Who Stays and Who Goes

Executives are certainly talking about how artificial intelligence can save the bottom line. On earnings calls, some have remarked that AI has helped keep their employee head counts from rising much, and a few have expressly said they’re cutting staff that AI is replacing.

But behind the bromides about head counts and reductions lies a stark reality: Experts say that companies often get large-scale staff cuts wrong—and end up either losing out to competitors or rehiring at expensive levels. Few leaders know how AI will impact the scope and size of the workforce, and experts say the worst-case scenario would be arbitrary restructuring, in which firms shed only the highest-paid workers or impose unnuanced head-count percentage cuts. “Few people in human resources, if any, have had to figure this out before,” says Alan Guarino, a vice chairman in Korn Ferry’s Board and CEO Services practice.

When Korn Ferry surveyed companies’ views on AI, around 80% said the technology is a top priority in their business strategy. However, other Korn Ferry research finds that only 9% of corporate leaders have the combination of behaviors and experiences needed for the AI era, and 91% exhibit predominantly “business as usual” mindsets and behaviors. What’s more, a new Korn Ferry survey of CEOs and directors finds that more than four in ten of the companies are not gearing up for any major AI-related workforce cuts in the next two to three years. Within that time frame, only 15% expect to cut more than 20% to 30% of workers, and 42% anticipate cutting less than 20%.

Still, AI cutbacks continue to cast a long shadow over worried workforces and confused leaders. The last time firms needed to make large layoffs was during the COVID-19 pandemic, and the initial emphases back then were employee safety and avoiding a financial collapse. Many leaders went to great lengths to talk about how bad they felt, or emphasized the benefits they gave furloughed employees. “For some reason, that impulse is missing in this equally uncertain transformation,” says Bryan Ackermann, Korn Ferry’s head of AI strategy and transformation. “Perhaps leaders should take a cue from how they reacted in the past.”

Rather than focusing on cutbacks that could shrink revenues, Ackermann says, smart firms are concentrating on upskilling workers to create strong human-machine partnerships that will spur innovation and growth. “We acknowledge the disruption,” he says. “But this isn’t about being Luddites or Pollyannaish.” Indeed, experts say using AI expressly as a reason to shed employees could be counterproductive. The goal shouldn’t be to replace jobs, says Wolfgang Bauriedel, a senior client partner in the Technology and Digital practice at Korn Ferry. Instead, there should be a continuum from humans to AI tools. “It’s not AI that will replace your job,” says Bauriedel. “It’s the people who successfully leverage and use AI who will.”

As AI tools march forward, the toughest decisions will involve determining what skills, roles, and responsibilities in an organization AI can replace, and which ones it shouldn’t, says Kim Waller, a Korn Ferry senior client partner who is working with clients going through that exact exercise. From there, organizations need to redesign their structures and determine whether those seeing their roles changed by AI can be trained. All that, Waller says, has to be cascaded down in a user-friendly, well-implemented way that gets the most out of the talent. Meanwhile, Ackermann says leaders should not underestimate the impact of poorly handled cuts on culture and future staffing: “CEOs that tout job loss, whether from AI or not, should not be surprised if they’re not attracting great talent.”

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