Redefining Management Value in AI-Powered Organizations

AI is redefining the value of managers, triggering structural shifts in corporate management hierarchies. Over the past two decades, management operated under a logic of scaling up: new departments were added as businesses expanded, and extra layers introduced as headcount grew. Rank was largely determined by how many people one supervised and the scope of one’s remit. This valuation logic rested on information asymmetry. Humans were needed to aggregate information, track progress, coordinate resources, and make preliminary judgments. AI’s arrival undermines this foundation. When these tasks can be performed by machines, often at higher quality, the rationale for middle management evaporates, and management reverts from an end in itself back to a means.

Two recent developments serve as examples.

First, Expedia. Alongside Booking and Trip.com, it ranks among the world’s top three online travel firms. In an internal memo co-signed by its Chief Product Officer and Chief Technology Officer lies a critical observation: “Over the past year, AI has fundamentally changed what is possible.” Substantial restructuring followed. Expedia eliminated eight vice presidents and senior vice presidents in one move, covering travel booking technology, checkout payments, fraud prevention, customer service and other product-and-technology lines. At the same time, the organizational structure underwent major rework. Multiple teams were consolidated into two large divisions: “Specialized Technology” and “Product & Technology”. Data, AI and agent platforms report centrally to the Chief Data and AI Officer. AI has completely rebuilt the group’s technology organization.

The core of this case is not layoffs, but the seniority of those cut. The eight departing executives were VPs — roles that sit at the decision-making table, setting directions and leading teams. Expedia employs roughly 16,000 people globally, half in technical roles. Removing eight VPs at an enterprise of this scale goes beyond routine organizational optimization; it represents flattening of an entire management tier. These departures stem not from poor individual performance, but from functions being superseded by AI and new organizational design. Consolidating data, AI and agent platforms into a single division means work once requiring coordination across multiple VPs can now be handled by one leader supported by a system.

Second, Starbucks. Starbucks previously cut roughly 2,000 corporate staff, followed by another 300 US headquarters roles, and recently announced over 200 more redundancies. CEO Brian Niccol set a $2 billion cost-reduction target, a large portion of which clearly comes from labor expenses. Some assume layoffs always stem from weak business performance, yet that assumption does not hold. Starbucks delivered better-than-expected results while cutting headcount: quarterly profits and sales both beat forecasts, and full-year guidance was raised. Layoffs amid strong performance are not the traditional contraction triggered by poor operations. Instead, the business is healthy, yet it aims to become leaner, faster and more AI-enabled.

Both examples point to the same conclusion: AI is displacing standardized, executable work performed by middle layers.

We Can Therefore See Clearly That:

• The Functional Boundaries Of Managers Are Being Redrawn. Information Aggregation, Progress Tracking, Resource Coordination And Preliminary Judgment — Work Once Undertaken By Middle Managers — Can Now Be Assigned To Machines. What Remains For Managers Are Strategic Judgment, Cross-Departmental Collaboration And In-Depth Understanding Of Business Operations.
• Enterprises Need To Re-Examine Their Hierarchical Setup. When Information Transmission, Process Coordination And Even Preliminary Decisions No Longer Rely On Manpower, The Depth Of Management Hierarchy No Longer Stands As A Symbol Of Capability. Instead, It May Become A Burden On Efficiency.
• Managers Will Not Lose Their Jobs As A Result; Rather, They Face Differentiation. Managers Who Only Know How To “Supervise People” May Be Replaced By AI. Those Who Leverage AI To Amplify Their Own Judgment Will Grow Increasingly Scarce.

AI transforms not only products and technology, but the organization itself.