The impact of artificial intelligence on modern management

Anvi Rao
21 hours ago
8 min read

By Anvi Rao

Edited by Nithila Gurram

Abstract

This study explores how artificial intelligence impacts management in the world of business. By using concepts of business and leadership, I aim to give readers a greater insight into what artificial intelligence can contribute to firms. Some key discoveries that I made whilst writing this is that artificial intelligence may be most useful in terms of global production network management. One can argue that it replaces human intelligence, I actually argue that the surge can emphasise the importance of human relationships. AI gives us a rapid way to interpret data and makes processes less complicated for us to interact with. However, human intelligence has the capability of emotion and empathy - key skills that a manager requires in order to be successful. This study is backed with statistics to show the surge in AI but human interaction can never be placed in a numerical term.

Introduction

With the increasing popularity of Artificial Intelligence (AI) such as Open AI’s ChatGPT, and Microsoft’s Copilot, one begins to wonder what positive effects such advanced technologies will have on the world of business and management. Management styles can be categorised into three main areas: Autocratic, Democratic and Laissez-Faire. AI has an important role in how managers across different firms respond and adapt to this growth. As we stand on the brink of a new era, it is important for us to consider how AI will impact business ethics, decision making, workplace relationships and its position in the short and long run.

Autocratic management

Also known as authoritarian leadership, this is defined as a style in which a manager makes decisions based on sole thinking, with little to no input from coworkers. The style is characterised by its “top-down’ chain of command”, decisiveness and expects a total sense of compliance. [1] AI can mostly benefit authoritarian leadership particularly through a method of surveillance and efficiency. A quality that autocratic managers have is the ability to make decisions quickly and AI makes their lives easier by collecting and interpreting data at maximum speed. Although AI makes this system faster, it lacks human implications. Autocratic managers are seen to have resilience, vision and trust; AI lacks basic human nature and can often unsettle employees by showing a more ruthless approach. Furthermore, AI can amplify the feeling of having one leading figure. This is because, especially in data-heavy industries like finance, AI can centralise power at the top by giving senior executives access to exclusive information - leading to a decrease in transparency for employees. They may feel that decisions are being made by computer programmes rather than managers that they look up to. A famous example of this is the leadership style of Steve Jobs. Despite the fact that Apple is the second largest firm in terms of market capitalisation, Jobs’ management style often provoked employee resentment and unproductivity in the workplace. If AI were to be in existence in the time of Steve Jobs, how would his leadership impact his employees?

Democratic management

Democratic management tends its nature towards being a system in which managers and employees collaborate to make decisions. Although the managers have the final say in what the outcome is, employees are strongly encouraged to contribute their ideas. Approximately over 22.5% of firms use this form of management and is seen as the most effective in an office setting. AI can aid firms by increasing employee participation; data can be collected from surveys and suggestion platforms which helps employees feel more open and valued as their thoughts are being taken into account. When AI’s insights are shared, it increases transparency between managers and employees and enforces a sense of trust amongst teams. A further benefit is that AI can reduce bias in decision making. This is because technology often favours data trends rather than human opinions, meaning that decisions can be made with an impartial eye and assists democratic leadership in being more fair and objective. Hence, it can be particularly useful in corporate processes like recruitment and promotions. On the other hand, “in a survey conducted by AI-security company Nsoft, 58.1% of respondents report an increased reliance on AI for decision-making.” [2] Over-reliance on AI reduces the frequency of group decision - an idea that Democratic management is heavily characterised by; it also reduces the way that the brain is designed for cognitive and critical thinking. Therefore, these decisions made may not be as advantageous to firms. Moreover, “over 75% of users are concerned about misinformation from AI”, consequently leading to decisions being skewed by AI interpretation, which means that employees and managers may turn a blind eye towards AI influence being ‘objective’ when in reality, this necessarily may not be the case. [3] The effect of bias could also be exaggerated with AI disproportionately representing groups who do not possess levels of digital literacy as other employees. This in consequence does not align with the attributes of Democratic management as it distorts the participatory decision making process instead of enhancing democratic engagement.

Laissez-Faire management

The term ‘Laissez-Faire’ is “ of French origin and translates to ‘letting people do as they choose’”. [4] In essence, this means that managers who adopt this style give their employees autonomy to do as they wish and take on a more ‘hands-off’ approach. A reduction in managerial control gives employees the freedom to optimise productivity and AI can help boost this - “companies that use AI heavily report high productivity (72%)”. [5] Employees who are more highly skilled may find this more beneficial as their managers need not give them unnecessary oversight in branches where they are extremely specialised. Thus, managers can focus their time towards strategic oversight and improve the business itself rather than micromanaging employee productivity. Additionally, decentralised access to AI systems allows both employees and managers to access data and tools independently without the need of an intermediary. As a result, employees can respond rapidly to dynamic changes in business and adapt quickly to new discoveries, challenges and managerial techniques. Laissez-faire environments work most effectively in innovation-driven and knowledge-based firms, particularly because their employees have high levels of autonomy and managers can distribute their focus equally. Contrarily, inadequate management insights can mean that employees interpret AI insights; this will result in flawed decision making and may prove detrimental to the business. Also, laissez-faire environments can consequently result in inconsistent performance and in fact a decrease in productivity. “A staggering 77% of employees report decreased productivity and increased workload due to AI implementation”. [6] As well as this, overreliance on AI tools can cause strategic misalignment - particularly in a hierarchical business structure where communication is of utmost importance. This would lead to uncoordinated decision making and damaged employee-employer relationships.

AI in operational and supply management

One of the most critical multi-stage processes within a business is their global production network and the role that senior management play in this is at its crux.

The metaheuristics of supply chain management are driven by management of efficiency
AI, as discussed previously, increases efficiency of allocation of resources and crunches data at a speed thousands of millions of times faster than a human would
AI “supports, manages and analyses supplier interactions” and identify issues such as delays in shipment and stockpile management
It can also help with improving supplier relationships and calculations can be made to make sure that payment is delivered on time and supply is relative to demand
As an example, Domino’s is infamous for using AI to “predict peak ordering times”, in order to make sure that a sufficient workforce is available to meet this demand [7]
A type of inventory management is ‘Just-In-Time’. This type of production network prioritises the efficiency that AI enhances

AI and management in the short run

In the near-term, AI may cause job displacement - “Nearly 1 in 5 Gen Zers is very concerned that AI will take their job in the next two years.”[8] Due to AI’s exceptional competence and effectiveness, industries such as interpreters and translators “(98%) affected by AI, proofreaders (91%) and mathematicians (91%)” and more may be hit the worst by AI’s global takeover. [9] Goldman Sachs estimates that “unemployment will increase by half a percentage point” as people seek new jobs in industries that AI will not impact as much.[10] In these certain industries, it may be more deleterious to managers, particularly as AI can oversight roles at a greater speed than a human can function. The data that is feeded into AI is given by people, which means that in consequence, these employees providing data may be replaced by AI due to its ability to collate ideas from many sources. However, the increasing use of AI in firms causes ethical and privacy concerns, as AI uses customer data to “perform tasks and understand customer needs”. [11] A key aspect of a manager’s role is to ensure that their employees’ data is kept safe under all circumstances. AI can often breach company protocol surrounding privacy and potentially leak vital information about certain firms or individuals. Therefore, a misuse or misinterpretation of AI can bring negative short term impacts to those in managerial positions. A positive impact of AI in the near term is that it marginally saves costs to firms. This could include infrastructure needed to hold employees within a company, a reduction in human errors as well as employees and their wages or salaries themselves

AI and management in the long run

A figure from a report published by Mckinsey&Company states that “92% of companies plan to invest more in generative AI over the next three years.” [12] I believe that managers, especially those in data and computing departments, must quickly adapt to the changes in AI - these could be ground-breaking in terms of innovation. In terms of a project management context, “according to MarketsandMarkets, the worldwide use of AI in project management will expand…from £2 billion in 2023 to £4.5 billion in 2028.” [13] Project managers must train to be able to synergise with generative AI and upskill their team. In this branch specifically, this harmony with AI will give firms a competitive advantage over those who are underskilled to take on AI and collaborate with it in an unorderly fashion. Data management will most likely be taken over by AI - providing interpretations and insights. Nevertheless, human connection and the manager - employee relationship will be more appreciable than ever. Due to it being a machine, AI cannot replace the value that genuine human interaction and debate has in the workplace. On a more negative note, I feel that those who specialise in AI based careers will be very in demand but also may face cases of occupational immobility. In particular, managers who have the ability to deal with AI and humans at the same time will be most effective; it could mean that their teams are overly reliant on AI if human oversight is ignored. In addition, a long term and permanent use of AI could mean that managers are constantly faced with doubt from employees - “46% of people globally are willing to trust AI systems.” [14] These complex machines provide employees with opinions and facts backed with data collected from many sources, leading to a challenge in traditional or authoritarian leadership. Overall, in the long term, AI will help shape the future of businesses, so long as managers are able to adapt to this.

Conclusion

My overall argument is that AI will help reshape rather than replace modern management. In relation to the three different kinds of management, the influence of artificial intelligence means that firms and senior leadership roles must be able to adapt in order to ensure that business thrives and grows further, thanks to technological advancements. Although AI brings many benefits such as increased efficiency in the workplace, this could mean that managers are either under scrutiny due to inefficiency or being more laid back in response to a technological boom.