DAO: Blockchain driven organizational structure

I have always been fascinated by the potential that blockchain held for HR. Imagine, for instance, a Global Standardized Resume – A verified, tamper proof version of the candidate’s education, work experience & skills. that companies can access to acquire the talent they seek. Not only will it save on the costs incurred on background verification (Which in itself is a $2Billion industry as we speak), it will also eliminate identity theft and fake profiles. Of course, it will simplify the application and onboarding process by a zillion times and most importantly – save reams of papers, that one prints in the name of proofs and documentations.

If this feels like a far-fetched idea, “brace yourself”, because the actual topic of my current article is far more radical.

The Organizations of Future: One of the key Human Capital Trend for 2017, as identified in the Deloitte Bersin’s report based on survey of over 10,000 respondents from across industries globally, is our topic of interest. To set some context, here is an excerpt from the report “Agility plays a central role, in the organization of the future, as companies race to replace structural hierarchies with networks of teams empowered to take action.” Could not have worded it better!

Allow me to introduce to you a new type of Organizational Structure – one that replaces structural hierarchies with networks of teams empowered to act, also known as a Holacracy.

Introducing Holacracy:

An organization where Distributed authority replaces delegated authority. As implausible as it might sound, there have been successful emulations of this model, even amongst companies that feature in the top 500 global organizations like Zappos – The big-ticket acquisition of Amazon recently was renowned for this alternate organizational model. In Holacracy, the organizational structure is regularly updated via small iterations, much like agile, distributed software. 

While the concept of Holacracy supersedes the Blockchain, Blockchain seems like a perfect platform to realize the benefits of a Holarctic organizational structure.

Block chain of-course is a structure of databases containing a history of transaction. Each entry or transaction is recorded on a time-stamped block through secure encryptions, thus making the entire block unviable if tampered with, thus attributing trust to transactions. A copy of this database is then maintained locally with all the participants (nodes), thus increasing the credibility manifold.

One of the interesting features of Blockchain is ‘Smart Contract’. Proposed by Nick Szabo in 1996, Smart contracts are computer protocols intended to facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts can enable enforcement of organizational policies through code. In other words, some of the key decisions that vested with the CXO office until recently could be democratized and delegated – effectively.

A closely related experiment on running an investment company electronically through crowd funding took shape in a big way recently. Hailed as DAO (Decentralized Autonomous Organizations), this DAO managed to rise and control about $150 million in crowd-funded assets, sitting on an Ethereum blockchain. Investors in this novel concept were given DAO tokens based on the Ether they invested, which could be used to vote on governance issues and other decisions like which projects the $150 million DAO should fund. People could also submit proposals, and vote on ventures that they would like the DAO’s funds to be invested. The smart contract code would then ensure execution of the payments based on the project milestones built into the code, thus ensuring a smooth execution of the project, eliminating conflicts, Ego, and most of the human related decision biases. One caveat however – A recent experiment in DAO went haywire when millions of dollars of funds were funneled out of the system, but that is a story for some other time.

For now, we can live with the possibility that Block Chain could be the future of organizations.

***Inspired by the speech given by Mr. Jaspreet Bindra , Mahindra Rise @ Tech HR conference , Gurugram 2017.