Only a few months ago, a week wouldn’t go by without several companies announcing another round of layoffs. The reasons ran the gamut, but usually traced back to one culprit: AI. Companies were confident the technology could handle what people used to do, and shrinking headcount was the line item to prove it.
But now, some organizations are doing an about-face, with multiple Fortune 500 companies announcing plans to increase headcount in coming months. Even recent U.S. Department of Labor numbers seem to signal a shift: U.S. jobless claims fell to their lowest level since 1969 the week of July 18.
Why companies are reversing AI-driven layoffs
For many workers who were laid off recently or have been scouring job boards to no avail, the reversal looks like whiplash or a welcome reprieve. Many of the companies now reversing course replaced people with AI instead of teaching them to work alongside it. Our research suggests why: Managers who lean hardest into that strategy post the highest burnout, the most workslop, and the weakest performance of any group BetterUp studied. “The AI revolution will not be won by those who replace people fastest, but by those who empower them best,” noted BetterUp chief scientist Kate Niederhoffer.
In contrast, augmentation, or pairing AI with continued investment in people rather than swapping one for the other, is an alternative path that’s slower but more rewarding in the long run. Companies tend to see a dip in productivity before they see gains while they’re still building out their AI systems. But the payoff compounds via steady retention, better productivity, and a robust leadership pipeline.
The mechanism behind that payoff comes down to what managers do with the hours AI frees up. Our research found that AI skill alone explains less than 3% of the difference in manager performance. What matters more is if managers funnel the saved time back into coaching their teams and planning strategy. Those who did that, instead of funneling it back into more of the same tasks, saw a 65% increase in their team’s AI performance.
Why companies want entry-level workers with AI skills
That same logic is playing out in who companies are looking to hire. It isn’t about simply restoring headcount, but hiring entry-level workers who often arrive with AI habits that more tenured workers haven’t picked up on yet. BetterUp chief people and community officer Jolen Anderson has noted that AI can’t lead change but that people “who know how to activate human agency in an AI-driven world” can.
Some of the companies now hiring are correcting for the misstep of assuming AI could substitute for people. As BetterUp co-founder and CEO Alexi Robichaux put it at this year's Uplift summit, "The people investment is not a trade-off against AI — it's the mechanism that determines whether AI creates or destroys enterprise value."
In that way, the companies hiring again didn’t discover something new about AI. Rather, they rediscovered something they’d temporarily forgotten about the power of people.
The Human Transformation Platform
Process doesn't change your business. People do. Our platform removes the guesswork from developing your people at scale and delivers growth that's proven, predictable, and precise.
The Human Transformation Platform
Process doesn't change your business. People do. Our platform removes the guesswork from developing your people at scale and delivers growth that's proven, predictable, and precise.
