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Popular buy now, pay later app Klarna hit the headlines earlier this week when CEO Sebastian Siemiatkowski announced plans to drop the company’s headcount by half – around 2,000 employees – through artificial intelligence (AI).
In a statement to the Financial Times, Siemiatkowski revealed his belief that the company could run just as effectively even with just half of its current staff.
With a headcount of just under 4,000 employees at the end of June, this could see the company losing 2,000 staff in the coming months—though there is no fixed timeframe in place.
“About 12 months ago, we would have been about 5,000 active positions within the company, and we are now down to about 3,800,” he said, clarifying that staff had not been laid off, but instead left through natural attrition.
With a hiring freeze in place, Klarna says it has replaced the output of staff who quit through AI automation. “By simply not hiring, which we haven't done since September ... the company is kind of becoming smaller and smaller," Siemiatkowski explained.
Klarna bets big on AI – but are workers losing out?
Klarna’s bet on AI appears to be working, at least for the business.
The company is particularly proud of its chatbot which it says does the work of 700 customer service employees, dropping average resolution time from 11 minutes to under two.
Siemiatowski added that the company can “do much more with less” through AI, projecting it could boost the company's profits by $40 million this year. “We’re seeing across our whole business that things that previously took people a lot of time can be done much faster and much shorter with the help of ChatGPT, and we need fewer people to do the same thing.”
It’s admirable that Klarna has not gone down the path of laying off thousands of staff as it reorganises its business around AI. Other big players in the tech scene like Intel, Dell, and Cisco cannot say the same and have joined a growing list of employers citing a shift to AI as part of the reasoning behind widespread redundancies.
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In fact, Klarna says it won’t encourage departures, limit promotions or pay raises, or place staff on performance improvement plans. Moreover, for the lucky 2,000 employees who remain at the company, the rewards may be greater. Siemiatowski hopes that lower labour costs will allow Klarna to pay each individual significantly more. For that, Klarna is to be applauded.
However, questions have to be asked of the policy. “Let’s not recruit now, let’s see how this plays out,” is a bold experiment from Siemiatowski, but one that will leave the majority of its workforce uncertain about their future.
Natural attrition is tricky to measure; did the employee leave because it was the right time for a career move, or because they effectively felt they had no future with a company that felt they were replacable "in the aggregate" by a bot?
Plenty of Klarna workers will be worried about when their jobs will become obsolete, prompting them to look elsewhere in the job market; others will fear that as their team disappears around them, they will be left juggling immense workloads with only the support of AI bots who will never offer the same level of interaction, camaraderie, or support as a human colleague.
Why workers should be reskilled, not replaced by AI
AI anxiety is very real. 65% of workers said they were anxious about AI replacing their jobs in a survey conducted by EY at the end of 2023.
And with layoffs flowing thick and fast, who can blame them? Countless HR teams, line managers, and employers have had to offer reassurance to their teams about the future of their work; that even if AI replaces some aspect of their work, it will be the most administrative and time-intensive parts, freeing them up to pursue more valuable and interesting projects.
So, while Klarna should be praised for avoiding immediate layoffs, the company – on the face of it – could be doing more to upskill and support employees toward more strategic or more valuable work.
Rather than being happy to let employees leave safe in the knowledge that their basic tasks can (theoretically) be in some way automated, the payments platform should instead help those employees drive their careers forward.
The CEO of Amazon Web Services, for example, recently explained to the company’s software developers that they likely would not be doing any coding in two years, reassuring them that this wouldn’t lead to jobs being lost and would instead allow them to develop product and custom-centric skills.
In a statement announcing the impact of its chatbot back in February, Klarna said its breakthrough would deliver “more interesting challenges for our employees.” Offering reskilling to workers to help them solve these challenges, rather than marking them down as another cost saving on their way out of the door, would bring benefits for the engagement and motivation of all staff and the business itself.
The business has already done much of the hard work by getting its business to a place where low-value, administrative work is overwhelmingly automated.
While allowing workers to leave now without a replacement could bring short-term cost savings, Klarna could ‘pay later’ by losing out on staff it should have instead pushed and developed to take on more valuable work.
