Reference no: EM133189177

Cumulative Case-Tesla: Traditional Challenges at a Modern Organization

This is the final part of a three-part cumulative case on Tesla and its ongoing challenges. This part reviews the situation from the organizational level.?This exercise is important because it offers real-world application of organizational behavior (OB) knowledge and skills, while also allowing you the opportunity to utilize the 3-Step Problem-Solving Approach-identify the problem, determine associated causes, and recommend solutions.

The goals of this activity are to help you develop critical thinking ability and realize the practical power of OB for solving problems in your job and career.

Read the cumulative case and answer the questions that follow.

Tesla's Unique Culture

Tesla's organizational culture is fueled by its unique mission-sustainability through innovation. The company doesn't offer jaw-dropping benefits or the types of high salaries many are used to seeing in the technology industry. Instead, it attracts and retains talent based on being mission-driven and promising to make the world a better place. These attractive values continue to outweigh the company's lack of work-life balance and controversial leadership decisions. In fact, Tesla received approximately 500,000 employment applications in 2017.¹

Tesla's culture integrates three key elements. First, it believes in ambitious innovation. The company was founded right after General Motors (GM) failed in its electric car pursuit with the EV1. Starting a business in a market segment where experienced players such as GM have failed requires abundant ambition, as well as product and process innovations.² Second, Musk believes in the first principles method of thinking, which requires employees to overcome challenges by identifying the basic factors presented by a problem or situation. One doesn't have to simplify every problem down to the smallest level to get the benefits of this way of thinking though, because most root causes will present themselves after digging down only a couple of layers.³ Finally, Musk is not keen on bureaucracy. As discussed before, he believes that Tesla employees should breach hierarchy and contact anyone in the company to solve problems and voice concerns. Specifically, Musk believes that, "Anyone at Tesla can and should email/talk to anyone else according to what they think is the fastest way to solve a problem for the benefit of the whole company. You can talk to your manager's manager without his permission, you can talk directly to a VP in another department, you can talk to me, you can talk to anyone without anyone else's permission."⁴

Tesla's innovation-focused culture may allow the company to rapidly respond to challenges, but it also has some disadvantages. Employees are pressured to constantly innovate and keep digging until all challenges have been addressed. What's even worse than the pressure employees face are the methods that Tesla is accused of using to enforce them. Karl Hansen, a former member of Tesla's internal investigations team, filed a complaint with the Securities and Exchange Commission (SEC) alleging some of these methods. According to Hansen, Musk ordered the installation of surveillance equipment at its Nevada Gigafactory to eavesdrop on the personal cellphones of employees at work to monitor their productivity.⁵

Martin Tripp, another Gigafactory worker, outlined how Tesla's workplace culture promoted production at any cost. Tripp told the SEC that Tesla lied about its Model 3 output and used faulty parts in vehicle production, without regard for driver safety.⁶ And when Tesla is honest, it often overpromises, rarely hitting its aggressive timelines. For example, Tesla fell short on more than 20 projections, from car production to financial targets, between 2011 and 2016.⁷

The production numbers and parts aren't the only issues causing employee angst. Some workers feel endangered and neglected on the factory floor as well. Jonathan Galescu, a Tesla production technician, told The Guardian that he's "... seen people pass out, hit the floor like a pancake, and smash their face open ... they just send us to work around him while he's still lying on the floor."⁸ Musk, wrote to his employees in 2017 that, "No words can express how much I care about your safety and wellbeing. ... Going forward, I've asked that every injury be reported directly to me, without exception. I'm meeting with the safety team every week and would like to meet every injured person as soon as they are well, so that I can understand from them exactly what we need to do to make it better ..." Following Musk's statement, The Guardian interviewed six Tesla workers who had been injured on the job in 2018; none of them ever heard from Musk. "He didn't meet with me, and my incident was filed," said one of the injured employees, "If he was truly going to meet with all the employees who got injured, he would be here for half the year."⁹

Is Tesla Structurally Sound?

Tesla believes that organizational structure has a direct impact on its ability to be innovative. The company is organized around energy, engineering and production, HR and communications, legal and finance, and sales and software divisions. Most divisions are led by vice presidents, and the company prides itself on having more open lines of communications and less bureaucracy, compared to similarly sized companies.¹⁰

Musk believes that a layered organization impedes innovation. In fact, he intentionally flattened the management structure in a May 2018 reorganization.¹¹ "As part of the reorg, we are flattening the management structure to improve communication, combining functions where sensible and trimming activities that are not vital to the success of our mission," he told employees in an email.¹² Experts argue that he may have swung too far on the side of decentralization. Consultant and author Jim Champy argues that Tesla needs greater hierarchy for complex decision making. "A flat, committee-based structure for a complex business quickly runs into trouble. Representatives from different parts of the business often have a penchant for arguing," says Champy.¹³

We can't be sure if Tesla is heeding Champy's advice because the company is not transparent about its organizational structure, other than the fact that Musk is in charge. For example, if you go to the Tesla website and look for company management, you will only see information about three individuals: Musk, JB Straubel (former chief technology officer who left Tesla in July 2019), and Zachary Kirkhorn (current chief financial officer).¹⁴ However, Musk is reported to actually have a 29-member senior management team reporting directly to him.¹⁵

Company insiders described to Inc. a massive senior management team that has few meetings. Furthermore, when meetings are held, members are not in the same place. To make matters worse, Musk, already burdened by having 29 direct reports, is often known for communicating with employees far below him in an apparently ambiguous hierarchy, causing even more confusion. Minda Zetlin, co-author of The Geek Gap, has concerns with Musk's handling of Tesla's organizational structure. "He needs to get better," says Zetlin. "Executives who don't feel their CEO trusts them to handle the people and projects directly assigned to them are likelier to quit. So are executives whose bosses hog the limelight and leave them in the shadows."¹⁶ Zetlin's advice is supported by the fact that since 2016 more than 40 top executives have fled Tesla.¹⁷

If innovation is the goal, then having a large number of direct reports in a flat-structure can be problematic for other reasons as well. According to Champy, structure can provide a mechanism for training and development, a key ingredient in having an innovative and competent workforce. Senior positions are not there just for rank and pay, he argues. These individuals need to mentor and coach those in their respective divisions if Tesla is to continue being cutting-edge.¹⁸

Employees at Their Breaking Point

Tesla is determined to save the world from carbon-based, fuel-guzzling cars, but at what cost? Musk frames every challenge as existential in order to rally the troops, but with high executive turnover and long work hours, employee stress continues to be a primary challenge.¹⁹ For example, one engineer who helped design the Model 3 gave The Washington Post his nonworking time as 7 pm to 9 pm, adding, "I've been 24/7 since the day I started."²⁰

The internal conflict between making a difference in the world and burning out is apparent at every level of the organization. Another Tesla engineer quit in 2015 over "ridiculous work hours" and his interactions with Musk, but returned a year later because he said the job made him feel empowered to solve big problems and change the world.²¹ Musk himself is falling prey to workplace burnout, admitting during an interview with The New York Times that stress is taking a heavy toll on him personally. He alternated between laughter and tears during the interview, stating that 2018 "has been the most difficult and painful year of my career."²²

Based on the organizing framework, the type of culture at Tesla can be attributed to which of the following?

Multiple Choice

• individual level outcomes
• organizational level processes
• person factor inputs
• individual level processes
• organizational level outcomes

What type of organizational structure does Tesla have?

Multiple Choice

• functional
• divisional
• matrix
• hollow
• horizontal

Tesla's organizational structure is considered a(n) ______ on the organizing framework.

Multiple Choice

• person factor input
• situation factor input
• organizational level process
• individual level outcome
• organizational level outcome

Employee counterproductive work behavior due to workplace burnout at Tesla is considered a(n) ______ on the organizing framework.

Multiple Choice

• organizational level outcome
• individual level process
• individual level outcome
• situation factor input
• person factor input

Which of the following potential stressors are not mentioned in the case?

Multiple Choice

• job demands
• work overload
• culture
• underload and monotony
• managerial behavior