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Six in ten professionals Korn Ferry surveyed now cover more than one role
Korn Ferry's survey of more than 16,000 professionals found 61% covering more than one role and 45% too busy to deliver results that drive growth. Companies book the payroll saving from flattening at once, while the cost the survey points to arrives later, in growth work left undone.
The Investor · Invest desk
What happened
- Uber said it would cut about 10% of its workforce, roughly 3,300 people, and reduce its number of managers by 20%.
- Korn Ferry found that 42% of organizations had cut management roles over the past year.
- In the same survey, 79% of CEOs reported improved efficiencies from AI, against 51% of individual contributors.
- Meta has begun asking some individual contributors in its Applied AI division whether they want to move back into management, Business Insider reported.
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Why it matters
- cost Because headcount is how CFOs keep score, in Cappelli's account, the saving gets counted while the extra hours absorbed by remaining staff do not, so a flattening can look cheaper on paper than it is.
- constraint Flattened teams have fewer spare hours for the experimentation internal AI tools require, so a company cutting staff and building AI at once is drawing on the same hours twice.
- contradiction A 28-point gap between CEOs and individual contributors on AI efficiency means staffing is decided by the group that sees the gains, for teams where only half report them.
- precedent Meta's offer gives other companies a model for partly undoing a flattening, and every manager role it refills hands back some of the saving the cuts produced.
A payroll cut shows up in the accounts in the quarter it happens. The work the departed people did has no line of its own. Korn Ferry's report is one attempt to count it: 62% of respondents said their workloads had risen significantly over the past two years [2].
Peter Cappelli, a management professor at Wharton, doubts that cutting managers raises output. "It is not more efficient in terms of productivity to cut managers," he told Fortune [10]. Managers, he said, solve problems that help their teams get work done [9]. "It just cuts costs and especially headcount, which is how CFOs in particular keep score." [11] The work stays behind: "The same work has to be covered by the remaining employees," he said [12].
Much of that covering falls on the managers who are left. In Korn Ferry's survey, 55% of them said they were exhausted [14], and 39% of workers said a shortage of managers left them feeling directionless [15].
Uber's cut implies a workforce of about 33,000 before it [1]. Chief executive Dara Khosrowshahi said the savings would be reinvested in growth and innovation [6], and described the goal as "clearer ownership, faster decisions, and more time spent building rather than coordinating" [7]. On those terms the saving moves money from coordinators to builders, or rather it bets that the remaining staff have spare hours to build with. He did not attribute the cuts to AI [8].
Internal AI projects run on those same spare hours. A July working paper by Arvind Karunakaran of Stanford, Kate Kellogg of MIT Sloan and Batia Wiesenfeld of NYU Stern followed a corporate law firm and an academic medical center for two years [19]. It found that building organization-wide generative AI tools created substantial work outside people's day jobs, including trial-and-error experimentation and reviewing outputs with colleagues in other departments [19].
At the law firm, more than 80% of domain experts eventually dropped out as that burden grew and support stayed limited, and the firm ended up with three organization-wide tools [20]. The medical center wrote AI work into job responsibilities, performance reviews and promotions. It has 141 [21]. That is 47 times as many [2], though two organizations in different industries are not a controlled comparison. "Leaders often assume AI experimentation is a stretch assignment that motivated employees will absorb on top of their regular responsibilities," Kellogg said [22]. That holds only for a while, she said: "Without meaningful support, recognition, and resources, people eventually disengage." [23] Korn Ferry's numbers point the same way: 52% of the workers it called AI-weary said the technology had added to their workloads [18].
The survey fits more than one outcome. If the share of workers too busy to drive growth [4] was this high before the cuts, flattening did not cause it, and Fortune's account of the report does not include an earlier figure. Should Uber's redirected payroll turn into revenue, the cut moved work to where it earns more and the thesis fails. A third case is rehiring, where part of the saving goes back out as the cost of putting managers back.
I think rehiring is the likeliest case at companies that cut managers but kept the work, because the exhaustion and drift figures describe teams that lost the people who solved problems for them [9]. The counter-case is that self-reported busyness is a weak measure of output. Revenue per employee at the companies that flattened would settle it.
What to watch
- Uber's coming earnings reports, for whether the payroll saving lowers costs or is absorbed by the growth and innovation spending Khosrowshahi promised, and whether that spending shows up in revenue.
- Whether Meta extends its offer to move individual contributors back into management beyond the Applied AI division, or other flattened companies do the same.
- A future Korn Ferry survey that splits results by whether employers cut managers: a similar too-busy share at companies that kept their managers would weaken the link to flattening.