Adopting AI is making businesses hire more managers to oversee how humans within the organization are working with the emerging technology.
According to a study by the IESE Business School, a 1% increase in adoption leads to a 2.5% to 7.5% increase in managerial vacancies and a 0.4% to 1.4% increase in the share of manager jobs relative to other positions. The numbers come from an analysis of 375 million job vacancies in the United States posted by labor market analytics company Lightcast and matched to Compustat data over more than a decade, between January 2010 and December 2022.
“When firms intensify their AI adoption, they experience a significant increase in the number and share of managerial vacancies, indicating that AI implementation drives a greater demand for managerial roles,” wrote the report’s authors, IESE professors Liudmila Alekseeva, Mireia Giné, Sampsa Samila, and José Azar.
That isn’t the only effect. AI adoption also “shifts the skill requirements for managers, increasing the demand for cognitive and interpersonal skills such as collaboration, creativity, stakeholder management and data analysis, while reducing the need for routine administrative skills like scheduling and budgeting,” they wrote.
“These findings suggest that AI reshapes organizations by increasing the importance of managerial expertise and by changing managerial roles and responsibilities within firms.”
Giné this month presented the findings from the 60-page report, “AI Adoption and the Demand for Managerial Expertise,” at IESE’s Global Alumni Reunion in Madrid, Spain.
AI is Different From ITC
The emergence and adoption of advanced information and communication technologies (ITC) historically have led to the reshaping of company structures, enabling decentralization, improving coordination, and improving the effectiveness of managers, the authors wrote. They pointed to ERP systems as an example, which reduced decision-making bottlenecks and improved productivity through automating key processes.
However, AI is a new sort of disruption that will reshape the structures of management through its capabilities around knowledge work and decision-making, given that it goes beyond the faster information processing and smoother communication capabilities from ICT by introducing a form of automation that mimics human cognition by making decisions, learning from data and solving problems that before had relied on human judgement.
“This positions AI as a transformative force, potentially significantly more transformative than previous technological innovations,” the authors wrote. “The distinction between AI and ICT is crucial because while ICT largely supported decentralization by empowering lower levels of the hierarchy with better information, AI might influence management structures in ways we do not fully understand yet, potentially increasing control at the top of the organization.”
Changing the Managerial Structure
It could essentially reshape the managerial structure of companies. While ICT tends to decentralize decision-making, AI could centralize – and intensify – management, leading to small groups of highly skilled managers overseeing larger teams due to AI systems requiring oversight, tuning and integration with existing business processes, going beyond simply automating tasks.
AI also could automate tasks that previously required human supervision, reducing the need for middle managers.
“The increasing complexity of overseeing both AI systems and human workers demands that managers develop strong combination of analytical and interpersonal skills,” the authors wrote. “While AI is handling a growing share of routine activity, the human workforce will increasingly handle exceptions and unexpected situations, requiring increasing creativity and problem-solving skills from managers in particular.”
They added that “this shift would reflect a broader change in the nature of management in AI-augmented organizations, where soft skills should be increasingly valued alongside technical expertise.”
Managing the Human-AI Interface
As they increase their adoption of AI, organizations need to manage the interface between humans works and AI systems, which are prone to bias, fairness and accountability issues. These will require managerial oversight to ensure the technology is used ethically so it doesn’t have a negative effect on the workforce, the authors wrote.
In addition, managers will have to mediate the coordination challenges between humans and AI systems and address potential conflicts created by the interactions to make sure AI enhances human performance rather than disrupting it.
“Overall, our findings underscore the profound organizational changes AI brings, particularly in enhancing the strategic importance of managerial expertise,” they wrote. “Contrary to concerns that AI might reduce managerial needs, our results indicate that firms adopting AI tend to increase both the number and share of managerial positions.”
