A number of large tech firms are backtracking after going all-in on AI and rehiring staff that were let go to save money.

The recent rise of generative artificial intelligence tools such as ChatGPT led to many tech firms adopting an AI-first approach and either implementing hiring freezes or cutting staff and replacing them with automation.

But some are now realising that these AI tools cannot complete particular tasks as effectively as humans and are rehiring staff in certain areas.

In recent weeks, Swedish fintech Klarna rehired some human customer service staff after initially replacing these workers with AI chatbots, while tech giant IBM has begun bringing staff back on after replacing most of its HR division with AI.

A human touch

Two years ago, Klarna implemented a hiring freeze and began to replace its human staff with AI.

By 2024 its total headcount had fallen from 3,800 to 2,000.

But Klarna CEO Sebastian Siemiatkowski earlier this month said that the company has since realised that its customers want to speak to actual humans, and will now make sure they always have the option to do so, as Gizmodo reports.

Klarna has said that its AI chatbots perform the work of 800 employees, but Siemiatkowski has now admitted that this led to reduced service quality and customer satisfaction, and that human interaction is still needed.

The CEO told Bloomberg that it is “so critical that you are clear to your customer that there will always be a human if you want”.

The company will now pursue a new hiring strategy centred on remote, contract-based workers, such as students and rural workers.

In a statement to Forbes, a spokesperson for Karna said the company was continuing to invest heavily in AI and “remains enthusiastic” about it.

They said the move to bring in more human agents was a “proactive move to enhance customer experience, not a reaction to failure or dissatisfaction alone”.

The need for empathy

Meanwhile, tech giant IBM has been forced to rehire some staff after laying off about 8,000 workers to implement automation, as The Wall Street Journal reports.

IBM shed its workforce in 2023, replacing much of its HR division with a new AI-powered digital HR employee dubbed AskHR, which performed many regular human resources duties such as queries, documentation and leave approvals.

But the company soon realised that this AI bot was unable to perform many of the tasks that required empathy or subjectivity, and eventually rehired many workers to cover these gaps.

IBM CEO Arvind Krishna told the WSJ that despite its widespread adoption of AI, the company’s workforce has actually increased.

“While we have done a huge amount of work inside IBM on leveraging AI and automation on certain enterprise workflows, our total employment has actually gone up, because what it does is it gives you more investment to put into other areas,” Krishna said.

These two cases back up a recent survey conducted by Orgvue which found that more than half of the business leaders admitted to making the wrong decision in laying off employees as a result of an AI deployment.
The survey found that four in 10 executives had shed workers to implement AI, and 55 per cent later regretted this.

A further one quarter of respondents did not know what roles would benefit most from AI adoption, and just under a third didn’t know which workers were most at risk from automation.

A number of other tech firms have announced significant job cuts or hiring freezes this year as they adopt an AI-first approach.

Last month Duolingo announced it would only allow its teams to hire new staff if they can prove that this work could not be done by AI as part of a shift to being an “AI-first” business.

Shopify also made a similar announcement this year, with teams wanting to request more headcount or resources having to first show “why they cannot get what they want done using AI”.

Last year Aussie telecommunications giant Telstra announced the retrenching of up to 2,800 workers as part of an AI-driven reset of its enterprise arm and an overhaul of its Telstra Purple service business.

There are also hopes that AI can “reignite human development” with a recent UN Development Programme report finding that there is some optimism over its ability to create jobs and opportunities, particularly in the developing world.