Cloudfare CEO: How did I decide which employees to replace with AI?

Author: Matthew Prince

Translation: Deep Tide TechFlow

Two weeks ago, I laid off more than 20% of the company’s employees. I didn’t do this because Cloudflare is in trouble. On the contrary, our revenue growth hit a historic high, our cash flow is very healthy, and the number of new customers we added globally has reached an unprecedented level. I made this decision because the business environment is changing drastically; to win the future, Cloudflare must ride the wave.

If you scour the history of American business, you probably won’t find another publicly traded company like ours—one that has maintained over 30% high growth while also cutting 20% of its workforce. However, what we did over the past two weeks is very likely to become the industry norm over the next year. This is a story about how artificial intelligence (AI) will reshape everything, but unfortunately, many executives and commentators have misunderstood how AI will upend the rules of business—and who exactly will be impacted.

To get clear on this, I reopened an old book published in 1954 (which is 20 years older than I am): Peter Drucker—praised as the “Father of Modern Management”—《The Practice of Management》. In this book, Drucker delves deeply into the various role types inside an organization. I group these roles into three categories: builders, sellers, and measurers.

As their names suggest, builders are responsible for creating products, while sellers are responsible for selling those products. And measurers handle everything else: internal audit, revenue recognition (a finance term and accounting process that determines when a sale can be formally recorded as company revenue according to accounting standards), finance, legal, compliance, middle management, day-to-day operations, and countless more.

Contrary to some analysts’ pessimistic predictions, the jobs of the builders are solid and aren’t going anywhere. If an engineer on my team could now increase productivity tenfold with AI, I would absolutely hire all such talent we can find.

Sellers also don’t need to worry about being replaced. Because the people holding the budgets are still very much human; they’re more willing to buy from those who are willing to spend time listening to needs, build trust, and step in to help when problems arise.

Measurers are just as vital to a company, but they are completely different from the first two. Top measurers are often worth their weight in gold. In the background, they work tirelessly, quietly, without chasing the flowers and applause that come with a front-of-house role (like a restaurant host who directly faces customers—roles that are more exposed to public attention and praise). Ideally, they can also maintain an objective perspective independent from the rest of the company. Drucker points out that while measuring business performance is important, customers are ultimately won through “building” and “selling.” A truly top-tier company should invest the most resources in these two core functions.

The wave of AI isn’t aimed at builders or sellers—it is targeting measurers. Tireless, completely independent, extremely efficient, and always online—today’s AI systems, when measuring and scrutinizing a company, offer objective, fine-grained detail and accuracy that even the most outstanding employees in the past could not match.

Take Cloudflare as an example. In the past, our internal audit team could only pull out a few business risk points each quarter for spot checks. Now, we are rolling out a new system comprehensively to conduct continuous, around-the-clock audits of every business risk point. Our financial closing process has become faster. We make fewer mistakes, and even when there are slips, they can be identified more precisely and reliably. As CEO, I now have an unprecedentedly powerful tool—not only to accurately measure the company’s overall operations, but also to help me precisely spot the rising stars in the team.

Among the employees we laid off last week, the vast majority were measurers. We streamlined the entire middle-management layer because, with AI’s assistance, supervisors can now manage more direct reports while still delivering accurate performance evaluations and effective guidance. We consolidated scattered operational roles into a unified business support group; when scenarios require specific expertise, we let AI fill the gap. We also significantly cut the marketing team—like most companies, it had been a major concentration area for measurers. In addition, across our entire finance team, we found substantial room for role consolidation and automation.

But the underlying purpose of this layoff was absolutely not simply to reduce headcount. In fact, the number of positions we currently have open for recruitment is at an all-time high. I expect our total employee count to continue growing over the next few years. It’s precisely because the “measuring” work no longer needs as much human labor that we can free up capacity to pour substantial resources into the people who truly drive company growth.

This summer, we received nearly 1 million resumes for 1,111 paid internship positions. The interns we ultimately hired aren’t just extremely strong—they’re also naturally “AI-native” (AI-native refers to the new generation who grew up with the AI era, naturally adapting to it and treating AI as a way of thinking and a foundational tool). Without exception, all of them are builders or sellers, and we expect that the vast majority will eventually receive full-time offers.

They belong to a new generation of the future, one that will invent entirely new ways to energize our business. Thanks to AI, we can now measure their contributions more precisely and identify future leaders with accuracy. AI is in no way a warning sign of bleak youth unemployment—if anything, it’s the opposite.

AI won’t end all jobs, but it will reshape every company. Ultimately, time will prove Drucker was right. AI will greatly enhance our ability to measure organizations, so that the living, human members of our team can put all their energy into where they truly can create and capture value: building and selling.