Your Board Is Wrong About AI
Cutting headcount to capture AI's value is often a shot to the foot.
Today is the start of this month’s CEO Masterclass. That’s three days of learning and discussion with a small cohort outside Austin. It’s going to be fun, and you’re invited to join us for an upcoming session.
There’s a conversation happening in boardrooms across the world right now, and it goes something like this:
AI is here. It works. Deploy it fast, reduce headcount, improve margins. Shareholders will be pleased. This is the future!
I’ve sat in enough board meetings to understand that when a powerful new cost lever appears, fiduciaries feel obligated to pull it.
But I want to make the case that this instinct, applied reflexively, is dangerous. It feels like the best way to keep up with your rivals, but it’s short-term thinking. And it can very easily backfire.
The Value Allocation Problem
Why is this the case?
Because running a company well requires balancing the interests of three constituencies: customers, employees, and shareholders. If you’re putting shareholders out first because it feels safest in the AI era, you’re not doing that core duty of balancing.
Customers, employees, and shareholders are the three legs of the stool that holds the enterprise upright. If the CEO favors one over the others, or chronically under-serves one, the stool topples.
The critical question for the CEO is how to allocate the value of AI.
In answering that question, the board usually has the CEO’s ear. Their instinct is to route AI-driven value almost entirely to the shareholder in the form of improved margins. It’s a reflex born of long adherence to a steroidal version of the Friedman doctrine: The business’s sole responsibility is to boost profits, now.
We’ve seen versions of that story long before AI. But the new tech is making it even more tempting to drive hard for shareholder value now, with urgency.
Slash the costs fast!
Show you’re making gains with AI!
Get it done!
But going back to our triangle, margin is only one place AI’s windfall can go. There are two others:
Customers
You can create AI-driven value for customers, through faster service, better products, or lower prices. You can use AI smartly to make their experience better.
When you starve them of value because you’re rolling out AI, you get:
AI “enhancements” that only annoy people
Interactions with chatbots in cases where human connection would have made a real difference
Employees
You can also use AI to create value for employees, through skills development, better tools, more opportunity, increased ease of work.
But when you prioritize AI-driven value for shareholders you get:
Nonsensical token quotas
Job loss without any returns for the business
Loss of trust and engagement in employees who remain
“Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced. Workforce reductions may create budget room, but they do not create return.” —Helen Poitevin, Gartner analyst
The Efficiency Mirage
There’s also the question of whether cost-cutting in benefit of AI even cuts costs at all.
In a 2026 Gartner survey of 350 large enterprises, roughly 80 percent had cut staff tied to AI. But those cuts showed no correlation with ROI. Companies reporting strong returns laid off at the same rate as those seeing modest or negative ones.
Another widely cited study from MIT found that 95 percent of enterprise generative-AI pilots delivered no measurable impact on the bottom line. Where returns did show up, they came from giving people better tools, not from cutting them.
Of course there is some savings case for AI, though it's currently narrower than the hype suggested. It’s something CEOs should be keenly aware of in their decision making.
“For my team, the cost of compute is far beyond the costs of the employees."
—Bryan Catanzaro, vice president of applied deep learning at Nvidia
None of this means shareholders should not benefit from AI
They must and should. You can move fast on AI and still be deliberate about where its value lands. The argument is against capturing all of the value, reflexively, in service of near-term profits and at the expense of the other constituencies that make the business work.
Many CEOs are barreling toward a brave new world where:
Customers are disinterested in the company’s current offerings.
Employees are disengaged and the company’s reputation as an employer is dinged.
Shareholders, who we were trying to please in the first place, aren’t even seeing the promised ROI!
The question for every CEO is:
What is the right allocation of AI-driven value across shareholders, employees, and customers given our competitive position and where we want to be in two to three years?
That answer will look different for every company. A company with significant pricing power and low employee substitutability faces a different calculus than a professional services firm in a tight talent market with sophisticated customers who have dozens of alternatives.
The board’s job is to advocate for shareholders. That is appropriate and healthy. The CEO’s job is to hold the full picture, understanding that shareholder value, sustained over time, is a consequence of serving the other two constituencies well too, not hollowing them out.