Since 2022, four experts from Hyundai Motor Group and external fields have gathered every Monday at 7:00 AM online to read and discuss Peter Drucker’s seminal work, Management. They share deep insights born from the collision of field experience and diverse perspectives. This article re-examines the role of middle managers in the AI era, based on the discussion of “Chapter 35: From Middle Management to Knowledge Organization” held on January 27, 2025.
Introduction
Global companies, including Microsoft, have recently conducted mass layoffs of middle managers. Many ask, “Are middle managers disappearing in the AI era?” The answer is no. To be more precise, while middle managers who merely relay and coordinate information will vanish, a new breed of AI-empowered middle managers with enhanced capabilities is likely to emerge in large numbers.
The essence of an AI-native organization is a knowledge organization. Knowledge organizations handle uncertainty and create unprecedented customer value. If an organization previously created value of 100 with a cost of 90, AI’s role is not to reduce that 90. It is to scale that 100 to 1,000 or 10,000. Ultimately, it is the new knowledge worker who makes this growth possible.
History Repeats: The 1950s vs. the AI Era
The same thing happened in the 1950s when automation technology caused a data explosion. People predicted middle managers would disappear. However, in one automobile plant between 1949 and 1970, production jobs fell by one-third while middle management positions increased fivefold. This happened because companies needed knowledge workers who could interpret the massive data churned out by machines and translate it into business decisions.
”Line Managers” Who Only Manage Will Be Phased Out
The layer Microsoft sought to eliminate likely consists of line managers—those who simply relay information up and down, coordinate schedules, and compile reports. This doesn’t mean those individuals were inherently that type of person. Rather, Microsoft likely wanted to eliminate the entire layer of managers who had been performing this traditional role and rebuild from scratch with a new breed of middle managers.
Three Core Roles of AI-Era Middle Managers
First, Judgment in Emergent Situations
AI excels at handling predictable patterns. However, decision-making in unpredictable, emergent situations remains a human domain. Middle managers in the AI era must be able to deliberately navigate emergent situations. They must be able to leverage AI to acquire the necessary capabilities and knowledge. Organizations, in turn, must empower them with the authority to judge and execute immediately on the front lines.
Second, Context-Based Interpretation
AI analyzes data and finds patterns. But interpreting and applying those results within the organization’s context, culture, and strategy is a human role. The key here is responsibility directed laterally and upward. Traditional managers held authority directed only downward. Knowledge experts, however, hold responsibility toward their peers and superiors. They exert influence through knowledge rather than direct command. Horizontal persuasion and negotiation are core competencies. This is the essence of a networked organization. Organizations must treat them not as “subordinates” but as “junior colleagues.”
Third, Educating the Boss
In the AI era, executives “know” less than ever. Front-line workers understand marketing trends, technological shifts, and customer data far better. Drucker makes a radical suggestion: top management should ask young knowledge experts, “Tell me what I need to know about your work. Teach me where the company’s opportunities are (Educate Me).” But this is not a mere suggestion box. It is a weighty responsibility to rigorously think through and prepare to persuade management so they can make the right decisions for the entire organization.
Requirements for Success
Three things are required for these three roles to work: clear decision-making authority (who can decide what in which situations), a two-way flow of information and context (strategy and priorities flowing down, expertise and field insights flowing up), and a horizontal collaboration structure (not authority directed downward, but responsibility directed laterally and upward).
At the heart of all this is self-control—not external oversight, but internal drive. Employees define their own goals and measure their own performance. Organizations must treat them not as “subordinates” but as “junior colleagues.” Their position may be middle, but their influence should be executive-level.
Closing: Are You Muscle or Brain?
Management is essentially the process of replacing physical force with thinking, habit with knowledge, and coercion with cooperation. Many large corporations still cling to hierarchical cultures and line-manager control. But the AI era will not wait.
I want to ask you: Are you working as a line manager of the past, passively executing a given plan? Or are you the heart of a knowledge organization, wielding influence strong enough to change your boss’s decisions with your expertise?
Is your knowledge this organization’s muscle, or its brain? In the AI era, your answer to this question will define your future.