Expert Comment: The firms racing to replace people with AI will be the first to fall
Jan-Emmanuel De Neve, Professor of Economics and Behavioural Science at Oxford's Saïd Business School, argues that companies racing to replace staff with AI risk hollowing out their own future.
We are in the midst of a panic over the impact of artificial intelligence on the world of work – and everything else. AI can write Shakespeare, solve unsolvable maths problems and make dogs sing like Taylor Swift. But it is in the world of corporate automation that the biggest impact is emerging. News abounds of AI stalking the corridors of corporations, with easy-to-automate graduate scheme jobs succumbing alongside a host of other roles. And it is not scaremongering.
In February, Twitter founder Jack Dorsey cut more than 4,000 roles at his payments firm Block – nearly half its workforce – citing AI directly. Meanwhile, every media organisation seems to have produced its own list of AI-proof jobs, spanning everything from plumbers and undertakers to hairdressers and barristers.
From a business point of view, AI can take over many tasks but not yet full jobs (which are bundles of tasks). Yet to many business chiefs, AI looks better, cheaper, and free of sick days. Why wouldn’t CEOs reduce team sizes if the same or more can be done by fewer people?
Well: because this could be a very short-term decision. AI may not just be coming for your job; it may be coming for the employers who simply automate.
Far from being the answer to every question, culling employees to make way for AI should be seen more as a Siren voice, beckoning executives onto the corporate rocks.
Predictions suggest a great many existing jobs will be cut in AI-inspired layoffs, with entry-level positions particularly vulnerable. Yet for the past year, colleagues and I have been researching the likely impact of automation on the world of work, and have found that this route can be anything but a path to success.
“CEOs are facing a strategic fork in the road. They need to ask themselves: are they primarily seeking to improve the bottom line through automation and headcount reduction, or is the ultimate goal to grow the top line in innovative ways through augmentation?”
Cutting staff and replacing them with AI can have several impacts. Yes, it can reduce headcount and, with it, staff costs. But it can also reduce profitability by:
- Locking companies into today’s patterns, which AI performs well at, rather than exploring potential futures, which humans do better.
- Damaging staff well-being and depressing engagement by making work feel insecure.
- Cutting off the talent pipeline and future leadership routes by reducing entry-level headcount in particular.
While layoffs may save money in the short term, our research shows they undermine employee security, and the loss of entry-level jobs risks stifling future leadership by hollowing out the junior talent pool.
AI should instead be used alongside staff – supporting and augmenting their roles. Used this way, it can take over repetitive tasks and free employees to think creatively and spend more time with customers and clients.
And, if firms choose augmentation over automation, they will retain a talent pipeline for the future.
One big mistake automators are making is cutting mostly young talent. That decision will show up in three or four years, when firms look for their next generation of leaders and find they are not there.
Unfortunately, recent surveys find that AI productivity gains tend to be ploughed into “more of the same”, leading many senior leaders to conclude they can do as much, or more, with fewer people. The problem is that this approach automates the past rather than inventing the future – which is where the future value of the company lies.
CEOs are facing a strategic fork in the road. They need to ask themselves: are they primarily seeking to improve the bottom line through automation and headcount reduction, or is the ultimate goal to grow the top line in innovative ways through augmentation?
Too many in the corporate world currently seem drawn to the easy cost-cutting route. But human capital, not AI, will be the basis of future success.
As we conclude in our recent Harvard Business Review article, ‘Why Companies That Choose AI Augmentation Over Automation May Win in the Long Run’: ‘In the end, the AI revolution will not be won by those who replace people fastest, but by those who empower them best. It might be a road less travelled, but it’s the one that will make a difference.’
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