Layoffs was once one thing that made an organization’s inventory tank. However after Block introduced layoffs just lately, its inventory went up. They usually weren’t the one ones: Snap did the identical factor just a few months earlier, as did Meta and Amazon. The widespread thread? All of them cited AI as their motive for cuts.
For CEOs staring down investor strain, the playbook has develop into clear: invoke AI, slash headcount, and watch the ticker go up.
I’m a CEO, and I’ve been laid off earlier than. I now advise HR and advantages leaders at Fortune 500 firms as they plan, execute, and transfer ahead after making workforce cuts. Right here’s why I’m cautioning fellow executives in opposition to leaping on the “AI” layoffs bandwagon with out excited about it from each angle.
Many ‘AI-driven layoffs’ aren’t actually about AI
A current Goldman Sachs survey discovered that solely 11% of shoppers had been reportedly reducing jobs on account of AI, whereas LinkedIn’s hiring data alerts that AI isn’t instantly resulting in the hiring slowdown… but. A few of the cuts we’re watching this yr are largely about overhiring in 2021 and 2022, a cooling financial system, softer client demand, and product bets that haven’t paid off. However these causes don’t sound all that glamorous on an earnings name; AI does.
As Tech investor Terrence Rohan put it plainly in a current interview: “Pointing to AI makes a greater weblog submit. Or it no less than doesn’t make you appear as a lot the unhealthy man who simply needs to chop individuals for cost-effectiveness.” It’s exhausting to inform right this moment the place AI is the basis reason behind layoffs and the place it’s principally a pleasant narrative wrapper.
However right here’s the issue: Your layoff story travels additional than your inventory pop.
Having personally skilled a layoff, I understand how painful and disruptive an involuntary exit could be. And, as a CEO who reviews to a board each quarter, I nonetheless must make exhausting calls like every government. However the way you make them and what you say about them is the half that issues.
With that in thoughts, that is what leaders want to bear in mind when they’re confronted with speaking these troublesome choices.
Bear in mind what a layoff actually means for all your workers
The way you clarify a layoff issues greater than the reason will get credit score for.
For departing workers, keep in mind they haven’t simply misplaced a job and their revenue. They’ve additionally misplaced, most often, many different basic lifelines: medical health insurance, life insurance coverage, retirement contributions, incapacity protections, and extra. That’s earlier than you rely their each day routine, sense of function, and group.
For the remaining workers: They know which groups bought minimize and what these individuals had been engaged on. They’re nervous they usually’re watching. The story you place in entrance of the market is instantly telling your group what sort of firm you are actually and sooner or later. So the way you speak concerning the choice and the way you deal with their departing colleagues speaks volumes, and instantly interprets into morale for the weeks and months forward.
In speaking any minimize, one of the best leaders deal with each lessons of workers with the seriousness and respect they deserve, not as a transaction which may give them a inventory increase.
Your inside and exterior story needs to be one and the identical
If you happen to informed the market the layoff was about AI, and your individuals understand it was a few missed product launch, you’ve simply taught your organization that management says what’s helpful, not what’s true. That lesson doesn’t keep contained to at least one announcement.
With the businesses I see dealing with layoff bulletins nicely, the phrases on the earnings name match the phrases within the exit packet. Departing and remaining workers alike see and listen to a proof they’ll perceive and that is sensible to them, regardless of how painful. They usually additionally expertise and witness a compassionate exit course of, as a result of treating them with dignity softens the ache of being on the receiving finish of this choice.
Bear in mind: Investor reward ≠ public notion
Most of us can recall a cringe-worthy public layoff gone awry. However when Perplexity’s CEO disregarded the severity of layoffs, the general public backlash was swift.
The counterintuitive reality about AI’s rise is that the stakes on model notion are solely on the up and up. As extra firms construct on the identical small set of foundational AI instruments, product output is beginning to look the identical. What you say and the way you behave issues extra, not much less.
Whereas ChatGPT emerged because the dominant drive, now Claude is making appreciable headway, particularly in enterprise gross sales. The consensus for why that is largely factors to how the 2 place themselves and what they stand for, from Anthropic’s public battle with the Protection Division over mannequin guardrails to OpenAI’s choice to run adverts in ChatGPT. Consumers paid consideration they usually moved their cash.
Buzzwords and bandwagons are tempting to leap on, particularly when each firm is racing to show it’s “AI-ready,” however they don’t at all times resonate with prospects, workers, and enterprise patrons taking note of much more than your earnings name.
Be sincere about what’s actually driving these cuts
In case your minimize is pushed by macro situations, say that. If a product was a complete flop, say that. If you happen to overhired throughout a bullish interval, say that. The truth is, layoffs are a daily factor for any company, and none of these causes are disqualifying.
To Terrence Rohan’s level: saying it’s simply AI could make you’re feeling like much less of the unhealthy man, however the impact is definitely the other. What erodes belief is dressing up respectable causes in a scapegoat rationalization as a result of the market prefers that model.
If AI is genuinely a part of your minimize, be particular about it
It’s very attainable, even probably, that AI performs some function within the cuts you’re making. However there’s not often a time when it’s defensible to make your individuals really feel replaceable.
There’s an actual distinction between saying “we’ve invested closely into AI and are restructuring round that shift” and “we’re changing 400 human help roles with a educated mannequin.” Most firms are doing the previous however signalling it’s the latter. That’s the place the belief breaks down.
AI will reshape a whole lot of work over the following decade, and because the market absorbs it we’ll see extra layoffs legitimately tied to it. That’s why it’s much more essential to be sincere, clear, and particular now. For higher or worse, most of us in management could have many extra of those moments for quarters and years to come back.
If you happen to make a behavior of dressing up regular enterprise choices with a glitzier costume, in the end it would come again to chew you. The way you discuss making cuts is the half that individuals really keep in mind, lengthy after your inventory is again to regular. And within the meantime, the individuals inside your organization are listening.
