Anyone who has been in Corporate America for any length of time expects to see layoffs. But last week’s announcement from Block CEO Jack Dorsey that he was laying off 40% of the company’s staff shook a lot of people. This was a healthy, growing tech company slashing nearly half its workforce. In the aftermath of his tweet stock in the parent company of Square, Cash App and Afterpay rose almost 17% on Friday. Certainly Dorsey’s move sparked fresh debate about AI’s impact on jobs in a week when others have painted doomsday scenarios. Three questions come to mind—ones that every CEO should be asking right now:
Is AI a catalyst or a cover for cutting jobs?
Dorsey made it clear that “the business is strong” and “intelligence tools” were changing the way they could work. When commenters pointed out the bloat he’d created during Covid, Dorsey admitted that he’d over-hired but said those issues were addressed two years ago. And he gave numbers, saying he’s targeting $2 million+ gross profit per person vs. $500,000 from 2019 to 2024. Leadership expert Stephen Miles calls the move “exceptionally executed,” and gives Dorsey kudos for courage, arguing that “the amount of self-belief he has that the company can be even better with fewer people shows he’s not being ruthless, just brutally honest about what’s best for the future of the company.”
Should companies do one big round of layoffs or smaller cuts?
Dorsey claims that it’s better to do one big cut as “repeated rounds of cuts are destructive to morale.” On that point, he’s right. A Careerminds study shows that serial layoffs are bad for morale and employee health. That said, big cuts can also be dumb cuts. Look no farther than X to see a shining example of how Elon Musk fired a bunch of people, only to then hire them back. And transformative change is hard, requiring new processes, cultural norms, tech integration and go-to-market strategies. It’s why leaders like BD’s Tom Polen argue Lean practices are a prerequisite for AI. Block is a company that also mines bitcoin, has had serial layoffs, and spent $68 million five months ago to fly everyone in for an “in-person company event” with Jay-Z. Raise your hand if you think Dorsey has this all figured out.
If layoffs are driven by AI, what’s the new business model?
While layoff memos focus on who’s being let go—CEOs like to lead with the heart, after all—it’s vital to understand who’s kept their jobs. Are these mostly technical people? The folks with soft skills and deep relationships that are hard to replace? ServiceNow CEO Bill McDermott emailed me a brief on Friday about its blueprint for agentic business that states: “When intelligence is abundant, the scarce resource is everything surrounding it: the enterprise context that grounds AI in reality, the governance that makes it safe, and the execution infrastructure that turns insight into action.” Does that make the case for more people? No. But it does suggest that top-level cuts don’t always turn out as planned.
