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The Impact of AI on Employment and Organisation in the Industrial Working

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The Impact of AI on Employment and Organisation in the Industrial
Working Environment of the Future
Swetlana Franken and Malte Wattenberg
Bielefeld University of Applied Sciences, Germany
[email protected]
[email protected]
DOI: 10.34190/ECIAIR.19.096

Abstract: AI applications such as robotics, automation or intelligent assistance are becoming drivers of a wide-ranging
change process in manufacturing companies, which not only affects the use of algorithms but also affects people and
organisation. Automation and algorithmisation will change the working world in a lasting way, whereby all value-adding
activities – from operative production work to skilled work and management – will be influenced. It is expected that, due
to its learning ability, AI will be able to act autonomously, support people through assistance systems, use resources more
effectively, make processes more environmentally friendly and enable new working models with direct participation and
greater transparency. It should increase efficiency, enhance customer satisfaction and facilitate and enrich work. Current
research confirms that it is less about technology and investment than about the openness of employees and executives
combined with a supportive organisational structure and culture that is decisive for the success of digitalisation. The
influence of AI on employment is controversial. It should lead to secure and demanding jobs, physical and cognitive relief
and an improvement in work-life balance. Yet, there are concerns about job losses, disqualification, growing autonomy of
digital systems and increased control potential for employees. However, research demonstrates that in the past one robot
has replaced on average two workers in the industry, while two jobs have been created outside. AI will probably
demonstrate a similar behaviour. The implementation of AI requires reorganisation of management, cooperation, co-
determination, qualification and a high level of knowledge exchange. Digital change requires flexible and agile
organisational structures and flatter hierarchies to be able to react to new complexity and dynamics. The participative
leadership of the future conducts flexibly within the framework of self-organising networks and interdisciplinary,
democratically formed teams. Executives see themselves as coaches and moderators. This paper examines the effects of
the introduction of AI in industrial enterprises based on a comprehensive literature review. Particular attention will be paid
to effects on employment and organisational structure and culture. Best practice examples for AI applications in industrial
companies will also be examined. Finally, a critical discussion examines possibilities and instruments for shaping
transformation within companies through AI with the involvement of all relevant actors.

Keywords: AI (artificial intelligence), workplaces, working environments, leadership, organisations

1. Introduction
Automation and artificial intelligence (AI) are transforming businesses. They will increase productivity and thus
contribute to economic growth (McKinsey, 2018). However only the view on technology falls short. In order to
take advantage of the opportunities offered by new technologies, the possibilities of technology must be
analysed in the context of the socio-technical system of technology and human organisation (Hirsch-Kreinsen
et al, 2018). The effects of AI applications on employment and work organisation as well as on organisation
(changes in structures, processes and corporate culture) are among the decisive factors which contribute to
the success of digital transformation (Franken, Prädikow and Vandieken, 2019).

However, the labour-relevant effects of AI have hardly been investigated, since AI applications are currently
only rarely used, as the current Adesso study shows: Even though 80% of respondents consider AI technologies
to be a decisive competitive factor, the realized AI applications are scarce. Only every fifth company surveyed
has implemented chatbot projects, while many other AI applications are only in the planning phase (Adesso,
2019).

The aim of this article is to highlight the impact and influence of AI on industrial enterprises. The underlying
research question is specified as follows: "What fundamental changes does the use of AI in industrial
enterprises result in at the employment level and organisational culture?" In section 2, the effects of AI on
employment, work design and organisation are first described, and an interim conclusion on the role of people
in the AI-based world of work is formed. Section 3 then deals with the practical design of AI applications in
companies. In addition to current study results on the use of AI applications, predictive maintenance and
chatbots are also used to discuss best practice examples. A critical discussion for a successful implementation
in companies forms the conclusion of the section, before a conclusion summarizes the contribution.

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From a methodological perspective, the present article is a slightly formalised literature review with the aim of
collecting, summarising and evaluating the available knowledge based on published specialist literature and
current studies by research institutions. In the second quarter of 2019, extensive research was carried out in
library databases and on the Internet. Criteria for inclusion of studies were the applicability regarding AI, the
publication by a recognized research institution as well as the publication date, which had to originate from
the years 2017-2019. Thus, the contribution serves in particular also the purpose of creating a highly topical
basis for further research studies in this new field.

2. Status quo on the impact of AI on enterprises and the world of work

The use of AI in the work process can promote productivity and profitability as well as being a driver of a new
corporate culture. "The potential offered using intelligent software lies in a new quality of work which, for
example, makes more effective use of resources, promotes self-development and health resources, makes
processes more environmentally friendly, enables new working models with direct participation, creates
greater transparency or supports people with assistive systems. This can lead to a productive and humane work
culture" (Offensive Mittelstand, 2019).

2.1 Impact of AI on (manufacturing) enterprises

Due to rapid technological development, intelligent algorithms will soon be able to act autonomously, without
human intervention. In particular, their situation-specific adaptive and learning capabilities (machine learning)
will open up new possibilities for controlling processes and anticipating problems in production and use. Up to
now, context-dependent learning processes based on a high proportion of implicit knowledge and associated
tasks due to a lack of explicit rules of action have been regarded as fundamentally insurmountable barriers to
automation and algorithmisation (Hirsch-Kreinsen and Karacic, 2019). Now these barriers have been
overcome. People are no longer the only intelligent learning beings, but are getting assistance or even
competition from AI (Brynjolfsson and McAfee, 2017).

Great opportunities are seen for AI in industrial production and the work processes encountered there
(Fachforum, 2017). In industry, autonomous systems can be used in driverless transport systems for company-
internal logistics or in human-robot collaborations. The advantages cited are acceleration and flexibilization of
production, a higher level of individualisation of products, a reduction in downtimes through predictive
maintenance and an increase in resource efficiency (Fachforum, 2017).

The respondents to the Adesso study (2019) confirm that AI techniques allow new processes and offerings in
areas such as marketing, sales and service. 85% of experts agree with the statement that AI procedures in
digital marketing reduce wastage and thus save costs, 54% can imagine using AI-based recommendations for
the development of a new product or service - almost a third have already implemented this or are currently
planning. So-called intelligent lead scoring, which predicts the conversion rate for each customer, is considered
a good idea by 56% - but only around a quarter of those surveyed are in the process of implementing or
planning (Adesso, 2019).

The opportunities of AI for the economy have not only been recognised by company representatives, but also
by politicians, who are now demanding and promoting a rapid further development of AI as a technological
basis for autonomous systems in Germany, for instance (BWE, 2018; EFI, 2018). AI is described in this context
as a key technology that can contribute to solving economic and social problems.

2.2 Effects of AI on work

In terms of work development, autonomous systems and AIs are expected to lead to secure jobs, good work,
demanding jobs and a significant improvement in work-life balance. Training and continuing education are
regarded as central prerequisites for tapping the potential of intelligent technologies (Barner et al, 2015).

Not only companies, but also consumers are rather positive about the use of AI: 83% in Germany, for example,
are convinced that AI and robots will take on many annoying tasks in the future and make life easier, 61%
believe that AI will bring them advantages, 46% can imagine using a purely virtual insurance offer without
people (Adesso, 2019).

A study by the Fraunhofer IAO also concludes that human beings and machines will work together closely and
in partnership in the future and that AI and learning systems will enrich the world of work. Digital

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technologies, including AI, are described as an opportunity to make work more flexible, interesting and
human-centred, and technology is seen less as a substitute for, but rather as a support for, human work
(Peissner et al, 2019).

However, optimistic forecasts regarding AI applications in business and society are questioned by many
authors (Hirsch-Kreinsen and Karacic, 2019; Ittermann and Neuhaus, 2018; Matuschek et al, 2018). From a
social science point of view, this technology-centred perspective does not go far enough. For a successful
implementation of AI applications, it is necessary to consider the triangle of technology, human and
organisation (Hirsch-Kreinsen et al, 2018). It is also known from innovation research that innovations are
always associated with considerable risks and often fail due to human and organisational barriers (Gassmann
and Sutter, 2013; Vahs and Brem, 2013).

There are well-founded fears regarding the social consequences of autonomous systems and AI, such as
possible job losses in manual and cognitive workspaces, the dangers of disqualification as well as a significantly
increased control potential, forced flexibilization and precarisation as well as increasing stress at work (Hirsch-
Kreinsen et al, 2018).

The substitution of jobs is a controversial issue. Well-known studies such as those by Frey and Osborne (2017)
are often interpreted in such a way that technical possibilities are directly implemented and lead to
corresponding job losses. The actual, often significantly delayed use of these technologies in companies is
therefore frequently not even taken into account. When studies in turn examine the effects of the actual use
of technology, this has so far been limited to specific technologies such as the use of industrial robots (Graetz
and Michaels, 2015; Acemoglu and Restrepo, 2017). In this respect, it is difficult to find well-founded, reliable
statements on the effects of automation and AI on employment (Arntz et al, 2018).

The study by Wolter et al. (2016) uses scenario calculations to model the effects of the change to industry 4.0
and concludes that the impact on total employment by 2035 will be rather small but shows that there will be
major upheavals between occupations and sectors (Arntz et al, 2018).

McKinsey (2018) also concludes that more than half of all activities can be automated and that until 2030
around 15% of the global workforce could be displaced by automation. However, in the same period, due to
economic growth, the additional labour demand will be around 21-33% of the global workforce. It has to be
mentioned, that these scenarios especially apply for emerging economies such as India. Besides lost and
gained jobs, even more jobs will be changed as human labour in the workplace will be complemented by
machines (McKinsey, 2018).

According to a study by the German Institute for Employment Research (IAB) (Dauth et al, 2017), a robot has
replaced an average of two workers in industry in the past, while slightly more than two jobs were created
outside industry in the same period. It can be expected that the AI will behave similarly. An earlier ZEW study
found that although automation destroyed 1.6 million jobs in Europe between 1999 and 2010, it created 3.4
million. In a recent study, ZEW calculated that automation will create 560.000 net jobs between 2016 and
2021 (Hagelüken, 2019).

Different inferences are drawn depending on the extent of the forecasting horizon for the impact of
autonomous systems and AI on employment. It is expected that industry 4.0 will initially require more skilled
workers in the medium term to build up know-how and make initial technological investments. In the longer
term, however, industry 4.0 technologies could also increasingly replace workers (Arntz et al, 2018).

2.3 Will people be expendable?

The growing autonomy of digital systems is also frequently the subject of critical discussion. The fear is that
intelligent robot systems or self-propelled automobiles will invade areas that were previously solely under the
control of human actions and human responsibilities and thus completely out of control (Hirsch-Kreinsen and
Karacic 2019). AI is therefore presented as a challenge for work system design, especially with regard to the
possible consequences for digital control, (de-)qualification and creative power (Gerst, 2019).

Though AI will soon be able to automate parts of human work, it will never be able to displace humans as
decision makers, designers, optimizers and controllers.

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People have intuitions, motives, experience and context knowledge, and they are able to understand meaning
(Gerst, 2019). AI, on the other hand, is only efficient when it comes to preparing factual knowledge or reading
patterns from data. But AI does not understand the larger context because it lacks "common sense and
background knowledge" (Lenzen, 2018). The more versatile autonomous systems act, and the more system
states they can assume, the less people can understand, expect and predict their actions, the more technology
narrows man's scope for his own strategic action (Gerst, 2019).

If some of the human tasks are delegated to AI, people can lose some of their skills in the long term:
employees who are guided and controlled step by step by technical assistance systems in the so-called worker
guidance; the pickers in commissioning; office personnel who, due to digitalisation, are only allowed to process
a fraction of a single customer order. Digitalisation fragments many activities and empties them of
competences (Gerst, 2019) - a process that can be described as the "Amazonisation of work" (Butollo, Ehrlich
and Engel, 2017).

With digital technology, the hope is associated that monotonous work can be replaced, and that people only
have the higher-value tasks left to them. A study by the Fraunhofer IAO (2019) shows that people are
predominantly optimistic about the use of AI and robots: For the present, only 8% of respondents say that
digitalisation and AI could replace (or "rather replace") human work in their profession, but 19% expect this for
the year 2030. Most see a balanced relationship between substitution and assistance (57% today, 46% in
2030). The proportion of respondents who primarily expect support (or "rather support") for their work
remains constant at 35% between now and 2030 (Peissner et al, 2019).

Managers are often unaware of the openness of the workforce towards AI. In a study by Accenture, executives
surveyed stated that in their opinion only 26% of the workforce is willing to work with intelligent machines. In
the same study, Accenture interviewed more than 14,000 employees globally. In fact, 67% of them believe
that it will be important to learn new skills, 62% state that AI will have a positive effect on their work (Sage-
Gavin et al, 2018).

People will not become redundant in the automated production of the future. Especially human creativity
from non-linear thinking and decision-making competence as well as communicative and socio-emotional
abilities will continue to be in demand. This comes especially to bear, because AI does not have any creativity,
which is a key in innovation activities.

According to Gerst (2019), human labour is demanded for two further reasons: The systems are only
insufficiently capable of reacting in unknown situations. And they repeatedly transmit dubious information.
And: If priorities are changed, it may be necessary to deviate from the automated routine. Human intervention
in technology also makes sense when it comes to direct communication with customers. Or if it is to be
expected that an employee with his knowledge and experience knows more precisely and earlier when
maintenance is due or whether capacity planning needs to be changed.

2.4 AI requires new leadership and organisation

The implementation of AI in companies requires a reorganisation of management, cooperation, co-
determination and qualification of the workforce as well as a high level of knowledge exchange. Digital change
therefore requires flexible and agile organisational structures in order to be able to react to the complexity
and dynamics of the digitalised working world. The leadership of the future does not delegate and decide on
its own but conducts flexibly within the framework of self-organising network organisations. Flatter hierarchies
allow employees more room for manoeuvre, and managers see themselves as coaches and moderators of
interdisciplinary, democratically formed teams and shape the framework conditions for participative
leadership.

Current research results show that for many companies not technology and investment are decisive for
success, but the openness of managers and employees towards digitalisation and a supportive organisational
culture (Franken, Prädikow and Vandieken, 2019; Franken et al, 2019). To optimally introduce new AI
applications, it is necessary to question the organisational culture, whereby values such as trust, an open
approach to knowledge, access to necessary further training, principles of decision-making, leadership styles
etc. should be scrutinised.

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The transformation process driven by digitalisation also places considerable new demands on the workforce.
In future, fixed occupational profiles and static skills will be replaced by increasingly dynamic job profiles that
require a higher degree of interdisciplinary process and methodological knowledge. This will make it necessary
to sensitise and qualify employees, promote digital participation in the world of work and facilitate the
participatory design of socio-technical work systems.

3. Practical design and best practices of AI applications in companies

The use of AI in manufacturing companies is still in its infancy, which represents an opportunity for balanced,
well-founded decisions on the optimal distribution of roles between human and AI. In the new division of
labour, AI should support and relieve people so that they can contribute specific human strengths such as
empathy, creativity and finding solutions in complex situations. To achieve this, AI applications must be geared
to the needs of employees, not vice versa. The effects of the use of AI in companies on employment effects,
structural changes, task changes and competence requirements for employees can only be defined based on
forecasts and estimates. The more important it is to consider and analyse the already existing best practices of
AI deployment.

3.1 Study results on AI in companies

The basic idea of AI is to recognize patterns in data sets, in production planning, in product development or in
picture or speech recognition. The ability of AI to quickly analyse large amounts of data (big data) and to
identify regularities as well as irregularities is used profitably in AI-affine companies.

The PwC study on AI in Enterprises shows a significant technological catch-up: According to 1,000 US business
executives surveyed, 27% have already implemented AI in different areas of their organization, 16% had
executed pilot projects of AI, and another "22% of respondents indicated that they had not yet implemented
AI but were planning to investigate its use in the enterprise." (PwC, 2019a). In Germany, only 4% of companies
use AIs, 2% currently implement AI systems, 17% plan or test AI deployments and 28% consider AIs to be
relevant but do not plan to use them (PwC, 2019b).

Thereby, there are already many functioning and efficiency-enhancing application examples.

According to PwC (2019), the possible applications of AI range from data analysis and chatbots to new services,
products and business models. Data analyses for decision-making processes lead the application ranking with a
user rate of 70%. 44% of the interviewed companies include AI in the planning of new, digital business models.
The majority of decision-makers plan the AI rather as a relief for employees, for example in routine work and
analysis processes, and not to replace people. This is mainly due to two fears: Firstly, many people are worried
that autonomous AI systems could evade human intervention; secondly, they are worried about job losses.

In many companies, the use of AI creates new, more efficient and productive workplaces than others.
However, control, efficiency and compliance measures are required for AI applications, especially the
implementation of security and transparency as top priorities (PwC, 2019b).

A study by EY clarifies the desired business outcomes from the application of AI: 54% of respondents indicated
an improvement of products and services, 50% the achievement of cost efficiencies, 49% the acceleration of
decision-making and 47% the enhancement of customer experience. The biggest obstacle (80% of
respondents), however, is the lack of requisite talent to drive AI adoption (MIT, 2018).

In addition, certain skills and competences are required for the cooperation with AI, which are formulated as
requirements for the employees: the decision-makers at AI-affine enterprises cited the understanding of AI's
applications and limitations first, followed closely by knowledge of secure and transparent AI solutions as well
as understanding and knowledge of data-driven business models (PwC, 2019b).

3.2 Selected Examples of AI: Predictive Maintenance and Chatbots

AI can be used to operate predictive maintenance. This is a common use case for AI in industry. In the past, a
production facility had to fail before it was repaired. Today, intelligent systems detect a malfunction before it
occurs. Repairing machines before they break - this enables predictive maintenance.

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Siemens relies on predictive maintenance for a printed circuit board cutting system at its factory in Amberg,
Bavaria. Thanks to process-oriented data analysis, the company can reduce the downtimes of its production
facilities and thus save up to 12.000 euros per machine in additional annual costs. Since the dust generated
during the cutting process can cause the spindle bearing of the system to jam, Siemens combines AI with
cloud-based and process-oriented data evaluation. Thanks to the predictive maintenance function, an
imminent machine failure can be foreseen by up to 36 hours and the spindle can be replaced before a defect
occurs (Tubbesing, 2019).

In the past, chatbots often referred to keywords, but today they use speech recognition, speech output and
learning technologies, which gives them a certain intelligence. Chatbots, which companies use to communicate
with customers, not only gradually learn the language and expressions of their interlocutors but are also
trained to understand the tone of callers and fake empathy.

This allows chatbots to develop into digital assistants who can also proactively provide information. On
Android, Google Now is moving in this direction, and Apple is trying to teach Siri to do the same. Particularly
well-known is the language assistant Alexa from Amazon, which the company has built into the smart
loudspeaker Echo. With Home, Google has created a similar product. These applications are mainly used in the
private sector but can soon be used in companies.

Chatbots bring advantages for both customers and companies. In customer service, waiting times can be
bridged or even shortened, support costs can be permanently reduced, suitable products can be offered in a
matter of seconds. Examples of such chatbots are Anna, the virtual assistant at IKEA, Sophie, the counterpart
at Congstar or Elias, who helps with the tax declaration (Demling, 2016).

However, the use of language assistants, especially by Alexa, has been criticised by data protectors because of
concerns about data security and privacy. Therefore, AI's applications should be viewed critically to objectively
assess their opportunities and risks.

3.3 Critical discussion: Possibilities and instruments for a successful implementation of AI applications in
companies
The analysis of the study results on the use of AIs in companies shows that the impact on AIs in most
companies is conceived as support for human work and ultimately makes the activities of employees more
interesting and demanding. However, the implementation of AI should be accompanied by training to ensure
the necessary skills for the use of technology. In addition, new demands are being made on corporate culture
and compliance measures, which have an impact on the organisation and management.

The example of predictive maintenance makes it obvious that AI applications in this field can provide more
safety at work and less downtime and thus higher efficiency, which also benefits employees. Here, as well, the
qualification of the employees plays a key role, as they must understand the processes and interrelationships
to be able to understand the AI decisions.

Smart speakers like Alexa are in vogue, Google and Amazon dominate the market. However, the devices listen
constantly and are able to store ambient noise. Users run the risk of being hacked, spied on and intercepted.
More and more smart products are collecting more and more user data. This raises concerns: data protection
commissioners warn against loudspeakers, the consumer advice centre sees risks for privacy, and in social
media comparisons with wire bugs and fear of surveillance dominate (Strathmann, 2018).

4. Conclusion and outlook

The rapidly advancing digitalization and the implementation of AI in companies is changing the world of work -
the role of people in companies, the design of work, the demands on employees, the organizational structure
and culture as well as leadership must be rethought and actively shaped. Previous research has proven: AI
offers considerable potential for supporting human work, even though the danger that it could partially
replace humans should not be underestimated. Human work can become easier, healthier and more
interesting by delegating routine activities to machines and algorithms. The future cooperation with AI and
robots is viewed positively by many people. Also, the increasing flexibility of work place and working time
means advantages for employees. Faster and greater changes are expected in future skill requirements, so
adequate vocational education and training is needed to take people into the process of digitalisation and give

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them a new employment perspective. It is very important for companies to question their management and
corporate cultures and structures and, if necessary, to realign them. The openness of managers to digital
transformation and a culture of trust and error tolerance make it possible to shape technological change in a
humane way and thus contribute to the success and competitiveness of companies. Future research should
take these findings into account in the development of research questions, concepts and implementation of AI
in companies.

Acknowledgements
This contribution would not have been possible without the support of the entire "Denkfabrik Digitalisierte
Arbeitswelt" team. We would like to thank all team members for their outstanding commitment in all previous
and upcoming projects.

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