20 January 2019

A difficult road ahead for tesla - Lawrence Jones MBE

A difficult road ahead for Tesla?

I am a big fan of Elon Musk. He is an extraordinary entrepreneur. Even the greatest entrepreneurs have limits, yet he is someone who reaches for the stars, quite literally.

But running multiple businesses is not without its risks and pressures. This week, despite reporting strong growth, Tesla boss Elon Musk sent an email to his team at Tesla announcing a 7% cut in its workforce. The car firm’s reported headcount is around 45,000, that would mean more than 3,000 job losses.

The reasoning for these cuts is to make the Tesla models more affordable to protect the future. Reading between the lines, I can’t help  thinking that one of the driving factors for his decision is off the back of a 50% cut in a green subsidy that the US government is now scrapping in the imminent future. The subsidy provided US customers investing in an electric car a few thousand dollars. This is a lot of money to find.

Like many of the good ideas brought in under Obama’s tenure, Donald Trump is cancelling them with seemingly little or no thought for the impact for which they were originally set up.

The stock market reacted to Elon’s letter and announcement, and there was a dramatic downturn in Tesla’s share price.

Not surprisingly, analysts and investors are clearly puzzled how he is expecting to significantly increase production of their very popular Model 3 vehicle whilst reducing the workforce by around 3000 jobs.

Elon wrote, “Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity, but succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.”

Difficult decisions

In business we all have to make difficult decisions. But when making tough, big decisions, part of the process is calculating the downside as well as the upside.

Cutting jobs is undoubtedly one of the hardest things anyone would have to do. It’s an unenviable task and one that should be avoided at all costs. What is perplexing is why they grew the workforce last year by 30% if job cuts were a possibility the following year.

Especially as the increases in headcount were successful; he openly talks in his letter to his staff at what a successful year it has been.

I can’t imagine what it must be like working for an organisation with such volatility and with such a brutal communication strategy.

Personally I believe that long before the “last resort” of emailing your entire team with such harsh news. Every endeavour should be explored first. And, whilst I am sure he probably has, how then have Tesla arrived at this point? When people’s livelihoods are at stake every care needs to be taken. It’s the beginning of a new year and these are thousands of loyal teammates who have given up jobs elsewhere to join the Tesla cause. Redundancies of this scale can have a negative effect on an entire town. 

His messaging suggests to me that people are not his number one priority: “…succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.”

I am sure that the people who have lost, or are about to lose, their jobs don’t feel the same way about their own particular futures at the moment.

Consequences

We are all giants in our own spheres. However small or large your operation, you have to remember that your decisions impact entire families, particularly when you are in  business. As an entrepreneur, these should never be taken lightly and should always be a priority.

It would be fair to say that 2018 was an interesting year for Musk and Tesla. He and the company were fined $20 million for his tweet and subsequent U-turn regarding taking the business private.

It was a roller-coaster ride for Tesla shareholders. The stock topped out above $387 on August 7, the day Musk said he had “funding secured” to take Tesla private at $420 a share. Musk didn’t have funding secured, and he later settled with the Securities and Exchange Commission, which had accused him of misleading the public. As part of the settlement, he agreed to step down as chairman for at least three years and pay a fine of $20 million.

He also faced controversy for his comments surrounding the rescuer of a football team of young boys. Whilst he absolutely deserved to be commended for his forward-thinking, innovative approach, I can’t help but feel that – from the outside looking in – his people skills are somewhat lacking.

Whatever stage you are at on your entrepreneurial or business journey, one of the first big lessons I truly learned in business is that “people are your greatest asset”. Without great people, you have nothing. It’s a phrase you hear all the time. It is almost meaningless nowadays, as it runs off the tongue of so many people that clearly do not understand the lengths that that statement can stretch to. 

At UKFast, for example, our people lead every aspect of the business, from innovation to service to what our brand stands for and represents. That’s why we have the office and culture that we have been commended for. People are the single most important part of any business. I would have thought that someone at Musk’s level would know this.

People first

Funnily enough a reporter and friend reminded me on Friday of an interview. In it he asked me to imagine I was in a hot air balloon. We were going to crash and all perish unless one of the people was thrown out. He asked me who on the board would I cut?

Apparently I answered very quickly: “Me, it has to be me.”

The board as a unit are so complete. My job is just to ensure they are all gelling and, nowadays, they do that with consummate ease.

I do think Elon’s focus on building a sustainable future for the motor industry is fantastic. His positive, green impact on the globe will be phenomenal when he succeeds. Creating an affordable electric car is certainly going to revolutionise the motoring world, but that shouldn’t come at the cost of his own team, should it? This is the easiest way for the rest of the Tesla team to lose trust in and passion for the business.

Lets hope he reconsiders and, just like I am sure the share price will bounce back and recover the 12.5% it lost on Friday, hopefully he may find a more innovative approach and change his mind. After all, you are only as good as the team that supports you tirelessly in the background.  In the announcement Musk referred to it as a ‘difficult road ahead’ for Tesla. That road certainly won’t be made any easier without the support and passion of the team within the business.

What are your thoughts? What would you do?

 

Back to Blog

Comments