AI is Replacing Employees; Will it Create an Employer’s Market?

Effectively, AI is Replacing Employees

AI Tool that Does the Work of 700 Full-Time Employees 

In a Forbes article, Klarna’s New AI Tool Does The Work Of 700 Customer Service Reps. A Swedish-based company, Klarna, that offers a buy now pay later option, allowing customers to purchase merchandise from retailers on lay-a-way, has recently shared the mind-blowing financial results.

Klarna reports having over 150 million active users purchasing from more than 500,000 vendors. Daily, its website handles upwards of two million transactions. The company has 5,000 employees.

The past couple of years, Klarna has been crafting its own version called the AI Assistant.  The Assistant is targeting the automation of a large portion of its customer service operations. Earlier this year, Klarna shared that their AI Assistant now adeptly manages inquiries concerning refunds, returns, payment issues, cancellations, disputes, and correcting invoice errors. This AI tool offers instant updates on pending balances and payment plans.  It also offers advice on spending limits and alternative purchasing strategies, in more than 35 languages, around the clock.

Customer Resolution goes from 11 minutes to less than two

Over the recent year, this AI assistant has engaged in 2.3 million conversations, accounting for two-thirds of all customer service interactions. Effectively, this AI is replacing employees, performing the duties of 700 full-time customer service representatives. More significant, it matches the customer satisfaction levels of human agents.  Also, it boasts enhanced accuracy in resolving tickets, leading to a 25% reduction in follow-up inquiries. Tickets are now resolved in under two minutes, significantly improving from the previous 11 minutes. This tool is operational in 23 markets and supports over 35 languages.

The AI Assistant developed by Klarna is saving them over $40 million annually. “This AI breakthrough in customer interaction means superior experiences for our customers at better prices.  It also means more interesting challenges for our employees, and better returns for our investors.” Klarna’s co-founder and CEO, Sebastian Siemiatkowski said in a press release.

Employees Future

As for the impact on Klarna’s workforce, this development serves as a cautionary note, signaling changes ahead. “That’s a good way of saying ‘watch out, people!’ Should employees there be concerned? Some should. But the good customer service agents will keep their jobs because they will be able to provide a higher level of service to more customers than ever before. Mediocre performers that can be replaced by a bot will be replaced by a bot.” said the Forbes article.

If productivity, customer experience, and profitability improve using an AI tool instead of human beings, then marginal employees will be in danger. Today, small and medium-sized businesses cannot afford such a significant investment in advanced AI solutions, but the landscape is changing. As larger corporations continue to invest in AI, the technology will become more accessible and affordable.  Whether we want to admit it, we see that AI is replacing employees.

How do you feel about AI replacing employees?

The CEO who replaced 90% of his customer service team last year says it was the right move.

E-commerce company CEO Suumit Shah has expressed that positions involving repetitive tasks are becoming obsolete due to

AI Chatbot replacing employees

advancements in AI technology. Shah, who previously faced criticism for his decision to replace 90% of his support staff with an AI chatbot, remains convinced that such technological adoption will become widespread.

Businesses Moving Towards AI Integration

In discussions with Business Insider, he emphasized the inevitability of businesses moving towards AI integration despite initial backlash to his approach. “That job is gone. 100 percent,” Shah said in a Washington Post interview. “It was [a] no-brainer for me to replace the entire team with a bot,” he added, “which is like 100 times smarter, who is instant, and who cost me like 100th of what I used to pay to the support team.”

The initial layoff made headlines last July when Shaw announced that he had laid off 90% of his customer support staff and replaced them with a chatbot he said outperformed them. Despite the controversy and debate, Shah maintains that reducing his customer support team is a strategic move driven by AI’s capabilities. He revealed to Business Insider that this shift significantly reduced the company’s customer support expenses while arguing for the benefits of AI to streamline operations.

*Related – How Artificial Intelligence (AI) is Benefiting Customer and Employee Satisfaction

Years after the onset of automation reshaped manufacturing roles, artificial intelligence is now targeting higher positions within the corporate hierarchy. In recent weeks, there has been a rising number of layoffs in white-collar sectors at companies like Google, Duolingo, and UPS. Although the direct job losses attributed to generative AI are minimal, several of these firms have attributed their staffing reductions to adopting new technologies that enhance productivity, including machine learning and various AI tools.

Are any Careers Safe? White-Collar Professions may be in Danger

According to an article in the Wall Street Journal, AI Is Starting to Threaten White-Collar Jobs. Few Industries Are Immune; generative AI is poised to disrupt a larger fraction of white-collar employment, impacting middle to senior management levels, per insights from company consultants and executives. This form of AI transcends the capabilities of earlier automation technologies, which primarily focused on streamlining repetitive tasks or analyzing data patterns for predictions. Generative AI can generate original content and merge ideas, performing millions of intellectual tasks daily on their computers.

No More Labor Shortage

Several recent layoffs are directly link to transformations induced by AI, while other firms reduce their workforce to reallocate funds towards AI investment.  It is driven by the need for greater efficiency. Additionally, executives at companies like Chemours anticipate a decrease in future recruitment needs, attributing this shift to the impact of AI on their operations. “As the company grows, we’ll need fewer new hires as opposed to having to do a significant retrenchment,” said Chief Executive Mark E. Newman.

Early this year, Alphabet’s Google announced the dismissal of numerous employees from sectors, including hardware and internal software tools, as part of its effort to reduce expenses and pivot towards greater AI investment. In a similar timeframe, Duolingo, a language-learning software firm, revealed it had eliminated 10% of its contracting workforce, with AI set to take over some aspects of its content creation responsibilities.

Fewer Employees = Fewer Leaders

This technology threatens to permanently alter or eliminate managerial positions, with corporate leaders and consultants

Will AI replace employees at all levels

suggesting that its rapid development could fundamentally transform or render obsolete various roles across the corporate spectrum in fields as diverse as technology and chemicals. “This wave [of technology] is a potential replacement or an enhancement for many critical-thinking, white-collar jobs,” said Andy Challenger, senior vice president of outplacement firm Challenger, Gray & Christmas.

United Parcel Service (UPS) also disclosed plans to eliminate 12,000 positions.  These mainly affect management staff and some contractual employees. Indication are that these roles are unlikely to be reinstated even with a future uptick in package delivery demand. UPS has increased its reliance on machine learning for tasks such as pricing shipments.  It is leading to a decreased need for human staff within its pricing department. Generative AI and related technologies are also changing some jobs at UPS. “By reducing repetitive tasks and physical stress,” UPS spokesperson Glenn Zaccara said.

Anticipations of AI Replacing Employees and Altering Management Hierarchies

Oliver Wyman offer a revealing study.  The adoption of AI is anticipated to alter the structure of management hierarchies. Initially, your impact will be felt most by entry-level employees as AI automates many of their tasks. Consequently, the nature of entry-level positions will evolve, resembling the responsibilities of first-level management more closely.

The study suggests that this shift may lead to a reduction in the layers of middle management.  These layers traditionally serve as the pathway to senior leadership positions. The survey within the study found that over half of the senior white-collar managers believe generative AI could automate their roles. This belief is slightly less prevalent among middle managers (43%) and first-line managers (38%).

How Corporate America is Shedding Labor at an Unprecedented Pace

One of my favorite thought leaders, Scott Galloway, wrote an excellent blog titled, Corporate Ozempic. He compares the unprecedented impact Ozempic has on personal weight loss to how corporate America is using AI to shed employees and payroll.

“Similarly, my thesis is that firms (notably tech companies) have also discovered a weight loss drug and are also being coy about it. Recent financial news features two stories: layoffs and record profits,” Galloway writes. “These are related. There’s no mystery to the surface narrative.  Five, ten or even 25% of a company’s workforce is laid off, and 6 to 12 months later, after severance pay and expenses are flushed through the P/L, its operating margin hits new heights. The ultimate peanut-butter-and-chocolate shareholder confection is Meta, which produced a singular Hall of Fame quarter in Q4.”

Related Podcast:  How AI Will Impact Customer Service

It is Shifting from an Employee Market to an Employer Market?

Galloway shares that technology firms laid off 165,000 employees in 2022, and 260,000 in 2023, and projects to let go of 270,000 in 2024. “Business results also don’t explain the deeper cuts. These companies are killing it. Meta’s revenue was up 16% in 2023; Alphabet’s, 9%. Microsoft’s most recent quarter registered 72% greater revenue than the like quarter in 2020.  Until then, it was its highest-grossing quarter to date,” Galloway shares. “Accordingly, Big Tech’s stock prices are at all-time highs.  And the magnificent seven were responsible for 70% of the S&P’s Macho Libre year (up 24%). Based on the numbers, the pandemic hiring binge wasn’t a mistake, but the correct response to a step-change in business. They needed these people … until they didn’t. The layoffs are no longer a signal of economic conditions, but innovation.”

AI replacing employees savingsGalloway argues the trend extends beyond the technology sector. The general economy experiencing consistent job growth and maintaining low unemployment rates (marking the longest stretch of unemployment below 4% in half a century).  Despite this, numerous companies across various industries have initiated significant layoffs. UPS, CVS, and Hasbro are just a few of the corporations that have declared reductions.   These reductions equate to over 1,000 employees each in the past six months.

Some Tech Leaders Predict AI Replacing Employees Will Change and AI Will Ultimately Create More Jobs

AI apocalypse predictions are not universally shared. Published reports show that around 300 million jobs worldwide could be lost due to AI. However, Microsoft CEO Satya Nadella and IBM CEO Arvind Krishna have said AI will create more jobs than it will destroy.

 

About The Author

John DiJulius

John R. DiJulius is a best-selling author, consultant, keynote speaker and President of The DiJulius Group, the leading Customer experience consulting firm in the nation. He blogs on Customer experience trends and best practices.