4 ms·

This is because they're trying to reduce the wrong headcount. The largest inefficiencies in corpo orgs lie in the ways they organize their knowledge and informa

This is because they're trying to reduce the wrong headcount. The largest inefficiencies in corpo orgs lie in the ways they organize their knowledge and information stores, and in how they manage decision making. The rank and file generally have a really good grasp on their subset of the domain -- they have expertise and experience, as well as local context. Small teams, their managers -- those are the ones who actually perform, and deliver value. As you move up the hierarchy, access to information does not scale. People in the middle are generally mediocre performers, buried in process, ritual and politic. In addition to these burdens, the information systems do their best to obscure knowledge, with the usual excuses of Safe and Secure (tm) -- things are siloed, search does not work, archives are sunsetted, etc. In some orgs tribalism also plays an outsized role, with teams acting competitive, which largely results in wasted resources and seven versions of the same failed attempt at New Shiny Thing. Then as we look higher yet in the hierarchy, the so-called decision makers don't really do anything that cannot be described as "maximize profit" or "cut costs", all while fighting not to get pulled down by the Lord of the Flies shenanigans of their underlings. They are the most replaceable. A successful "AI Transformation" would come in top-down, going after the most expensive headcount first. Only truly valuable contributors would remain at that level. Organizational knowledge bases would allow to search, analyze and reason about the institutional knowledge accrued in corporate archives over the years, enabling much more effective decision making. Meanwhile, the ICs would benefit from the AI boost, outsourcing some menial tasks to the machine, with the dual benefit of levelling up their roles, and feeding the machine more context about the lower-level work done across the org.

lenerdenator 1y ago
> This is because they're trying to reduce the wrong headcount. > A successful "AI Transformation" would come in top-down, going after the most expensive headcount first. This isn't a mistake. McKinsey consultants and their executives at their clients are a part of the same clique. You don't get into either without going to the right schools, being in the right fraternities, and knowing the right people. "Maximize profit" and "cut costs" are to be read as "keep the most money for ourselves in the form of earnings per share and dividends" and "pay fewer people". And since you can convert shares to money by gutting companies, there's no real incentive to remain competitive in the greater marketplace.
nostrademons 1y ago
I've wondered sometimes what the root of this dynamic is, and why corporations are as inefficient as they are. I've come to the conclusion that it's deliberate. When I look at top-level decision-makers at my Mag-7 employer, they are smart people. Many of them were go-getters in their earlier career, responsible for driving some very successful initiatives, and that's why they're at the top of the company. And they're very intentional about team structure: being close enough to senior directors and VPs to see some of their thinking, I can tell that they understand exactly who the competent people are, who gets things done, who likes to work on what, and then they put those people at the bottom of the hierarchy with incompetent risk-averse people above them. Then they'll pull them out and have them report directly to a senior person when there's a strategic initiative that needs doing, complete it, and then re-org them back under a middle-manager that ensures nothing gets done. I think the reason for this is that if you have a wildly successful company, the last thing you want to do is screw it up. You're on top of the world, money is raking in from your monopoly - and you're in zugzwang. Your best move is not to play, because any substantive shift in your product or marketplace risks moving you to a position where you aren't so advantaged. So CEOs of successful companies have a job to do, and that job is to ensure that nothing happens. But people's natural inclination is to do things, and if they aren't doing things inside your company they will probably be doing things outside your company that risk toppling it. So you put one section of the company to work digging holes, and put the other section to work filling them in, and now everybody is happy and productive and yet there's no net external change to your company's position. Why even have employees then? Why not just milk your monopoly, keep the team lean, and let everybody involved have a big share of the profits? Some companies do actually function like this, eg. Nintendo and Valve famously run with fairly small employee counts and just milk their profits, some HFT trading shops like RennTech just give huge employee dividends and milk their position. But the problem is largely politics. For one, owning a monopoly invites scrutiny; there are a lot of things that are illegal, and if you're not very careful, you can end up on the wrong side of them. Two, owning an incredibly lucrative business makes you a target for competition, and for rule-changes or political action that affect your incredibly lucrative business. Perhaps that's why examples of highly-profitable businesses that stay small often involve staying secret (eg. HFT) or being in an industry that everybody else dismisses as inconsequential (eg. gaming or dating). By having the huge org that does nothing, the CEO can say "Look, I provide jobs. We're not a monopoly because we have an unfair advantage, we compete fairly and just have a lot of people working very hard." And they can devote a bunch of people to that legal compliance and PR to make sure they stay on the right side of the government, and it also gives them the optionality to pull all those talented people out and unmuzzle them when there actually is a competitive threat.
re-thc 1y ago
> A successful "AI Transformation" would come in top-down, going after the most expensive headcount first. Do you still need an "AI Transformation" then? Sounds like just axe the CEO or cut their enormous salary = profit?
tempodox 1y ago
Logically you’re right, but power does not follow logic. And so it’s the lowest levels that get replaced by “AI”.
josefritzishere 1y ago
Management will not volunteer to replace themselves. So that would mean that if that's all that Ai is trully good at... the product is unsalable.
- apwell23 1y ago
  do you mean a VP laying off a middle manager would send a signal that he can be similarly replaced?
fluidcruft 1y ago
I think another barrier is that end users don't trust IT to not pull the rug out from under us. It's quite a bit of effort to learn and figure out workflows for actually getting work done and IT doesn't tend to give a shit about that. Particularly enterprise IT's attitude about trials can kiss my ass. Enterprise IT has their timeline, and I have my deadlines. I'll get to it when I have time. But particularly we're always dealing with IT security "experts" running dumb checklists taking things away and breaking everything and never bothering figure out how we're supposed to use computers to actually get any work done ("hmmm. we didn't think about that... we'll get back to you" is a common response from these certified goons). Apparently the security gods have decided we can't have department file servers anymore because backups are too difficult to protect against ransomware or something so we're all distracted with that pronouncement from the mountain trying to figure out how to get anything done at the moment.
- _DeadFred_ 1y ago
  What the above person is arguing for is this this exact thing but instead of 'security you don't need' it's now people you don't need because AI can scan an information repository and be the expert.
  - fluidcruft 1y ago
    I think I disagree. I'm arguing that AI is useful from the bottom up. That's my personal opinion. The top generally doesn't actually understand how work is actually done. This idea that LLM replaces people seems like pure hype to me after having started to play with it (on my own time... after picking from among tools... because so far the ID-blessed CoPilot has been less than worthless and hasn't actually saved me any time... whereas Claude is just amazing and I keep finding new things for it to achieve). These are tools that can help people be more productive if they figure out how to use it to do work. In my experience Claude is like having free minions to do annoying grunt work so I get more of my work done. C-suite yapping doesn't actually get work done because they never actually do real work anyway.
_DeadFred_ 1y ago
You can't 90% utilize everyone. There are lots of rolls where they are needed maybe 2-5% for edge cases, but those cases are brake the company ones. So they do mediocre seemingly unimportant rolls because they are willing/able to meet those 2-5% requirements. They get kissed up to because they literally keep the company around. I said before but in a pre-2000 world when I worked at a public company I got lectured when my employees timecards utilization were too high because you can't actually utilize people at those levels full time continuously and management wouldn't sign off on incorrect timecards. But the modern world pretends it's fine and is trying to optimize to it and it just won't work. You can't optimize out the key knowledge, and you can't keep the key knowledge and be 80% utilized doing something else. This is all based on some ideal world that doesn't exist in reality.
duxup 1y ago
I shared this recently with regard to teams cross training. I worked in tech support at a big company long ago. Tech support, sales, and engineering used to have a week (for each employee) where we would leave our team and follow the other team around. It provided incredible efficiency. I now knew what sales was talking about when they called me, they understood how I worked, engineering and I got along so well they used to invite me to their team when they had lunch catered. Who didn't we need anymore? The middle managers between the groups who brokered what info each group could see, and how we communicated among groups. We solved problems before they started all on our own. The middle managers won in the end, ending the cross training, too costly they said, but I think they realized that we just didn't need them / weren't engaging them anymore...

lenerdenator 1y ago

> This is because they're trying to reduce the wrong headcount. > A successful "AI Transformation" would come in top-down, going after the most expensive headcount first. This isn't a mistake. McKinsey consultants and their executives at their clients are a part of the same clique. You don't get into either without going to the right schools, being in the right fraternities, and knowing the right people. "Maximize profit" and "cut costs" are to be read as "keep the most money for ourselves in the form of earnings per share and dividends" and "pay fewer people". And since you can convert shares to money by gutting companies, there's no real incentive to remain competitive in the greater marketplace.

nostrademons 1y ago

I've wondered sometimes what the root of this dynamic is, and why corporations are as inefficient as they are. I've come to the conclusion that it's deliberate. When I look at top-level decision-makers at my Mag-7 employer, they are smart people. Many of them were go-getters in their earlier career, responsible for driving some very successful initiatives, and that's why they're at the top of the company. And they're very intentional about team structure: being close enough to senior directors and VPs to see some of their thinking, I can tell that they understand exactly who the competent people are, who gets things done, who likes to work on what, and then they put those people at the bottom of the hierarchy with incompetent risk-averse people above them. Then they'll pull them out and have them report directly to a senior person when there's a strategic initiative that needs doing, complete it, and then re-org them back under a middle-manager that ensures nothing gets done. I think the reason for this is that if you have a wildly successful company, the last thing you want to do is screw it up. You're on top of the world, money is raking in from your monopoly - and you're in zugzwang. Your best move is not to play, because any substantive shift in your product or marketplace risks moving you to a position where you aren't so advantaged. So CEOs of successful companies have a job to do, and that job is to ensure that nothing happens. But people's natural inclination is to do things, and if they aren't doing things inside your company they will probably be doing things outside your company that risk toppling it. So you put one section of the company to work digging holes, and put the other section to work filling them in, and now everybody is happy and productive and yet there's no net external change to your company's position. Why even have employees then? Why not just milk your monopoly, keep the team lean, and let everybody involved have a big share of the profits? Some companies do actually function like this, eg. Nintendo and Valve famously run with fairly small employee counts and just milk their profits, some HFT trading shops like RennTech just give huge employee dividends and milk their position. But the problem is largely politics. For one, owning a monopoly invites scrutiny; there are a lot of things that are illegal, and if you're not very careful, you can end up on the wrong side of them. Two, owning an incredibly lucrative business makes you a target for competition, and for rule-changes or political action that affect your incredibly lucrative business. Perhaps that's why examples of highly-profitable businesses that stay small often involve staying secret (eg. HFT) or being in an industry that everybody else dismisses as inconsequential (eg. gaming or dating). By having the huge org that does nothing, the CEO can say "Look, I provide jobs. We're not a monopoly because we have an unfair advantage, we compete fairly and just have a lot of people working very hard." And they can devote a bunch of people to that legal compliance and PR to make sure they stay on the right side of the government, and it also gives them the optionality to pull all those talented people out and unmuzzle them when there actually is a competitive threat.

re-thc 1y ago

> A successful "AI Transformation" would come in top-down, going after the most expensive headcount first. Do you still need an "AI Transformation" then? Sounds like just axe the CEO or cut their enormous salary = profit?

tempodox 1y ago

Logically you’re right, but power does not follow logic. And so it’s the lowest levels that get replaced by “AI”.

josefritzishere 1y ago

Management will not volunteer to replace themselves. So that would mean that if that's all that Ai is trully good at... the product is unsalable.

apwell23 1y ago
do you mean a VP laying off a middle manager would send a signal that he can be similarly replaced?

fluidcruft 1y ago

I think another barrier is that end users don't trust IT to not pull the rug out from under us. It's quite a bit of effort to learn and figure out workflows for actually getting work done and IT doesn't tend to give a shit about that. Particularly enterprise IT's attitude about trials can kiss my ass. Enterprise IT has their timeline, and I have my deadlines. I'll get to it when I have time. But particularly we're always dealing with IT security "experts" running dumb checklists taking things away and breaking everything and never bothering figure out how we're supposed to use computers to actually get any work done ("hmmm. we didn't think about that... we'll get back to you" is a common response from these certified goons). Apparently the security gods have decided we can't have department file servers anymore because backups are too difficult to protect against ransomware or something so we're all distracted with that pronouncement from the mountain trying to figure out how to get anything done at the moment.

_DeadFred_ 1y ago
What the above person is arguing for is this this exact thing but instead of 'security you don't need' it's now people you don't need because AI can scan an information repository and be the expert.
- fluidcruft 1y ago
  I think I disagree. I'm arguing that AI is useful from the bottom up. That's my personal opinion. The top generally doesn't actually understand how work is actually done. This idea that LLM replaces people seems like pure hype to me after having started to play with it (on my own time... after picking from among tools... because so far the ID-blessed CoPilot has been less than worthless and hasn't actually saved me any time... whereas Claude is just amazing and I keep finding new things for it to achieve). These are tools that can help people be more productive if they figure out how to use it to do work. In my experience Claude is like having free minions to do annoying grunt work so I get more of my work done. C-suite yapping doesn't actually get work done because they never actually do real work anyway.

_DeadFred_ 1y ago

You can't 90% utilize everyone. There are lots of rolls where they are needed maybe 2-5% for edge cases, but those cases are brake the company ones. So they do mediocre seemingly unimportant rolls because they are willing/able to meet those 2-5% requirements. They get kissed up to because they literally keep the company around. I said before but in a pre-2000 world when I worked at a public company I got lectured when my employees timecards utilization were too high because you can't actually utilize people at those levels full time continuously and management wouldn't sign off on incorrect timecards. But the modern world pretends it's fine and is trying to optimize to it and it just won't work. You can't optimize out the key knowledge, and you can't keep the key knowledge and be 80% utilized doing something else. This is all based on some ideal world that doesn't exist in reality.

duxup 1y ago

I shared this recently with regard to teams cross training. I worked in tech support at a big company long ago. Tech support, sales, and engineering used to have a week (for each employee) where we would leave our team and follow the other team around. It provided incredible efficiency. I now knew what sales was talking about when they called me, they understood how I worked, engineering and I got along so well they used to invite me to their team when they had lunch catered. Who didn't we need anymore? The middle managers between the groups who brokered what info each group could see, and how we communicated among groups. We solved problems before they started all on our own. The middle managers won in the end, ending the cross training, too costly they said, but I think they realized that we just didn't need them / weren't engaging them anymore...