(This article is part of a series on Artificial Intelligence for Board Members and Senior Executives.)
Senior corporate officers across the nation are wringing their hands. The 2023 economic climate is uncertain, but one thing is for sure—more layoffs are coming. In November 2022 alone, more than 80,000 layoffs were announced from tech giants like Meta, Amazon, and Twitter, as well as conventional companies like PepsiCo, Goldman Sachs, and Ford.
Downsizing is one of the most difficult things that leaders ever have to accomplish. How many should you let go? When should you do it? Who stays and who goes? What severance do you offer? How do you protect your diversity targets? How to maintain trust and productivity in those who get to stay?
Let too many go, too fast, and you could damage service and execution. Let too few go, too late, and you might lose money. Let the wrong people go and you may just create internal chaos. Getting this wrong can have enormous consequences on profitability, productivity, brand reputation, and stock price.
That made me think—could AI assist with this problem?
Throughout the recent years of aggressive growth, AI helped HR departments source, screen, and interview candidates, and even to reduce bias in hiring practices. IBM and others used AI to predict which employees were about to quit. Attraction and retention were the names of the game.
So what about layoffs? Are there any AI tools that help guide corporations’ decision making? As it turns out, there are, and I’d like to share with you five ways that AI can make “organizational rightsizing” work to the advantage of both the employer and employees:
Rightsizing your organization: 5 ways AI can help
1. Performance Evaluation
When layoffs are called for, department managers are often given headcount quotas and told to choose who to cut. But for managers in the trenches, every department member seems essential. Without sufficient tools and experience to guide their decisions, the process can be chaotic and highly destructive to morale.
AI can offer objective performance evaluation to help managers decide who stays and who goes. AI software startups like GoFusion Perfacto and Entomo use data from employee productivity, attendance record, and other KPIs to help separate the star players from the rest on the basis of objective performance metrics.
This approach provides department heads a justification for their downsizing decisions, freeing both leaders and teams of the worst ills of purely subjective decision-making.
2. Skills inventory
When put under pressure to downsize, it is human nature for managers to make decisions biased towards short-term needs. Retaining the talent most critically needed for your organization’s core business activities today makes sense in theory. But when that happens across the board, it can leave you unprepared to take on your most important future-facing strategic initiatives.
AI can help take inventory of your organization’s skills distribution, compare that to predictions of what will be needed in the marketplace, and identify where skill gaps exist so that you can factor that into your decision-making. Tools like eightfold.ai and Seekout boast what they call “talent intelligence,” combining insights about staff skill with marketplace and organizational needs to make data-driven talent decisions. This enables the C-suite to consider the talent management requirements of the entire organization, not just that of individual departments.
3. Retraining potential
Layoffs mean fewer employees, each wearing more hats. Organizations get restructured. Functions become consolidated. And the staff who remain often must take on new roles and learn new skills as a result. AI can help identify those staff who are better candidates for reskilling and suggest how to help them expand or change their roles.
HR software like Pymetrics and Workday have tools to analyze soft and hard skill data in your existing workforce, along with certifications, performance record, past projects, and clearances, to identify the strongest mobility or role-expansion opportunities. They sometimes even include personalized course recommendations and training modules, so that you have a clear path towards reskilling staff.
4. Bias avoidance
When times are good, it feels easier to pay sufficient attention to the organization’s sense of equality. But when the pressure of layoffs comes, that resolve may begin to fray. How can you be sure that decisions are made fairly, objectively, and in accordance with your organization’s equality objectives? How can you protect your organization’s commitment to diversity and equality?
AI can help here as well. Onwards HR, for instance, contains an “Adverse Impact Analysis solution,” which analyzes data across departments and keeps HR and legal teams informed of potential bias in the pool of employees short-listed for dismissal.
Even for staff who must be let go, AI can play a role. Helping your employees transition is not only the right thing to do, but it is important for protecting your organization against reputational damage, both from outside and from within.
AI can help identify the roles and companies that furloughed employees should seek out, and support them in obtaining the skills they need to successfully obtain new employment. FutureFit AI, for example, compares employee skills with hundreds of millions of others. Then, using real-time labor market data, it recommends career moves and proposes learning paths to help laid-off staff achieve success—all with AI.
AI from companies like BlueJ Legal can even help you determine the optimum amount of severance pay to offer your outgoing employees in accordance with age, role, length of service, and litigation case law,
To be clear, I am not advocating for handing over layoff decision-making to AI wholesale. While it might be nice to fully delegate the dirty deeds of downsizing to AI, humans are still needed to handle layoffs strategically and empathetically. But used properly, AI can certainly support leaders in one of the hardest decisions any of us ever has to make.
If you care about how AI is determining the winners and losers in business, and how you can leverage AI for the benefit of your organization, I encourage you to stay tuned. I write (almost) exclusively about how senior executives, board members, and other business leaders can use AI effectively. You can read past articles and be notified of new ones by clicking the “follow” button here.