Coinbase didn’t just lay off 14% of its staff due to AI. It replaced managers with ‘player-coaches’ and turned its org chart upside down

Armstrong mentioned the layoffs, which might have an effect on just underneath 700 staff primarily based on Coinbase’s last employee count, are partly due to a crypto downturn. Yet the primary motivator is making the corporate’s management construction flatter, enabling its staff to work quick, with AI on the forefront.

In apply, this implies reducing what Armstrong dubs “pure managers,” opting as a substitute for “player-coaches” who oversee group members however are additionally sturdy particular person contributors. The firm can be planning to leverage its most AI savvy staff by creating “AI-native pods,” which might even embrace one-person groups directing brokers that embody the obligations of engineers, designers, and product managers.

“We are not just reducing headcount and cutting costs, we’re fundamentally changing how we operate: rebuilding Coinbase as an intelligence, with humans around the edge aligning it,” Armstrong wrote in a post on x.

The CEO mentioned following the layoffs the corporate’s management construction can even stretch not more than 5 layers under its personal place. Flattening the management construction will enhance effectivity, he argued.

“Layers slow things down and create coordination tax,” Armstrong added within the X submit.

For years, Armstrong has been all in on AI. After securing GitHub Copilot and Cursor licenses for each engineer, he “went rogue,” asking engineers to get onboarded with the instruments by the end of the weekmoderately than the “quarters” somebody within the firm had mentioned it will take. Those who didn’t meet the deadline had to face the results.

“Some of them had a good reason, because they were just getting back from some trip or something,” Armstrong mentioned final 12 months on the Cheeky Pint podcast with Stripe CEO Patrick Collison. “Some of them didn’t, and they got fired.”

Over the previous 12 months, Armstrong mentioned he has seen how AI has allowed engineers to ship in days that used to take a group weeks. Nontechnical staff are additionally utilizing AI to write code whereas many of the corporate’s workflows are being automated, transformations that Armstrong mentioned influenced Tuesday’s layoff resolution.

Coinbase didn’t instantly reply to Fortune‘s request for remark.

To make sure, as Coinbase flattens its org chart, it’s also growing its employee-to-manager ratio, with every chief accountable for 15 or extra studies. This follows the latest “megamanager” pattern sweeping company America, the place managers now oversee a median of 12.1 staff, up from 10.9 in 2024, according to Gallup. Goal will be the starkest instance, with its new utilized engineering group sporting a 50-to-1 employee-to-manager ratio.

Apart from Coinbase, different corporations equivalent to block and Snap have laid out hundreds, citing the speedy development of AI. Yet, Sam Altman, the CEO of OpenAI, has additionally warned that some corporations are “AI washing,” or blaming unrelated layoffs on AI. Aleksandar Tomic, the associate dean for strategy, innovation, and technology at Boston College, told Fortune some CEOs have used the pretext of AI restructures as a way to spin layoffs as a positive, rather than a negative, for their companies. At the same time, economy-wide layoffs remain lowleaving these AI-related layoffs largely as a tech sector phenomenon.

“Instead of saying, ‘Hey, we have some business issues that caused us to have layoffs,’ which would be viewed negatively by the market, they say, ‘Oh, we are laying off people to gain efficiency,’ and then their stock price goes up,” he mentioned.

Still, Armstrong mentioned the layoffs and reorganization of Coinbase’s management construction will assist the corporate adapt for an period the place “small, high context” groups execute shortly. The previous, unhurried method of working is disappearing quick.

“AI is bringing a profound shift in how companies operate, and we’re reshaping Coinbase to lead in this new era,” Armstrong mentioned.