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AI layoffs backfire as cutting staff doesn't cut it, firms warned (www.theregister.com)

submitted 1 day ago by Powderhorn@beehaw.org to c/technology@beehaw.org

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Bosses betting on AI to slash headcount and boost margins are discovering an uncomfortable truth: the strategy isn't working.

New research from Gartner lays out the problem in stark terms. The analyst firm surveyed 350 global businesses - all with annual revenues above $1 billion, all piloting or deploying intelligent automation - and found that around 80 percent had cut staff as a result.

The returns? Elusive. Companies that reduced their workforces were just as likely to see negative outcomes or marginal gains as they were to generate any meaningful return on investment (ROI).

The conclusion? Layoffs don't create returns, they just create vacancies.

"Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced," said distinguished VP analyst Helen Poitevin and lead researcher on the study. "Workforce reductions may create budget room, but they do not create return. Organizations that improve ROI are not those that eliminate the need for people, but those that amplify them," she added.

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[–] i_am_not_a_robot@discuss.tchncs.de 29 points 1 day ago (1 children)

This isn't new. Even before AI, failing companies would use layoffs as a sort of loan on their quarterly numbers. If you lay off your employees, you're really profitable for as long as you can continue collecting money for the work the employees had already done.

[–] HobbitFoot@thelemmy.club 6 points 1 day ago (2 children)

I don't think it is just failing companies that are doing this.

COVID fundamentally broke the relationship of cost of living to the salary of certain jobs. You don't need to pay salaries for people to live in Silicon Valley or Seattle if everyone in the department is full remote. So, if you are going to keep the job as full remote, you can base the salary on a more average cost of living and cut wages. You can use AI as an excuse for senior staff layoffs for investors, then quietly hire workers in more parts of the world with lower salaries.

[–] corsicanguppy@lemmy.ca 4 points 1 day ago* (last edited 1 day ago) (1 children)

Those of us around for the days when off-shoring was some kind of magic pill will remember how it wasn't. Outsourcing to some guy in Delhi, Ohio, doesn't seem so different; apart from time zone, maybe.

Ai isn't the cause for this but it certainly was the enabler.

[–] HobbitFoot@thelemmy.club 2 points 1 day ago

Part of the issue with off-shoring was that a lot of the work was contracted to different companies. Nowadays, large companies own the satellite offices so they have better control over the work.

[–] belated_frog_pants@beehaw.org 3 points 1 day ago

Exactly what's happening. Job postings specifically exclude larger cities now and low ball the shit out of the offer