Nearly half of companies don’t intend to replace staff with AI

Almost one in two companies said they have not considered AI implementation that can result in staff reduction, while only 8 per cent recognised adoption of this technology as an avenue for cost reduction, research has shown.

Global law firm King & Wood Mallesons (KWM) has released its Directions 2025 report, which provides annual insights into the attitudes of leadership at Aussie companies, comprising data drawn from survey responses from 230 senior executive/executive business leaders.

AI literacy as a core competence

KWM found that while 41.7 per cent of respondents reported that they considered AI solutions that could reduce headcount in specific functions, 45.6 per cent did not – automation technologies for repetitive tasks continue to be implemented; however, companies are “placing a premium on redeploying talent towards higher-value analytical or other work,” it said.

Over half (56.8 per cent) of respondents viewed AI as a tool for improving productivity – the survey found – while 8 per cent viewed it to reduce costs, and almost one in 10 (9.1 per cent) saw it primarily as a platform for “new business models or revenue streams”. The firm said this reveals that companies are taking an “operations-first approach”, prioritising decision making over more experimental improvements.

KWM partner and report co-author Rhys Casey said organisations are prioritising reskilling, positioning AI literacy as a core competence. The report’s data revealed that 77.4 per cent of respondents said that a lack of skills, training and readiness was a barrier they faced when considering AI adoption – statistically the greatest implementation challenge that companies tackled.

Changing tides

Based on its findings, companies have increasingly placed innovation as a priority and have placed less emphasis on corporate culture. “This raises a key question for business leaders as to the role of culture in this next phase, including to help drive performance,” KWM partner and report co-author Meredith Paynter said.

It also found that for the next six months, companies planned to prioritise: AI implementation (38.6 per cent), which has increased from last year (26.4 per cent), and attracting and retaining skilled labour (33.2 per cent), down on last year (44.2 per cent). Directors and senior leaders regarded generative and agentic AI as a “critical enabler of productivity, growth and competitive differentiation”, it said.

Additionally, for the next three to five years, 47.5 per cent of respondents have planned to implement generative AI and agentic AI at their organisations this year, which is up from 27.4 per cent last year, and 20.9 per cent in 2023. This indicates that companies have recognised an urgency to implement AI for its competitive structural advantage, it said.

KWM stated that these results showed that companies have moved AI from the sidelines, into the centre of strategic and operational planning in both the short term and long term.

“The survey data shows Australian businesses are acting swiftly and strategically on AI as a driver of productivity,” Casey said.