Microsoft, by chief executive Satya Nadella’s own description, is “thriving”. Its quarterly profits soared by almost 25 per cent and its market valuation hit $4tn last week. In any normal situation, it would seem incongruent that the company is at the same time slashing its workforce by the thousands.
The pursuit of a leaner workforce is not new. In times of economic uncertainty, companies prune excesses — cutting headcount and eliminating inefficiencies. But today it is not just about doing more with fewer people. Companies are preparing for a time where there might be less work for their employees altogether.
Even as business leaders claim AI is “redesigning” jobs rather than cutting them, the headlines tell another story. It is not just Microsoft but Intel and BT that are among a host of major companies announcing thousands of lay-offs explicitly linked to AI. Previously when job cuts were announced, there was a sense that these were regrettable choices. Now executives consider them a sign of progress. Companies are pursuing greater profits with fewer people.
For the tech industry, revenue per employee has become a prized performance metric. Y Combinator start-ups brag about building companies with skeleton teams. A website called the “Tiny Teams Hall of Fame” lists companies bringing in tens or hundreds of millions of dollars in revenue with just a handful of employees.
OpenAI’s Sam Altman has gone further, predicting the eventual rise of a one-person $1bn company. That may still sound far-fetched — but it is undeniable large language models are already reshaping white-collar work. While new jobs are being created in the AI age and some workers redeployed, a lot of positions will be eliminated. Companies are increasingly saying the tasks of those workers no longer exist.
Already it’s clear the hiring of coders has dropped off a cliff. And almost daily, my inbox delivers examples of AI’s prowess versus humans. Among the latest is how one Big Four firm has slashed turnaround times for research by 75 per cent, reclaiming 3,600 analyst hours by using AI-generated reports.
Younger workers should be particularly concerned about this trend. Entire rungs on the career ladder are taking a hit, undermining traditional job pathways. This is not only about AI of course. Offshoring, post-Covid budget discipline, and years of underwhelming growth have made entry-level hiring an easy thing to cut. But AI is adding to pressures.
Dirk Hahn, chief executive of recruiter Hays, said to me: “While there will be exceptions, the rise of AI could constrain the recovery in some junior white-collar roles.” If the footholds are eroding, where does that leave future workers? What shape do organisations take if there are fewer starter jobs and middle management positions? Professional development and leadership pipelines need to be redefined.
The consequences are cultural as well as economic. If jobs aren’t readily available, will a university degree retain its value? Careers already are increasingly “squiggly” and not linear. The rise of freelancing and hiring of contractors has already fragmented the nature of work in many cases. AI will only propel this.
But are leaner organisations necessarily better ones? I am not convinced these companies are more resilient even if they perform better financially. Faster decision making and lower overheads are great, but does this mean fewer resources for R&D, legal functions or compliance? What about a company’s ability to withstand shocks — from supply chain disruptions to employee turnover and dare I say it, runaway robots?
Some companies such as Klarna have reversed tack, realising that firing hundreds of staff and relying on AI resulted in a poorer customer service experience. Now the payments company wants them back.
The tech bros touting people-light companies underestimate the complexity of business operations and corporate cultures that are built on very human relationships and interactions. In fact, while AI can indeed handle the tedium, there should be a new premium on the human — from creativity and emotional intelligence to complex judgment. But that can only happen if we invest in those who bring those qualities and teach the next generation of workers — and right now, the door is closing on many of them.