Expect

fewer

managers

‏‏‎ ‎direct‏‏‎
‏‏ reports‏‏‎ ‎‎

From the editor: This overheard passage comes from a virtual event that featured a productive disagreement between members. In this piece you’ll see two opposing perspectives about the well-worn assumption that AI will replace labor. As always, ON_Discourse operates under the Chatham House rule—no attribution of perspectives without explicit consent.

‏‏‎ ‎Yes,‏‏‎ ‎ and here’s why

AI could accelerate the flattening of organizations

MBA programs didn’t prepare anyone for this. The accelerating adoption of AI tools could completely redefine how businesses organize. The first dominos to fall will be the HR and management layers. At first glance this seems like a bad thing, but it’s not…

Today’s model is fundamentally stupid—I don’t mean that pejoratively. Managers are incentivized to grow their teams regardless of need. Why? Having more direct reports leads to more promotions and more raises for managers. This sustains a conventional growth model that leads to overhiring and layoffs.

AI tools will disrupt the need for companies to grow their workforces by injecting intelligence and data into this dumb growth model. The knee-jerk reaction to such a shift typically sounds like, “If we don’t grow our teams, how are we ever going to get promoted and have a career path?”

This thinking is rooted in the assumption that a hierarchy and a climbing mentality are required for growth. AI tools will reveal that this is not the case, and adding people will not be seen as a requirement for revenue growth.

Instead, revenue growth could be achieved while keeping headcount flat, or even through reductions. Many non-revenue-generating roles, like in HR and middle management, will start to disappear. Active executors that have a more direct relationship with the bottom line of the organization will replace them.

People managers who remain will have more time to focus on their hands-on efforts. These individuals were good enough at doing something to get promoted. Their employers will develop metrics and goals around those skills, unlocking an entrepreneurial spirit.

Instead of adding more people to manage, people managers will become more focused on outcomes. AI tools could help incentivize individual contributors based on what uniquely motivates them and the impact they can make.

On the HR side, plenty of functions could be handled by AI, possibly with less bias, more clarity, and more transparency. The processes could be opened up and deployed more equally across teams.

More layers and hierarchy only distract from revenue-generating functions and complicate decision-making.

This has important knock-on effects. Non-revenue-generating roles pull businesses further away from their customers and the outcomes they want. More layers and hierarchy only distract from revenue-generating functions and complicate decision-making, whereas fewer non-essential roles could mean more focus on translating user needs to products and services.

Some argue that AI can just help bring all the data needed for decisions to the top of the organization, but that’s backward. Why bother having such a structure? Instead, flatten your organization and empower more people to make decisions closer to the customer.

AI tools will disrupt the need for companies to grow their workforces by injecting intelligence and data into this dumb growth model. The knee-jerk reaction to such a shift typically sounds like, “If we don’t grow our teams, how are we ever going to get promoted and have a career path?”