Klarna's Workforce Reduction and AI Integration: Future Plans

Klarna's CEO, Sebastian Siemiatkowski, aims to reduce the company's workforce to 2, 000 employees in the near future, down from a peak of 5, 000. Siemiatkowski expressed that they can achieve more with fewer employees and has a general target of 2, 000 without a specific deadline. Klarna has been a strong advocate for the implementation of AI, especially since the emergence of large language models, as it has the potential to significantly reduce the number of employees required. The company's AI chatbot, developed in collaboration with OpenAI, has been able to handle the workload of 700 customer service agents. While Klarna still outsources some customer service tasks, it also intends to utilize AI for certain marketing roles. The company has started to witness the benefits of AI reflected in its financial performance. In the first half of 2024, Klarna reported a revenue increase of 27% compared to the same period in 2023. Additionally, revenue per employee has grown from SEK 4 million ($393, 000) to SEK 7 million ($689, 000) over the past year. It's worth noting that while the impact of AI on the company's growth might be overstated, Klarna has also benefited from declining interest rates this year.

Many tech companies have experienced increased revenue per employee by reducing their workforce after realizing that they had over-hired during the COVID-19 surge. Klarna's reduction in headcount is already underway, with the number of employees decreasing from 5, 000 to 3, 800. Last year, Siemiatkowski announced a hiring freeze due to AI advancements within the company, enabling Klarna to grow more rapidly without rapidly expanding its workforce. Klarna's long-term plan involves natural attrition, where employees leave the company due to better job opportunities or personal preferences, which is common in the tech sector. Instead of conducting layoffs, Klarna does not intend to fill vacant positions when employees depart. The company does not utilize traditional tactics, such as restricting promotions, salary raises, or implementing performance improvement plans, to encourage employee departures. It remains uncertain how employees will respond to the message that their positions may not always be available, but it is clear that there is an underlying motive tied to Klarna's highly anticipated initial public offering (IPO). Siemiatkowski has not publicly commented on IPO plans, likely waiting for the right timing following the company's market value decline from $40 billion to $6. 7 billion during a broader market downturn. Many current Klarna employees may not have the opportunity to witness the company's IPO firsthand.