Money Elon Musk Says This Is Why Tesla Just Fired 2 Percent of Its Work Force

08:46  04 november  2017
08:46  04 november  2017 Source:   Inc.

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Tesla CEO Elon Musk came under fire recently as reports surfaced of his company suddenly firing about 700 employees. In a third-quarter earnings call on Wednesday, Musk addressed these reports. And his response was interesting. Here's what he said

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  © AP Photo/Stephan Savoia  

Tesla CEO Elon Musk came under fire recently as reports surfaced of his company suddenly firing about 700 employees. In a third-quarter earnings call on Wednesday, Musk addressed these reports.

And his response was ... interesting.

Here's what he said:

The other thing I want to mention--that there are a lot of articles about Tesla firing employees and layoffs and ... these are really ridiculous. And any journalist who has written articles to this effect should be ashamed of themselves for lack of journalistic integrity.

Every company in the world, there's annual performance reviews. In our annual performance review, despite Tesla having an extremely high standard, a standard far higher than other car companies, which we need to have in order to survive against much larger car companies ... you can't be a little guy and have equal levels of skill as the big guy. If you have two boxers of equal ability and one's much smaller, the big guy's going to crush the little guy--obviously. So, the little guy better have a heck of a lot more skill ... or he is going to be clobbered. So that is why our standards are high. They're not high because we believe in being mean to people. They're high because if they're not high, we will die. Despite that, in our annual performance reviews, only 2% of people didn't make the grade. So that's about 700 people out of 33,000. This is a very low percentage. GE, I don't know if they still do, but they certainly for a long time had a policy of firing 10% of their employees for performance every year, no matter what.

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He spends a couple of days working at Tesla , which has its offices in Palo Alto and factory in Fremont. At the end of the week, it was just Musk and two other men doing the work . ‘If you were my employee,’ he said just as often, ‘I would fire you.’”

If you were to stack Tesla's performance later releases compared to other companies, the number would be low. So, the only reason these articles had any play whatsoever is because journalists and editors with low integrity fail to provide any context for where this stood because the actual article would've read, Tesla fires 2% of its employee base for performance-based reasons, a remarkably lower number compared to other companies. But of course, that would be a meaningless article, so they forget to include that. Shame.

There's a lot to unpack here, but here are some initial thoughts on the good, the bad, and the ugly of Musk's message.

The Good

Musk has continually insisted that to compete with traditional carmakers, Tesla must perform at a higher level. "We obviously cannot compete with the big car companies in size, so we must do so with intelligence and agility," he wrote in one companywide email.

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Through his boxer illustration, Musk does a great job of bringing this point home. When he says "our standards are high, because if they're not, we will die," he demonstrates emotional intelligence by using powerful language that will appeal to his supporters. And his explanation does provide necessary context.

The Bad

However, Musk's assertion that journalists and editors lack integrity for reporting on this doesn't really hold water.

Musk claims that:

  • Every company in the world holds annual performance reviews
  • Comparing Tesla's firing of 2 percent of its employee base for performance-based reasons is "a remarkably lower number compared to other companies"

The problem with that? For one thing, GE--the company Musk references--has gotten rid of performance reviews (just like countless other companies), because it's deemed them impractical, outdated relics of an era of management that was out of touch with its people.

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Secondly, remember that Musk's whole strategy hinges on not following the crowd. Any attempts to favorably compare Tesla with much larger companies is simply asking for trouble.

The Ugly

Here are two of the most troubling claims from former employees, as reported by CNBC:

  • Several current and former employees said that the round of firings appeared to be a cost-cutting measure, with many of those terminated being the highest paid in their position
  • One fired employee claims that "performance reviews were thrown out and rewritten by upper management"
  • At least some terminated employees "were informed via email or a phone call 'without warning,' and told not to come into work the next day"

Musk has not addressed any of these claims.

To his credit, Musk asserts he's ready to take responsibility for things that go wrong at the company. Referring to another problem at Tesla that needed to be addressed, Musk said the following:

"I move myself to wherever the biggest problem is in Tesla ... I really believe that one should lead from the frontlines and that's why I'm here."

Can't argue with that sentiment. But it looks like it may be time for another move.

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