Tesla HR

Introduction In this report I will be making a critical analysis of Tesla, Inc’s approach to people management and applying relevant concepts/theories to the observations. Tesla, Inc is an automotive and energy company that not only builds all-electric vehicles but also infinitely scalable clean energy generation and storage products. Their mission is to accelerate the world’s transition to sustainable energy and believes that the world needs to stop relying on fossil fuels and move towards a zero-emission future (Tesla.com, n.d.). The role of employees within Tesla has a big effect on the performance of the business, a greater appreciation of workers results to improved performance whilst overriding the interest of the employees could cause problems. This conflict will be discussed in the next few sections. Strategic Human Resource Management Strategic human resource management focuses on the importance of human resources and closely align people with the business’s long-term strategic goals and objectives in order to optimise an organisations performance and develop organisational culture that foster innovation, flexibility and competitive advantage (Rees and Smith, 2017). Elon Musk uses a transformational leadership style (Blazek, 2016), which is used to create a positive change in the employees by enhancing motivation and performance of workers to innovate and create change through a variety of mechanisms (Odumeru and Ogbonna, 2013). According to the previous HR manger Elon Musk has the ability to make people believe his vision (Blazek, 2016), which is to make Tesla a more productive and innovative company. This can be identified through Tesla’s recruitment and selection process in which they select “talented individuals” that share Tesla’s passion to change the world. HR strategy has been conceived in terms of generating specific employee behaviours. According to Schuler and Jackson (1987), in order to fulfil a business strategy, HR policies and practices need to be identified to achieve one of the competitive strategies: innovation, enhancing quality, and cost reduction (Porter, 1980). Tesla’s strategy mainly focuses on battery technology that will allow them to produce high volumes and low-cost electric cars with no fumes, noise, or dirt (Akakpo et al., 2018). From this, it can be suggested that Tesla pursue both innovation and cost reduction of Porter’s competitive strategies - which is demonstrated through their HR practices. Tesla allows workers to use their individual initiative to search for new ideas to differentiate the business from other competitors in the automotive industry (Akakpo et al., 2018). For example, through Tesla’s organisational culture, employee capabilities are maintained and channelled to the strategic effectiveness and success of the business (Meyer, 2019). This open innovation approach enables the company to combine ideas derived from employees to design innovative vehicles. This has shoot Tesla to the top of FORBES’ World’s Most Innovative Companies list. Incorporating employees in the decision-making process of designs and car models is a feature on innovation because it empowers and motivates employees to be more passionate, innovative and more involved in their work. However, pursuing a competitive strategy of innovation comes with problems as the business would face constant and unpredictable change, meaning HR policies would have to be constantly adjusted to meet the organisation’s needs. This would be challenging for and costly for Tesla as they have to come up with ways of training leaders and managers who will 3 embrace and promote the company’s vision and long-term goals (Aggeri, Elmquist & Pohl, 2009). Although Tesla allows workers to participate in the decision-making process of designs and car models, the innovation process in not easy. Tesla employees work harder than anyone else, with Musk asking already overworked employees to pull over time before the launch of the original Tesla Roadster, an employee said, “But we haven’t seen our family in weeks.” Musk’s response: “You will have plenty of time to see your family when we go bankrupt” (Dyer and Gregersen, 2015). As a result of this workers can feel demotivated and reduce work morale. This is a problem with SHRM as it does not take into consideration of employees interests and sees them as an asset to the business. Talent Management Talent management is the process used by employer in attempt to attract, identify, develop, engage and retain individuals who are of value to the company and can fulfil the businesscritical roles (Sage.com, n.d.) in order to increase efficiency of operations. Tesla’s intense and thorough recruitment process is vital to their talent strategy. According to an ex Tesla recruiter, Musk is “really obsessed with hiring world class talent” and “pressure was on in recruiting” (Cain, 2017). The company hires talented individuals that meets their business goals and share their passion to change the world, this is looked at through the followings: (i) Recruitment and Selection Recruitment are the practices and activities carried on by the organisation with the primary purpose of identifying and attracting potential employees. In a lot of cases a person is attracted to the company rather than a job as said when they said that “An employer brand is a set of attributes and qualities- often intangible” (CIPD, 2019). In the case of Tesla, the company is able to attract talent through their focused mission and cohesive core company values. The company provides a safe working environment, as well as that they work hard to create a diverse and inclusive workforce composed of talented individuals because Musk believes differences is what makes the company stronger and smarter. For example, Tesla has received a score of 100/100 on the Corporate Equality Index for 5 years in a row and has been named in the “Best Places to Work for LGBTQ Equality” from the Human Rights Campaign (Tesla.com, 2018). Moreover, it is clear that Tesla wants to project to its potential employees. This can be seen by the way they publish their success and demonstrate that they are a company to work for if you want to be working in edge technology. Tesla are looking to employ talented young individuals who have a lot of potential, this can be seen through their style of marketing and their recruitment process as they have created adverts that appeal to younger people with online postings and required skills that suit a younger audience. As well as that they encourage students or new graduates with an interest in electric vehicles to apply to their intern/co-op or new grad positions. The company receives nearly 500,000 applications for just 2,500 open positions meaning that the acceptance rate is just at 0.5%, making it hard to land a job at Tesla (Hess, 2018). The company conducts an intense hiring procedure to select the best employees for the company, candidates go through interview process with staff and hiring managers where the interviewees are faced with complicated questions and great pressure. The final stage is to 4 impress the CEO, Elon Musk, whether it is in person, over the phone or in a written essay written on why they want to work at Tesla, and they should be hired. After all this, the recruitment team will decide on which candidate would fit into Tesla as an organisation (Cain, 2017). Although their external recruitment brings new fresh talent to the company, problems can arise through their e-recruitment as posting jobs online brings an overwhelming amount of applications and not every applicant may be qualified for the role or resumes may not express the real value of candidate, as a result the selection process becomes a lot harder and talented, qualified individuals fit for the job may go unnoticed (Manju, 2017). Furthermore, another problem with Tesla’s recruitment process is that interviews does not actually show whether the candidates for the job are genuine. Tesla can confirm validity and reliability of candidates by making candidates go through a trial period at the end to test their abilities to complete a particular role and to make sure that what they have demonstrated in the interviews is the truth and they are the perfect fit for the job (Lunenburg, 2010). (ii) Performance Management Performance management describes the arrangements that employers use to maintain and improve the performance of their workforce so that the organisation achieves its goals (Beardwell and Thompson, 2017). Due to Tesla’s innovative strategy, they require high employee performance, in order to improve the performance of their workforce there are a number of HR measures put into place to encourage high performance so that the organisation achieves its goals. One of which is to engage its employees, Louis Efron and Juliana Bednarski of Tesla recognise the importance of employee engagement and incorporating it into Tesla’s core business strategy in order to boost performance. Tesla has found that engaged teams have 15% more profitability, 30% more productivity and 37% less absenteeism (Everwise, 2015). In order to have engaged employees the business needs to have an effective recruitment. Managers should be careful in pooling out potential talent, new hired employees should meet Tesla’s values in order for them to develop realistic job expectations and reduce conflict that may arise in the future (Markos and Sridevi, 2010). Although Tesla tried a different approach, they seemed to have gone back to their old approach using traditional annual review to determine promotions, demotions and firings. Performance reviews happen annually, and employees meet managers to discuss their performance over the 12 months (Courtney, 2019). Based on this, top performers are rewards with either compensation, equity awards or promotions. This method could cause potential problems as it creates a stressful and competitive environment at Tesla. The company back in 2017 lay off hundreds of workers after their performance review (Korosec, 2017), going against what Elon Musk wants to achieve which is making them feel part of a larger team. (iii) Reward management In order to retain the best talents Tesla makes use of strategic reward, which aims to improve employee performance, loyalty, and assisting in achieving business goals, and inducing them to be retained long term in the organisation. There are different ways to classify rewards. Tesla’s reward strategy mainly involves extrinsic rewards, such as base pay for example a Mechanical Engineer can expect to earn 5 around $87,737 as a base salary (Payscale.com, n.d.), this is excluding equity and benefits factored in. On top of this the company believes that it is important for everyone to be an owner of the company, therefore, unlike other companies everyone who works at Tesla is awarded shares of Tesla stock and can buy additional Tesla stock (Tesla.com, 2018). This could help with recruiting new talent and to retain valuable employees. However, there are also some non-financial rewards that add value to the total reward, for example, the business offers health insurance to eligible employees, including free high-deductible health-insurance plans (Glassdoor.co.uk, 2014). According to Herzberg’s et al. (1959) two-factor theory model, Tesla’s reward management only prevents dissatisfaction through their hygiene factors. Hygiene factors prevent dissatisfaction and are there to fulfil the psychological needs of individuals such as salary and good working conditions, these do not lead to positive satisfaction over the long run. Although, extrinsic rewards do help motivate workers, there needs to also be a good balance of intrinsic rewards which Tesla is lacking. Motivational factors yield positive satisfaction and motivate employees for better performance (examples include recognition and responsibility). It has been reported that the assessment of a team’s performance is highly dependent on Elon Musk’s opinions. He has previously been known to disregard employee’s efforts simply because he changed his mind about a product (Eadicicco, 2015), this can demotivate employees as they do not feel valued enough. Conclusion Tesla is an innovative company and within a growing market, there is great pressure on employees to constantly innovate, although there are benefits to innovation it puts strain on human resources. The main problem is Elon Musk’s involvement in the decision-making process and his “unrealistic stretch targets without a realistic plan in order to achieve them” (Matousek, 2019). Based on this issue, I propose two recommendations for Tesla. The first is to make the work more varied and implement more motivational rewards to motivate them during the long hours. The company claims to have a strong relationship with their employees but from the employee reviews on Glassdoor.co.uk (2019), employees have expressed that the “managers do not care about them”, and the long hours are “mentally and physically exhausting”. It is important that employees are under good management, as poor management can have harmful effects such as loss of productivity to losing employees. The second is to appreciate employees more, although Tesla has a main focus on employees this is not shown through their management for example, the constant restructuring and change means there’s lower job security. Musk announced the automaker is laying off 7 percent of its full-time work force, more than 3,000 people (Stewart, 2019). This causes stress and negative emotions within the workforce which could have an impact on job performance. The business should not open positions with the intentions of laying them off months later, this could create a deceitful image for Tesla. By sticking to HR practices not only will the company benefit but also the employees who are the main importance in HR. 6