Digital payment company PayPal is trying to prove that it can still compete in a faster, more automated financial technology market. Under Chief Executive Enrique Lores, the company is pursuing a turnaround plan built around cost cutting, artificial intelligence (AI), and a simpler management structure. 

The plan reportedly includes cutting about 20 percent of PayPal’s workforce over two to three years, reducing layers of management, and investing more heavily in technology that can automate work and improve efficiency. Lores reportedly believes PayPal has underinvested in its technology platform and has fallen behind some other financial services companies. 

Planning for a Turnaround

Planning involves setting objectives and deciding how to achieve them. PayPal’s top managers are making long-term choices about where the company should compete and what it should prioritize. Lores has identified several focus areas, including checkout, buy now, pay later, financial services, Venmo, payment processing, and crypto.

The company is also trying to improve profitability while becoming more technologically advanced. That requires forecasting how customers, competitors, and technology may change. For example, Lores sees room for growth in buy now, pay later because customers are increasingly looking for flexible payment options. He also wants PayPal to become stronger in AI, not just as a company that uses AI tools, but as what he called an AI-native payments company.

This builds on earlier technology changes at the company. Under former CEO Alex Chriss, PayPal began a large-scale effort to re-engineer its technology infrastructure. That initiative was expected to cost as much as $300 million and last 18 to 42 months. It included moving more systems to cloud-based solutions, reducing network delays, improving scalability, streamlining operations, and exiting some data centers. 

Organizing Around AI

Organizing means arranging resources and activities so the company can meet its objectives. PayPal has already begun reorganizing its structure. The company said it would divide into three business units: Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto. This change is meant to improve accountability and align the organization with market opportunities.

Lores also wants to remove duplication and reduce layers of management. He said some parts of PayPal have eight or nine management layers and suggested that the company should usually be able to operate with fewer. 

A major part of this organizing effort is the appointment of Anshu Bhardwaj as chief AI transformation and simplification officer. Her role is to examine processes across the company and determine how they should be redesigned using technology and AI. Her team is expected to identify high-impact AI uses, lower operating costs, and create measurable value.

Staffing and Downsizing

Staffing involves hiring, developing, and retaining people, but it can also include downsizing when managers decide the organization has more employees than it needs for its strategy. PayPal’s situation shows how downsizing is increasingly connected to technology. AI and automation can reduce the need for some routine, rules-based work. At the same time, companies may need new skill sets to build, manage, and improve AI-driven systems.

For PayPal, the reported 20 percent workforce reduction is not a small adjustment. It would affect thousands of employees and could reshape the company’s culture. A cost-cutting plan may make sense on paper, especially if it promises $1.5 billion in savings, but employees experience that plan on a personal level. Some lose jobs and others may worry they could be next. Remaining employees may face heavier workloads or pressure to learn new tools quickly. Managers must communicate clearly, reduce confusion, and rebuild trust after layoffs.

Directing Through Uncertainty

Directing means leading and motivating employees to work toward organizational goals. In a turnaround, directing becomes especially important because employees need more than instructions. They need a reason to believe the new strategy can work.

PayPal’s leaders are trying to send a message that the company must focus on fundamentals, modernize its technology, and move faster. Managers will need to explain how AI will be used, which work processes will change, and how employees can contribute. They also need to create a sense of workplace belonging at a time when the company is shrinking. That may be difficult because AI can create fear as well as opportunity. 

Controlling With KPIs

Controlling means measuring performance and making corrections when results fall short. PayPal’s turnaround plan likely includes objectives and key performance indicators (KPIs). The company’s managers will likely watch measures such as operating costs, total payment volume, productivity per employee, cost per transaction, customer-support efficiency, and AI-enabled savings.

The company has already reported several important performance measures. In one quarter, revenue rose to $8.35 billion from $7.79 billion a year earlier, total payment volume rose 11 percent to $464 billion, and transaction margin dollars rose 3 percent to $3.8 billion. Those numbers matter because managers can’t simply announce a turnaround and assume it is working. They must compare actual results with goals. 

The Underlying Management Story

PayPal’s AI turnaround is about planning, organizing, staffing, directing, and controlling during major change. While the company is trying to cut costs, simplify its structure, modernize its technology, and compete with newer digital payments companies, it must manage the human consequences of downsizing and keep employees focused on serving customers. That balance will determine whether the turnaround succeeds. 

In the Classroom

This article can be used to discuss management and downsizing (Chapter 6: The Nature of Management).

Discussion Questions

  1. Describe the objectives of PayPal’s turnaround plan.

  2. How does PayPal’s reported downsizing plan connect to the company’s increased focus on AI? 

  3. What changes did PayPal make to its organizational structure, and why were those changes important?

This article was developed with the support of Kelsey Reddick for and under the direction of O.C. Ferrell, Linda Ferrell, and Geoff Hirt.