save time on verification, reminders/ notifications, automatic updates or processing. Perhaps, it’s time we begin to look more into this area.