Reading Time: About 4 minutes
Two headlines collided in my feed this afternoon. One from The Wall Street Journal noted that several companies, despite strong profits and growth, are cutting headcount. Another, from Bloomberg, reported that Microsoft was preparing sweeping layoffs in its sales, marketing, and customer-facing teams.
Layoffs in times of plenty? The easy answer is AI. But the real story is more complicated.
AI is reshaping the workplace, but I believe these co-occurrences are part of a pattern that hints at something deeper than automation replacing human roles. We’re in the middle of a cultural shift in perspectives on productivity, the structure of organizations, and the value of human work. We are perhaps witnessing a reset, rather than a preemptive strike against recession. I believe it traces back to COVID.
During the pandemic, I heard it again and again—from clients, colleagues, even through my own experience launching a consulting practice from my dining room table: “I’ve never been more productive.” Freed from offices, commutes, and layers of hierarchy, many professionals discovered they could deliver more value with fewer resources. The productivity gains were real, but they came at a steep cost: exhaustion, burnout so widespread it sparked the “Great Resignation,” and a collective re-evaluation of work-life boundaries. Meanwhile, the culture of work wobbled, with managers caught between the Pandora’s box of remote flexibility and the enduring benefits of real-time, in-person collaboration.
That experience led many leaders to a sobering conclusion: adding bodies doesn’t always lead to better results. Silicon Valley amplified the signal when Elon Musk acquired Twitter and promptly slashed more than two-thirds of its workforce. When the platform didn’t crash, a managerial contagion took hold, suggesting that downsizing was desirable. Layered beneath this shift were emerging tools like generative AI, accelerating a future of work that’s leaner, flatter, and increasingly decoupled from traditional notions of organizational scale.
From the Past, a Parallel
We’ve seen a version of this before.
In the late 1970s and early 1980s, businesses began to emerge from a postwar consolidation era. White-collar workplaces were just beginning to experiment with the earliest forms of computing. Machines like the Xerox Alto and later, IBM PCs, promised to make knowledge work more efficient. Yet economists observed what they called the “productivity paradox”: tech investment soared, but overall productivity barely budged.
It wasn’t until businesses restructured—redesigning workflows, redefining roles, and rethinking performance—that the payoff became visible. By the early 1990s, sectors that had made deep IT investments began to pull away in productivity. The lesson was simple: tools work best when they change how we work.
We’re in a similar moment now.
What This Means for Students and the Next Generation of Leaders
As a business educator, I think often about what these shifts mean for students entering the workforce. The headlines are intimidating—Microsoft layoffs, AI disruption, flattened hierarchies. But they also can signal opportunity.
First, we should acknowledge the unease. Students may see fewer “traditional” entry-level roles. Large departments with sprawling workforces and long onboarding ladders are giving way to streamlined teams and specialized pods. But history suggests that technology’s first effect is displacement. Its second is transformation.
What students can control is how they prepare. Tomorrow’s organizations need critical thinkers who can not just do the work, but design the work. The differentiators will be candidates who know how to build smarter workflows, lead cross-functional teams, and use AI as a force multiplier. I repeatedly tell my students that their future lies in being “AI whisperers.”
Skills in change management, human-centered design, and strategic communications will rise in value. Emotional intelligence will become even more important. And the ability to connect the dots between data, brand, systems, and culture will be highly valued. These are, at least for now, the functions where humans still outperform AI because they require empathy, intuition, creativity, and the gift of human experience. In this evolving landscape, the path to employment will be paved not with whats and whos, but with hows and whys.
Contract Labor, Consulting, and the Rise of the “Temp” Economy
This cultural shift also echoes the history of contract work. A few years ago on our podcast, we featured Louis Hyman and his book, Temp: How American Work, American Business, and the American Dream Became Temporary. Hyman traces how, starting in the 20th century, U.S. companies began shifting away from lifetime employment and toward project-based work. The rise of consulting, temp staffing, and flexible labor models allowed businesses to stay lean, fast, and responsive.
Today’s flatter organizations seem primed for another contract labor boom. If companies need fewer full-time employees, shouldn’t this be a golden age for freelancers, consultants, and specialized firms?
Yes … and also no.
While there is demand for flexibility and expertise, even the consulting giants are trimming staff. Why? Three reasons stand out:
- Clients have matured. They’ve built stronger in-house capabilities and are more selective about what they outsource.
- Technology has changed the project model. AI and automation let smaller teams do what once required a bench of analysts.
- Efficiency is king. Retainers are giving way to modular, outcome-based work. Clients expect proof, not just polish.
So while the opportunity for consultants is real, so is the pressure to prove value quickly. The firms and individuals who thrive will be those who can deliver immediate, measurable value. It’s not about showing up with a slide deck. It’s about solving problems before the next meeting.
Where Do We Go From Here?
All of this points toward a fundamental redefinition of work. If we no longer equate progress with headcount or office space, what replaces it?
I believe we’re entering a phase where quality of impact matters more than scale of operation. Where success is judged by the clarity of your contribution rather than the size of your team. And where AI doesn’t eliminate our relevance but forces us to sharpen it.
We may see a renaissance of craft and a deeper appreciation for what it means to do fewer things, better. We may also feel the discomfort of legacy systems such as business schools and professional services firms scrambling to catch up.
But I remain optimistic. We’ve been here before. Each wave of transformation brings both dislocation and discovery. The challenge for students, for companies, for all of us is to lean into what makes us irreplaceably human. In my own life, I have discovered the beautiful sensation of cognitive offloading. By creatively working with tools such as AI, I have freed up my brain to think about problems and opportunities in more expansive ways. It has invigorated me and I’ve felt as though I’m in the midst of an intellectual growth spurt, where curiosity is thriving.
Perhaps, in a flatter and faster world, this is the promise of the moment.