New report says workforce impact crisis is driven by perception, not production
Employers are being cautioned against making workforce decisions based on AI's potential amid widespread layoffs resulting from the technology's adoption in the workplace.
A new global report by leading AI authorities, Thomas Davenport and Laks Srinivasan, is warning leaders against headcount reductions and hiring freezes ahead of AI delivering actual value to their organisations.
"Don't make workforce decisions based on AI potential that hasn't been proven yet," an insight from the report read. "Getting ahead of what AI can actually deliver today creates risk, not efficiency."
The warning comes as the report found that 90% of organisations have already reduced or frozen hiring in anticipation of future AI productivity gains.
Another 60% of organisations have also carried out headcount reductions in anticipation of AI than from actual AI deployment.
"In other words, actual or planned headcount reductions in anticipation of AI are thirty times the number made from actual AI implementation," the report read. "This gap reveals a workforce impact crisis driven by perception, not production."
AI-triggered cuts
The findings reflect real-world reports of organisations that are reducing their headcounts as they implement AI, even if they are still in the early stage of its implementation.
This is what makes AI different from other technological adoption in workplaces, according to Davenport.
"What's different with AI is how many consequential decisions – especially on workforce – organisations are making before those systems catch up," said Davenport in a statement.
The report warns that these workforce changes can have a "psychological impact" on employees, who are already feeling anxiety from AI-triggered layoffs, with some suffering from survivor's guilt as their colleagues get retrenched amid AI adoption.
"Be careful about anticipating benefits from AI with headcount reductions or hiring freezes before AI capabilities are actually in production," the report warned.
Regretting job cuts
The warning also comes as some organisations that have laid off staff due to AI have walked back on this decision, reopening closed roles and rehiring retrenched staff.
Nearly a third of employers in a recent Careerminds research said they already rehired between 25% and 50% of the roles they initially let go. Another 35.6% said they have rehired more than half of the roles they cut.
The move comes as they admit that AI tools required more human insight than anticipated, with some leaders saying their AI tools underperformed and did not deliver as expected.
Davenport and Srinivasan's research found that most organisations are achieving a great deal of value (45%) or a moderate amount of value (45%) from AI tools.
According to the report, getting the most value from AI stems from providing AI training for leadership and employees.
"Organisations that invest in both – upskilling and leadership AI fluency – see a 23-percentage-point advantage in value realisation," the report read.
It added that workforce resistance is only a small barrier to employee adoption, as most of the workforce is waiting for "effective senior leadership" and other enablement processes.
"Invest in both employee training and governance structures – not one or the other," the report read.
"Training without governance creates chaos; governance without training creates bureaucracy."
