Elon Musk’s Leadership Gaps At Tesla Come To A Head

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This past week Tesla announced it was reducing its workforce by 10%. The move comes at a time in which the company’s stock value has plummeted, leading many to question Musk’s leadership. With few tangible plans about the company’s future as sales continued to decline, investors were concerned about a lack of vision to restore the company’s momentum.

But then the earnings call came in, and Tesla stated, “We are focused on profitable growth.” The company acknowledged pressures from EV competitors and promised to speed up the development of new vehicles.

Shares were up roughly 11% in after-hours trading.

Certainly, transportation electrification is a rising trend that has enabled Tesla, with its 100% battery electric approach, to stand out in the market for many years. The difficulty in breaking into the automotive industry for upstarts benefited Tesla, which already had established adequate financial resources, R&D expenditures, manufacturing facilities, human resources, patents, and other capital requirements.

Today’s corporate environment is more dynamic and complex than it has ever been, though, and emphases the responsibility of leaders to take control of difficult situations and guiding the team members to achieve the organizational goals.

When we first met Elon Musk and heard about the vision he was embarking on to build a sustainable future, we were convinced he held a mindset that conveyed caring about his impact on others and was willing to listen, learn, and exert the choice and character to change as situations merited it.

The vision of a sustainable future was a primary entrepreneurial narrative that mattered for an early-stage venture like Tesla, as it needed to bridge the large gap between the current state of transportation at the time and the future the company promised to create. Observers who have followed the trajectory of Tesla have documented multiple, overlapping entrepreneurial narratives that the firm has deployed to strengthen conviction in the firm’s rise to success.

The concept that positioned Tesla as a software company whose software happened to be embedded in electric vehicles was intriguing for an early adopter audience. They believed Musk held only positive intentions toward others and worked for the good of the mission and the enterprise he served. They thought he was a transformational leader who saw the opportunities in turmoil and inspired people to follow him to a better future.

That first impression has not played out. Instead, Musk has exhibited a shift from constructive to destructive leadership style. Such a destructive or dark leadership style is generally associated with personality traits such as narcissism, Machiavellianism, and psychopathy. Dark leaders may also be characterized by a lack of empathy, a lack of accountability, and a tendency to prioritize their own interests over those of their followers or the organization they lead.

A recent opinion piece in the New York Times referred to Musk as one of those “brilliant, restless builders of empires and defiers of convention who experienced the highest highs and the lowest lows of business.” The author noted that the world is “not always kind to visionaries with self-control issues.” It’s clear now that Tesla has struggled mightily in the transition from a visionary pioneer to reliable producer of cars in high volume.

Several disconcerting factors that emerge directly from Musk’s leadership style have led the company to this uncertain moment in time.

Leveraging the labor force: Business today is influenced by forces of globalization, digitization, and automation; it needs to be grounded in a resilient workforce. Managing employee productivity and performance needs to be combined with overcoming new problems, all while maintaining psychological health, positive morale, and a strong organizational culture.

Musk’s leadership style often leans toward the coercive. This isn’t the first time that Tesla resorted to layoffs to balance the books. The company laid off 24% of Tesla’s employees in 2008, explained as a mechanism to help the company survive. Again, in 2022, Musk announced that he wanted to cut 10% of Tesla’s jobs because he feared recession. While that eventuality did not play out, competition in the EV marketplace did seem to catch Musk and his board of Yes People unawares. Musk is reported to be challenging to work with because he demands full attention and acquiescence but doesn’t want the restrictions that come with leading a publicly traded company. Musk’s insatiable power-seeking and an excessive need to dominate others or even objectify them has devalued the workers we aid in the goal of reaching a sustainable future.

Shifting focus to an uncertain technological future: The Tesla CEO continues to focus on a self-driving vehicle, the Robotaxi, even though those who have test-driven with the support of Full Self Driving have various reactions. CleanTechnica’s Fritz Hasler says, “It’s better! It’s smoother and requires fewer interventions!” Fritz also described some successes and necessary improvements for FSD. CleanTechnica’s editor, Zachary Shahan, narrates videos in which he uses FSD and concludes, “In many regards, it’s amazing tech and is insanely good. However, from the perspective of this being used for robotaxis, we are far from that, in my opinion.” Cathie Wood’s Ark Invest team focused quite a bit on the Tesla brand because of its focus on autonomy. Will this truly play out?

A new model, a new EV audience: In the book, The Hazards of Great Leadership, the authors suggest that “great leadership, which accomplishes morally commendable and difficult objectives by leaders and followers, requires competence, morality, and charisma.” But the way of great leadership isn’t one dimensional. In fact, great leaders can undermine their own success and accomplishments, as well as their followers — they can become a threat to the organization in which they are employed.

Musk’s leadership is often driven by his personal interests, to the point where that focus seems to have supplanted discussions of a $25,000 electric vehicle, which would have mass audience appeal. Indeed, Tesla’s stagnation might easily be traced in part to a lack of a new model, which is commonly accepted every few years in the auto industry. Tesla seems to have heeded the headwinds, as it stated in the earning call, “We have updated our future vehicle line-up to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025.” Target dates are flexible for Tesla, but the news was still well-received by relieved fanbois.

In the meantime, Tesla is planning to send a team of people to scout for locations in India this month. The broad brush strokes of the upcoming discussions reportedly will affirm the company’s investment plans in the South Asia nation — including setting up a manufacturing facility and increasing purchases of auto parts from India to nearly $15 billion. It’s a horizontal move that has investors experiencing malaise.

An independent board? Nope. A difference between other boards and that of Tesla is that many distance themselves from the idiosyncrasies of their founders, insisting on strength and independence over loyalty to a single individual. Instead, Tesla has filed a proxy statement for its annual meeting asking shareholders to re-approve Musk’s 2018 pay package.

As a reminder, a Delaware judge ruled that the package was illegally excessive. Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery said Musk had, in essence, overseen his own compensation plan — currently worth about $50 billion — with the help of compliant board members. The proclamation reinforced criticism about the ineffective nature of Tesla’s board of directors and their disinterest or inability in reigning in their mercurial leader.