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There have been many signs recently that Elon Musk's tenure as CEO of Tesla is not going well.
Musk's lawyers are scheduled to appear in a New York court today to convince a judge not to hold Musk in contempt of having tweeted a production forecast without first clearing the tweet with Tesla's lawyers, what the Securities and Exchange Commission says Musk is committed to doing. September regulations.
Yesterday, Tesla announced a 31% drop in vehicle deliveries compared to the previous quarter. This decrease is due in part to the difficulties encountered in shipping the Model 3 to Europe and China, and partly to the dramatic drop of 44% in shipments of the more expensive Model S and X models. Tesla shares fell by around 9%. % at the opening of negotiations this morning.
In March, the dashcam video showed that the Tesla autopilot was heading for a concrete lane divider. This is particularly alarming since a Tesla customer died a year ago when the autopilot steered his car into a separation lane in a similar situation.
Also in March, Tesla announced a price reduction for wireless autopilot upgrades for people who had purchased a Tesla car without choosing the autopilot upgrade. This anger from customers who had paid more for Tesla's complete self-driving package, had not yet had the technology, and had not received a refund. A few days later, Musc admitted that it was a mistake and restored previous prices.
In February, Musk announced that Tesla would close most of its stores in the United States to reduce costs. A few weeks later, the company reversed the trend and announced that many of its stores would remain open.
And all this has happened in the past two months alone. Musk has made many more decisive decisions in 2018.
Why did Musk make so many mistakes? This seems in part to reflect Musk's impulsive personality. But this also reflects Musk's management philosophy.
Musk's management style is a bad choice for a major automotive company
"It's better to make many decisions per unit of time with a slightly higher error rate than a few with a slightly lower error rate," Musk wrote in an email dated ###. ###################################################################### 39; May: The Wall Street Journal. "Because obviously, one of your good future decisions may be to reverse an earlier wrong decision, provided the previous decision is not catastrophic, which they are rarely."
It may be a good management philosophy for the CEO of a ruined startup where speed and flexibility are paramount. This has probably described Tesla for 10 to 12 years. At the time, survival required Tesla to act quickly and make bold and risky bets.
But it's a bad philosophy for the CEO of a large mature company like Tesla around 2019. Tesla's survival no longer depends on the success of its products. The success of Tesla instead depends on the competent execution of different tasks in parallel: development and launch of Tesla Semi, Model Y and new Roadster, replacement of the S model, refresh of the X model, construction of a new factory in China, Tesla autopilot upgrade. technology, continuing to reduce battery costs, developing its sales and service infrastructure, continuing to expand its compressor network, renovating its retail stores and upgrading its system for referral customers, streamlining model 3 production to improve profit margins, etc.
An automobile company – or in fact any big business – manages this kind of situation by recruiting an army of competent executives and then delegating different tasks to different people. And once the CEO has delegated a task to a subordinate, he must give the subordinate sufficient autonomy to perform his task.
This is not Musc 's approach. Musk is famous for making impulsive decisions that throw Tesla into chaos. The decision to close Tesla stores is an excellent example. Subsequent reports suggest that many affected people have not even heard of this plan until Musk publicly announced it. The announcement of Musk sent Tesla store managers scramble to execute the new plan. Then, when Musk changed his mind a few days later, they had to scramble to reverse these actions.
Not how Elon rolls
Obviously, a CEO has the right to decide to close the stores of a company if he wishes. But a competent CEO will first consult the employees concerned. He hears objections, builds consensus and gives people time to plan for the new strategy.
Instead, Musk has maintained its strategy of making "many decisions per unit of time with a slightly higher error rate". The problem is that the cost of poor decisions from a CEO increases as the business grows. A simple tweet or email from Musk can create chaos for hundreds or even thousands of basic Tesla workers. And as Tesla grows, it becomes less and less likely that Musk has all the relevant information, which increases his rate of error.
Not only does this philosophy reduce Tesla's productivity in the short term, it also prevents Tesla from recruiting and retaining talented people for key management positions. Tesla has become notorious for its high turnover rate of executives, and one of the main reasons seems to be that it is not fun to be a leader in a company with a CEO like Elon Musk.
The result is a business culture that makes long-term planning difficult. And that may be why unexpected obstacles seem to continue to prevent Tesla from achieving its goals. For example, one of the main reasons why shipments dropped in the last quarter is that Tesla did not have enough capacity to ship its cars abroad. Shipping cars on the other side of the ocean requires careful planning, but it is not this difficult. A well run company should have been able to put in place the necessary transport capacity months in advance.
But it's hard to focus on this kind of trivial detail in a company where the CEO constantly asks subordinates to drop everything to work on new ideas – or when a high turnover means that key positions are vacant the most of the time.
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