AI Layoffs Don't Deliver ROI—Redeploying Workers Does, Gartner Data Shows

CEOs Say AI Gives Them Only Two Options, and Both Are Bad News for Employees

Can't-miss innovations from the bleeding edge of science and tech In an age of AI, our hardworking CEOs are being tortured with a tough decision, according to new Wall Street Journal reporting: they can embrace AI and lay off scores of employees -- or keep their employees, but use AI to make them work even harder. If those options sound like a false dichotomy to you, you're probably not wrong. But it's emblematic of the logic that business leaders, gripped by AI fomo, are operating with. No one wants to be left behind by the latest technological leap, and few would pass up the opportunity to produce more for less -- which is what AI, however dubiously, promises. Exemplifying this logic, Spotify co-CEO Gustav Söderström opined during a recent earnings call that businesses can either translate AI "straight into cost savings and cut headcount," or they could "say we're going to be roughly the same amount of people, we 're just going to do more." Spotify, for its part, is "keeping our head count roughly flat and just doing much more shipping, more value to consumers," Söderström said. Many CEOs are opting for the AI layoffs route, at least nominally. Jack Dorsey's fintech company Block said it was laying off 4,000 employees, or 40 percent of its global workforce, citing efficiency gains from AI. Atlassian fired 1,600 while also extolling a pivot to AI. The crypto hub Coinbase said it would slash its headcount by 14 percent this week, with its CEO Brian Armstrong telling employees that AI would allow them to be more productive. "Over the past year, I've watched engineers use AI to ship in days what used to take a team weeks," Armstrong wrote to staff, per the WSJ. "This is a new way of working." In all, AI was cited in the announcements of more than 54,000 layoffs last year, one survey found. The trend doesn't look like it'll slow down either, as many companies are jumping on the latest crop of AI models' ability to churn out code. A recent Gartner survey cited by the WSJ suggested that 80 percent of companies using AI agents and other autonomous tools said they're also cutting staff. Yet, forcing employees to use AI to do more work isn't the uncomplicated, surefire route to success it's made out to be. Emerging research suggests that AI is actually intensifying work, driving employees towards burnout and causing "brain fry" as they use AI tools to multitask to a ludicrous degree. An MIT study that found the overwhelming majority of companies saw zero growth in revenue after adopting AI raised major doubts that embracing the tools would bring a return in investment. Tech hirings often come in dramatic boom and bust cycles, so it's difficult to say how much of these cuts are truly down to AI or business leaders responding to other economic trends. It's likely that even the shot-callers don't truly have a grasp on how AI will shape their workforces. "We don't really know what the optimal size of the company will be in the future," Meta chief financial officer Susan Li told investors last week, per the WSJ.

Layoffs Don't Deliver AI ROI -- Redeploying Workers Does, Data Shows

Many business owners who've deployed artificial intelligence (AI) tools across their workplaces are feeling pressure to justify that spending with proof the work automating tech has lowered their overall costs. Often, that has been engineered by companies carrying out huge headcount cuts to lower their labor expenses, thereby buoying their profits. But a new study by business consultancy Gartner indicates layoffs are an ineffective way of achieving return on investment (ROI) in AI, with the better method being retention of human employees and refocusing their work on more value-creating tasks. The gritty managerial dilemma now before many leaders was highlighted in a Wall Street Journal report this week titled, "AI Is Forcing CEOs to Make a Stark Choice: Lay Off Workers or Make Them Do More." Frequently, the decision has been the former, as companies counter-balance investments in the tech by slashing staffs -- a move that also has the advantage of thrilling Wall Street analysts and investors. Indeed, just this week crypto platform Coinbase announced a 14 percent headcount cut. That followed earlier moves by Atlassian, Meta, and Amazon to reduce about 10 percent of their workforces respectively, and PayPal saying it plans to eliminate 20 percent of its jobs over the next few years. That steady drumbeat of mass layoffs is increasing fears across the labor force that warnings of "AI apocalypse" are already being substantiated, with the tech continually pushing huge numbers of workers into unemployment. Those worries are likely to increase even more, with Gartner estimating companies that spent $86.4 billion on AI in 2025 will increase those investments to $206.5 billion this year, and $376.3 billion in 2027. Fortunately, some business leaders believe there's a better alternative to lopping off large portions of staffing to offset -- and justify -- the huge sums spent on developing and adopting AI. Results of Gartner's newly released survey of 350 business executives indicates that deploying the tech to put employees to more effective and profitable use winds up being a wiser and more profitable long-term solution than headcount cuts. "Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced," said Helen Poitevin, distinguished vice president analyst at Gartner in comments accompanying the findings. "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 by aggressively investing more in skills, roles and operating models that allow humans to guide and scale autonomous systems." Some business leaders have already adopted that alternative to staff cuts. As the Journal noted, Spotify, IBM, and taser manufacturer Axon Enterprise are all pursuing plans to use AI in ways that free employees from repetitive, lower-impact, and gruntier tasks so they can be reassigned more interesting, enriching, and valuable work. That view starkly contrasts the "brutally clear and honest" comments recently made by Bed, Bath & Beyond CEO Marcus Lemonis, who warned that AI will drive a "significant reduction in head count" in coming months. Lemonis has been far from alone in taking that approach to AI and staff management. According to Gartner's survey, fully 80 percent of "organizations piloting or deploying autonomous business capabilities" like apps and chatbots have resorted to layoffs to offset spending on those, and generate savings "that appear to translate into return on investment." However, in looking more carefully at outcomes, Gartner discovered "workforce reduction rates were nearly equal among respondents reporting higher ROI from autonomous technologies and those experiencing only modest gains or negative outcomes." In other words, the tech alone didn't generate increases or declines in productivity, nor did cuts in staffing. Instead, Gartner found that companies that deployed AI and other automation tech most profitably usually maintained headcount, and assigned employees to new, farther-reaching, and more valuable work tasks using those tools. Doing so, Gartner's report on the survey said, resulted in "human-amplified" businesses harnessing AI to empower rather than replace staff -- and attain benefits over far longer periods than the brief financial sugar-boosts that layoffs usually produce. "Long term, autonomous business will create more work for humans, not less," said Poitevin. "Lasting structural factors such as demographic decline and high-stakes, trust-dependent consumer moments will ensure human talent remains central to running, governing and scaling autonomous business." Get 1 Smart Business Story delivered straight to your inbox when you subscribe to Inc.'s free daily newsletter.