I haven’t seen it in person, but I can vividly imagine a slide finding its way into every boardroom deck, every quarterly review, every corporate “AI Strategy” presentation. On the left: current headcount and operating costs. In the middle: a big, bold arrow labeled “AI Adoption.” And on the right: a significantly different set of numbers. Fewer people. Lower costs. Higher margins.
The CFO smiles. Someone who looks like the token McKinsey consultant shouts “operational efficiency gains ftw” while everyone around the conference room table applauds, fist pumps and high fives.
*Okay obviously it doesn’t go down like this, but it’s how this plays out in my brain.
Despite all of the board room enthusiasm – this is actually the slide that might just cost companies their future.
For decades, companies have squeezed employees for marginal efficiency gains to make the quarterly numbers look a little better. Headcount reductions result in a stock price spike 10 out of 10 times. Now, AI has been handed to the “do more with less” crowd as the ultimate weapon. But there’s a critical difference between using AI to remove friction and using AI to remove people. The first is a strategy. The second is a reflex – a panicked, short-sighted reflex, dolled up in a Big 4 PowerPoint.
The leaders who define the next decade aren’t asking, “How do we do the same work with fewer people?” They’re asking, “How do we use the same people to do 10, 20, or 100 times the work we’ve historically done?”
It’s a question Kyle explored in depth on a recent episode of the Recruiting Future podcast — and why shifting from risk avoidance to risk readiness is the first step to getting there.
A False Summit
Over the next 12, 18, 24 months, we’re going to witness a significant wave of AI-driven layoffs. It’s already underway in customer service centers, content factories, back-office ops, and it’s beginning to accelerate into more and more corporate knowledge work.
At first glance, it feels completely logical. AI can handle 30-40% of routine tasks. Maintain output with fewer people, bank the savings, report a strong quarter, get a bounce in stock price. The board does another round of fist pumps. This mindset feels like a False Summit to me – it looks like the peak, but you’ve mistaken a resting point for the destination.
The mistake buried in the math is that it only works if your current output is the right target. But your current output was designed around human limitations that no longer exist. You’re not optimizing for the future. You’re optimizing for yesterday.
I read a great essay that was released this week – a macroeconomic analysis by The Kobeissi Letter highlighted why this thinking is structurally flawed. The market is pricing in a “doom loop” – AI replaces labor, consumption drops, businesses automate more, rinse and repeat. But this assumes the economy is stagnant and demand is fixed. History proves the exact opposite.
And if every company in your industry makes the same “rational” cut, no one gains advantage. You’ve collectively agreed to operate with less capacity. That’s not strategy. That’s a herd blindly walking off a cliff.
The Math of Expansion
Efficiency has a ceiling. You can only cut costs to zero. Every dollar saved is a one-time gain. Value creation has no ceiling. Revenue, market-share, innovation – no theoretical upper limit. Yet most boardrooms remain fixated on the side of the equation that tops out at zero.
History has a name for this mistake: the Jevons Paradox (a term I recently learned diving down a late-night AI research rabbit hole). TL;DR – In 1865, when James Watt’s steam engine made coal dramatically more efficient, England didn’t use less coal – they used massively more, because efficiency unlocked a thousand new applications.
AI is what The Kobeissi Letter calls a “general-purpose capability shock” – it reduces the marginal cost of human attention, ushering in an era of abundance. When human labor becomes more leveraged, the winning move is to deploy more of it against higher-value problems, not to eliminate it.
The back-of-napkin version: a five-person marketing team using AI can now produce what previously required 40–50 people. The “efficiency” CEO fires four and maintains output. The “expansion” CEO keeps the team and goes after ten market segments instead of one. Seems clear which is the winning strategy.
This is HR’s Hero Moment!
Right now, a massive AI leadership vacuum exists in the C-suite. The CFO is hunting for margin, the CTO is probably busy navigating whether or not she should allow her eng teams to use clawdbots, and overwhelmed department heads are too busy surviving the quarter to meaningfully push back on simultaneous mandates of ‘AI-ifying’ their department and planning forthcoming headcount cuts. Because everyone is looking at spreadsheets instead of the humans in the middle, layoffs proceed.
This is HR’s moment to step in. AI has handed CHROs and CPOs the single greatest opportunity to redefine their function, shifting the ultimate question from “Who do we fire?” to “How do we redeploy?” The more progressive companies already had a mini trial run of this during the COVID hiring freezes, when they successfully shifted recruiters into SDRs, CSMs, and AEs.
Now, HR needs to play offense. Don’t wait for the Board to mandate a reduction-in-force. Sit down with the CMO, CTO, and VP of Sales before the CFO asks for cuts, and make a pitch to them along these lines:
The Reality: AI is about to free up 30% of their team’s time, and the CFO will inevitably want those headcount savings.
The Partnership: Let’s team up now to protect your people and point that freed-up capacity directly at our biggest growth bottlenecks.
The Math: Redeployment costs a fraction of the institutional knowledge, recruiting fees, and ramp-up time we’d bleed during a layoff.
The Challenge: This requires real innovation. It’s not just about doing today’s high-value work faster, but uncovering entirely new problems for these teams to solve.
The Ultimate Goal: Supercharge our people with AI rather than replacing them with it.
What we’re talking about is operational capacity reallocation, tied directly to business outcomes. And remember those fancy ‘skills-based’ hiring platforms everyone bought but never quite utilized? Let’s dust them off! Perhaps they were ahead of their time and this could be the perfect opportunity to put them to good use.
The HR leader who walks in with a redeployment strategy instead of a reduction-in-force plan is the next hero of the C-suite.
And for the individual contributors reading this – the people understandably anxious about their futures – your job isn’t disappearing, but it is changing. The employees who thrive won’t be the ones with the most certifications. They’ll be the ones who raise their hands and say, “Now that I’m not doing [automated task], here’s what I can do instead.” Don’t wait for someone to redeploy you. Agency has never mattered more in your career.
Defining the New HR Playbook
The next few years will sort the market with significant clarity.
“Status Quo” companies will get leaner. Briefly more profitable. Then they’ll stagnate because they gutted the capacity that drives long-term growth: capacity to think creatively, capacity for innovation, institutional knowledge, customer relationships. They optimized for a quarterly earnings call and lost the decade.
“Expansion” companies will keep their headcount and operate with the output of an organization ten times (or more) their size. They’ll capture the market share, the talent, and the relationships that the lean companies left on the table.
Processing headcount reductions has historically been a painful necessity of the HR function. But this AI transition we’re in gives us a chance to rewrite that script. AI isn’t about doing less work with fewer people. It’s about doing better, higher value work, at a scale we couldn’t previously imagine, with the HUMANS you already have.