IBM Replaced 8,000 Staff with AI—Then Rehired Them. Here's What That Means

In early 2023, IBM made headlines for doing what many companies were only hinting at. It laid off nearly 8,000 employees, mostly in human resources, and announced that artificial intelligence would be handling their jobs from now on.

To many, it sounded like the cold, calculated future of work had finally arrived.

The goal was simple: increase productivity by automating repetitive tasks using its proprietary AI tool, AskHR. Payroll processing, vacation requests, employee documentation—these were the things machines could now handle at scale. And on paper, the math worked. IBM claimed $3.5 billion in productivity gains across 70 different business lines.

But something unexpected happened next.

IBM’s CEO says its new A.I. tools will be able to do ’30 – 50%’ of ‘repetitive’ office work after indicating his own company will pause some hiring - Fortune Magazine

AskHR, IBM’s AI-driven HR assistant, performed impressively. By 2024, it had handled over 11.5 million internal interactions. The system automated 94% of all HR inquiries and boosted customer satisfaction dramatically, turning a -35 net promoter score into a +74.

That alone was a win by corporate standards. But the remaining 6%—the questions and concerns that weren’t formulaic—still needed human intervention. These included sensitive workplace issues, ethical dilemmas, or emotionally charged conversations that required empathy and discretion. For that, AI simply wasn’t enough.

The fallout? Gaps in service, dips in employee morale, and delays in resolution. So, IBM had to do something no one predicted after such a bold embrace of automation: rehire.

"A March Goldman Sachs report found over 300 million jobs around the world could be disrupted by AI, and the global consulting firm McKinsey estimated at least 12 million Americans would change to another field of work by 2030. A "gale of creative destruction," as economist Joseph Schumpeter once described it, will blow away countless firms and breathe life into new industries. It won't be all bleak: Over the coming decades, non-generative and generative AI is estimated to add between $17 trillion and $26 trillion to the global economy. And crucially, many of the jobs that will be lost will be replaced by new ones." - Goldman Sachs

It wasn’t just damage control. This was a deeper realization. While AI was fantastic at handling scale and structure, it lacked nuance. So, IBM shifted gears—not away from AI, but toward complementing it with human insight.

New hires weren’t in the same roles AI had replaced. Instead of duplicating old headcount, IBM invested in fields where AI couldn’t compete: software engineering, marketing, client engagement, and strategy. These roles required creativity, critical thinking, and a human touch that no algorithm could convincingly fake.

In fact, according to CEO Arvind Krishna, overall employment at IBM has increased since the wave of automation.

IBM is far from alone. Across industries, businesses are discovering that AI, while efficient, isn’t omnipotent. Duolingo, for example, experimented with replacing language tutors with bots—only to find user satisfaction dropped. Several customer service platforms made similar moves, only to quietly rehire staff when metrics faltered.

This isn’t a failure of AI. It’s a sign of its limits. Repetitive tasks? Sure. Deeply human conversations? Not yet.

According to the World Economic Forum, 92 million jobs could disappear by 2030 due to automation. But in that same breath, it forecasts the creation of millions of new roles—many of which don’t exist today. AI trainers, ethics officers, hybrid product managers—these are the professions of tomorrow. And IBM's hiring playbook is starting to reflect that future.

Read the report here.

Here’s where this gets especially relevant for the luxury and high-end market.

Luxury is about nuance. It’s not mass-market efficiency—it’s bespoke attention. Whether you're selling a handcrafted watch, a million-dollar property, or concierge-level experiences, the human factor isn't just helpful—it’s essential.

AI can assist in personalization and data crunching, but the final connection—the storytelling, the empathy, the knowing smile—is what closes the deal. That’s what IBM learned the hard way.

IBM’s U-turn is a blueprint for modern workforce strategy. It tells us that the future of work isn’t binary. It’s not a fight between humans and machines. It’s a partnership—a rebalancing.

The most successful companies won’t be those that simply cut headcount with tech. They’ll be the ones who redirect their resources wisely. Use AI to handle the grunt work. Use people for everything else.

For luxury brands, this is critical. Your customers expect AI precision, but they demand human elegance. Balancing both is the key to staying competitive—and credible—in a world where digital and human touchpoints increasingly collide.

IBM’s experience shows that automation isn’t an endpoint—it’s a catalyst. One that demands agility, re-education, and a deeper understanding of what work really means in an AI-enhanced world.

IBM's experience underscores the complexities of integrating AI into the workforce. While automation can enhance productivity, it cannot fully replace the human element in complex or nuanced scenarios. This case highlights the importance of balancing technology with the irreplaceable value of human insight.

AI might write code. It might approve time-off requests. But it can’t mentor, persuade, comfort, or innovate—not the way a human can.

So if you’re watching the job market, wondering if AI will replace you, consider this: maybe it will just free you up to do the work machines never could.

Writing for Resident Magazine focusing on the tech section complements my role as an AI consultant specializing in software development, digital marketing, and advertising strategy. These articles serve a dual purpose: they’re a form of ongoing research and thought leadership, and they directly support the practical work I do with businesses, training teams to implement AI in ways that enhance productivity and streamline operations. 

Each article published also contributes to the growing body of creative and professional work I showcase at markderho.com, while strengthening the quality and substance of my LinkedIn presence. It’s all interconnected: real-world consulting, credible writing, and meaningful connections through a shared curiosity about what’s next in AI and human experience.