Why IT leaders need to be involved in layoff decision-making to avoid AI washing

Companies are pouring billions into AI initiatives in pursuit of productivity gains. Yet, for many, the payoff isn’t coming soon enough. As a result, layoff announcements attributed to AI investments are coming thick and fast.

Earlier this year, Monday.com became the latest major tech company to announce AI layoffs. The restructuring plan, which will see more than 600 jobs, or 20% of the workforce, culled, has been put down to the need to pivot to “a leaner, more focused operating model” and “AI-driven growth strategy”.

In a memo published on LinkedIn, Monday.com co-founder and co-CEO Eran Zinman stressed that though the company is “seeing significant value from AI internally, this decision was not made to reduce costs or replace people with AI.”

The layoff trend is set to continue in the short-term – at least in the short-term. A survey released by consulting firm Mercer in May found that 99% of 825 C-suite leaders expect they will have to reduce their headcount over the next two years.

However, according to another survey of 600 HR professionals, conducted in February by Careerminds, a third (32.9%) of respondents said their company had lost critical skills as a result of layoffs blamed on AI. More than a quarter (28.1%) indicated that the employees who had been spared weren’t equipped with the knowledge required to fill the skills gap created by the layoffs.

IT leaders are often overlooked

The data shows that there’s a disconnect between the reasons behind layoffs and their intended impact. The problem is that decisions “are being made in the wrong rooms,” argues Sonali Fenner, a managing director at technology consultancy Slalom focused on strategy and innovation.

She says that layoffs are typically a response to board pressure to demonstrate the return on investment (ROI) of AI tools and vendor promises of ROI not materializing quickly enough. This means review processes end up being fragmented and rash decisions are made.

“Finance triggers the review, HR manages the process, operations signs off the business case, and IT is consulted just long enough to answer a feasibility question before the door closes. When the automation underperforms, as it regularly does at the early stage of enterprise AI maturity, nobody is clearly positioned to own the gap between what was promised and what was delivered,” explains Fenner.

The people within a company who actually understand the AI tools being invested in and what they can and can’t automate tend only to be “consulted as an afterthought”.

Technical knowledge can inform layoff decisions

It makes sense, then, that IT leaders should be involved in layoff decision-making – they sit closest to where AI is actually deployed. For example, they are the ones whose roles involve tracking the ROI of AI, and they have visibility into whether AI has actually delivered the productivity gains layoffs are being justified by. As Fenner puts it: “IT leaders know the difference between what an automation deck says and what the system actually does at 2 am on a Tuesday.”

David Fischer, chief revenue officer at Luware, a software firm that builds customer service and compliance tools, echoes this. “IT leaders absolutely need a seat at the table when businesses make workforce decisions linked to AI, but they shouldn’t be making those decisions alone,” he says.

It’s IT leaders’ bread and butter to have a clear read on what AI can automate, where its limitations lie, and where it can support human workers in their roles, Fischer adds. On the other hand, operational and HR leaders are better placed to understand the implications layoffs can have on people and the wider business.

Research released by Cornerstone recently found that when CIOs and chief human resource officers (CHROs) work together on workforce planning, changes happen 13% faster. However, while 94% of 2,000 IT and HR leaders surveyed said that a joint approach was becoming a priority, only 35% admitted that AI-related decisions were being made together.

Be mindful of the conflict of interest

Despite the need to involve IT leaders in layoff decisions, doing so isn’t without its risks, namely a conflict of interest.

“IT leaders responsible for delivering an AI programme may be under pressure to demonstrate a return on [AI] investment through efficiency gains,” Fischer points out. They may feel incentivized to overstate AI tools’ capabilities.

Fenner adds: ”The conflict of interest concern is real. IT leaders who championed AI investment carry an inherent risk of overestimating its readiness to justify the spend.” This can lead to unnecessary job cuts. Plus, a loss of the technical knowledge, critical judgment, and oversight human workers use to manage AI outputs, catch errors, fix biases, and maintain accountability.

“But excluding them from layoff decision-making creates a greater problem: decisions made with an incomplete picture, with no one technically accountable when that picture turns out to be wrong,” she adds.

Both Fenner and Fischer agree that the companies that get layoffs right are the ones that bring IT leaders to the decision-making table but aren’t letting them sign off on the layoffs.

Operational and HR leaders who lean on IT leaders’ knowledge about where, in their business, human expertise remains invaluable can ensure that they’re not AI-washing and using AI as an excuse to reduce headcount.