This piece argues that boards and CEOs are hiding behind artificial intelligence to pursue an old instinct: cutting people to flatter margins. In the process, they are undermining the very capabilities they claim to be “streamlining.”
The cult of efficiency
In boardrooms from New York to Bangalore, AI is now less a technology than a slogan. Executives talk of “productivity gains” and “leaner operating models,” while quietly treating staff as a cost line to be erased rather than an asset to be nurtured. The narrative is seductively simple: algorithms can replace mid-level analysts, offshore teams can mop up routine work, and shareholders will be rewarded for this discipline. The reality is messier. Many firms are discovering that cutting experienced staff and replacing them with cheaper labour—and a handful of tools—creates brittle operations, not intelligent enterprises.
Substituting know‑how with headcount cuts
Artificial intelligence does not arrive in a vacuum. It requires data that make sense, processes that are codified, and people who understand both the business and the tools. When companies lay off those people first and buy AI later, they are hollowing out the very substrate on which automation depends. Complex tasks in marketing, customer service or software development rarely become “plug‑and‑play” just because a vendor slide says so. Without institutional memory and local expertise, errors multiply, quality drops and the supposed efficiency dividend evaporates into rework and customer churn.
Offshoring as a convenient shortcut
For decades, offshoring has been the corporate reflex for cost reduction. Now it is being fused with AI in a simplistic equation: automate what you can, push the rest to cheaper jurisdictions. The fact that this is easier to do to “non‑core” teams—often in the global South—is not accidental. It reflects an ingrained bias: talent in nearshore or offshore markets is treated as expendable, even when it has been quietly carrying critical processes for years. Countries like Costa Rica have built deep expertise in digital services, technology and analytics. Yet some firms treat these hubs as disposable, preferring a marginally cheaper alternative that looks good in a quarterly report but is far less resilient in practice.
The quiet cost of cultural contempt
This is not just about spreadsheets. It is about culture. When boards treat entire geographies as interchangeable, they send a clear signal: experience does not matter, only price does. That corrodes loyalty, accelerates brain drain and leaves companies with workforces that are numerically large but strategically weak. The assumption that offshore workers will tolerate worse conditions, fewer protections and constant precarity is not only morally dubious; it is strategically naïve. Talent moves. The best people in these markets will not wait around to be replaced by the next “efficiency wave”.
Why this will backfire
The short-termism is almost textbook. In the pursuit of a few extra basis points of margin, firms are discarding teams that understand customers, markets and internal systems in ways that no model can replicate. Eventually, the cycle reverses: systems break, customer satisfaction collapses, regulators start asking questions, and suddenly managers remember that they need people who can do more than recite prompts. By then, much of the talent has left, local ecosystems have been damaged, and rebuilding costs far exceed the savings that were booked. The irony is that the same executives who trumpet “digital transformation” are creating organisations that are less adaptable and less intelligent over time.
The illusion of universal disposability
Large firms often behave as if they are uniquely powerful: they can always hire back, shift operations to a new vendor, or spin up yet another offshore centre. That confidence rests on a flawed assumption—that high-quality expertise is endlessly abundant and will always accept worse terms. In reality, once a company becomes known for treating teams as disposable, its employer brand suffers. Skilled workers in places like Costa Rica, India or Eastern Europe have options. They choose firms that invest in them, not those that treat them as a temporary arbitrage opportunity. As more companies race to the bottom, the few that resist will quietly accumulate the best people.
AI as alibi, not strategy
The most striking feature of this wave of “AI-driven restructuring” is how little strategy is involved. Instead of asking where automation can complement human judgment, boards too often treat AI as political cover for decisions they wanted to take anyway. Layoffs become “modernisation,” offshoring becomes “global optimisation,” and criticism is dismissed as technophobia. This is less a digital revolution than a rebranding of austerity. The Economist, if it were being uncharitable, might call it creative destruction without the creative part.
A different path
There is another way. Companies can use AI to augment skilled teams rather than replace them, treating automation as a force multiplier for people who already understand the business. They can recognise that mature service hubs—such as those built in Costa Rica—offer not just low costs, but sophisticated capabilities that improve when invested in. They can accept that resilience, ethics and long-term trust are not sentimental luxuries, but hard assets in a volatile world. The firms that choose this route will not generate the most spectacular layoff headlines. They are more likely, however, to still be functioning smoothly when the current wave of AI‑themed cost‑cutting has run its course.
