Should Algorithms Make Layoff Decisions?

Headlines continue to be dominated by news of widespread layoffs in technology, finance and other sectors. Many companies reducing their workforces cite reasons such as overzealous hiring during the pandemic, an uncertain economy and lower-than expected revenues. 

Recent research by Capterra, a software review company in Arlington, Va., suggests that while the rationales for those layoffs may have varied, there was likely a common denominator: reliance on algorithms and HR software to determine who got to stay and who was shown the door.

Capterra found that 98 percent of HR leaders said they would rely on algorithms and software to determine layoffs, if needed, in 2023. More than one-third said they would rely solely on data fed into algorithms to come up with recommendations to reduce labor costs in a recession.

Rise in Data-Driven Decision-Making

The use of AI-powered analytics to make downsizing decisions reflects the continuation of a trend that began more than a decade ago. A push from the C-suite to become more data-driven, coupled with the emergence of sophisticated people analytics software, has made HR much more tech-enabled. HR industry analysts say this has led to the growing use of next-generation tools that can crunch vast amounts of data from different HR systems to generate recommendations and insights.

Yet whether the use of algorithms to make layoff decisions is a sound practice has sparked debate in the HR community. While some applaud it as a long-overdue…