Companies Are Laying Off Based on AI's Promise, Not Its Performance: Harvard Business Review Report

Harvard Business Review published an important analysis in January 2026 that raises something alarming: companies are not laying off employees because AI actually does their jobs better — they are laying them off because they expect it to do so.

In other words, layoffs are based on the promise, not the performance.

The Finding

Based on a survey covering more than 1,000 executives in December 2025:

Companies are actually laying off due to AI
But the layoffs are almost entirely based on anticipated AI impact, not its current performance
Only 1 in 50 AI investments delivers transformative value, according to Gartner

Why Is This a Problem?

1. People Are Losing Their Jobs Based on an Illusion

If you lay off 100 employees to replace them with AI — and then discover the AI is not ready — you have lost all 100 employees and you cannot get them back.

2. Loss of Institutional Knowledge

Long-tenured employees carry knowledge in their heads that is not written down anywhere. When you let them go, that knowledge goes with them.

3. Impact on Morale

Remaining employees watch their colleagues get laid off and become fearful. Productivity drops and stress rises.

Why Do Companies Do This?

Investor Pressure

Investors want to see an "AI strategy." Layoffs look like a step toward efficiency.

FOMO

"Other companies are doing it — if we don't, we'll fall behind."

Immediate Cost Savings

Regardless of AI — laying off employees reduces costs in the short term.

The Lesson

For managers: lay off based on data, not hype. Test AI first at a small scale. Confirm it actually does the work. Then make the decision.

For employees: the good news is that many of these layoffs could be reversed when companies discover they need their people. The bad news is that this will not help you if you are the one who got laid off.

Conclusion

Not every AI-driven layoff is a justified layoff. Some companies are rushing and making decisions based on hype. But that should not make you ignore the shift — learn and prepare, regardless of the reason behind the layoffs.