Why replacing staff with AI backfires - and 5 ways smart leaders generate real value instead

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Defaulting to AI-enabled layoffs is often seen as a shortcut to cost-cutting. Specialist site jobloss.ai , which tracks AI-enabled layoffs, reported that 126,000 US employees lost their jobs between January 2025 and June 2026 due to AI-related factors.

Ankur Anand, group CIO at recruiter Harvey Nash, told ZDNET it's easy to see why many executives regard AI deployment as a pathway to cost-cutting.

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"Early messages from vendors, consultants, and even some boards have focused on productivity, automation, and doing more with less," he said. "Headlines about AI‑related layoffs reinforce the idea that the fastest route to value is through fewer people."

This default position paints a grim picture for professionals anxious about AI-enabled job cuts .

However, replacing workers with AI is no guarantee of success. In fact, a growing body of evidence suggests many businesses are beginning to recognize the limitations of AI and even regret some of their job-cut decisions.

Research from Careerminds found that slashing jobs is unlikely to create the value senior executives crave. Three-quarters of organizations found AI layoffs cost more than they saved, and as many as nine in 10 companies would rethink them given the chance.

Such is the sense of regret that analyst Gartner estimates 50% of companies that attributed headcount reduction to AI will rehire staff to perform similar functions by 2027.

Also: Companies embracing AI the most are hiring more people - including entry-level

In short, suggested Anand, firms that treat AI mainly as a cost‑cutting tool are missing the bigger opportunity -- allying technological capability with human excellence to generate new value for the business.

"If your AI strategy starts and ends with headcount, you are using a growth technology to run a shrinkage plan," he said. "The leaders who win will use AI to create new value, not just cut costs."

Steve Lucas, CEO at integration technology specialist Boomi, told ZDNET that the starting point for value-based considerations should be a big dollop of circumspection about AI-enabled layoffs.

While emerging tech will change roles and responsibilities, many of the job cuts attributed to AI -- particularly in the IT industry -- are companies looking for a convenient excuse.