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John Engle
John Engle
Articles (359) 

Tesla: Treating Employees as Disposable Tools Is Not Sustainable

Attempts to deny employees well-deserved bonuses have exposed the electric car company's exploitative culture

July 11, 2019 | About:

Tesla Inc. (NASDAQ:TSLA) always seems to go into a frenzy in the last month of each quarter, accelerating deliveries, slashing prices and exhorting sales and delivery staff to dig deep and push through bottlenecks.

In an effort to galvanize its North American sales and delivery teams for the latest end-of-quarter push, Tesla promised each team member from these groups a cash bonus -- $1,200 and $550, respectively -- if they could deliver 33,000 cars in June. Sales employees have often been offered such rewards, but this was a first for delivery staff. That seemed like an insurmountable goal to most outside observers, yet the frontline employees defied the odds and delivered a whopping 95,200 vehicles in the second quarter.

Given the record-breaking delivery print, it seemed as if the special bonuses were all but guaranteed to be paid out. Alas, Tesla had other ideas.

Bait-and-switch

On July 10, Electrek’s Fred Lambert published a report that, despite the overall record deliveries, Tesla claimed that its North American numbers had fallen just shy of the 33,000 goal:

“The North American sales and delivery teams worked nonstop to achieve the goal in June and help Tesla achieve record numbers. However, two sources familiar with the matter told Electrek that Tesla said to employees that they were 200 cars short of the goal, which is less than 1%, and Tesla’s management has stopped mentioning the bonuses ...To be clear, when employees asked management about their bonuses, they are being told that they didn’t reach the goal. Another employee asked about a pro rata bonus and the company doesn’t seem open to it at the moment.”

A 200-car shortfall translates to a delivery miss of barely more than half a percentage point. Despite the herculean efforts of sales and delivery employees across the continent, Tesla evidently felt perfectly happy to simply stiff them based on what amounts to a rounding error.

Hue and cry

Tesla’s decision to bilk its sales and delivery employees out of their bonuses did not sit well with many of the company’s fans and supporters. Even Electrek, which is usually a dedicated mouthpiece for Musk and Tesla, found the decision inhumane. In his report on Tesla’s decision to skip the bonus payments, Lambert voiced open criticism of the company, a rare event indeed:

“It’s really disappointing that those employees, who already saw their compensation drop, are not getting access to the bonuses even though Tesla delivered a record quarter.”

Electrek’s article circulated extensively on social media and garnered significant attention to Tesla’s harsh decision. Evidently, someone at Tesla was listening, as the company promptly began to backpedal. According to Lambert, the company is now telling employees that they will receive their bonuses after all:

“Employees are now being told they'll get their bonuses! If you think they don't deserve them after hitting 99% of this extremely ambitious goal, getting a compensation cut earlier this year, and working like maniacs, there's something wrong with you.”

Verdict

Tesla has made a habit of demanding the moon from its employees and offering little in return. It has been able to leverage employees’ genuine dedication to the mission of accelerating the advent of a sustainable world to both galvanize harder work, and get around having to actually pay them for the work they do.

Treating employees as disposable pawns is anything but sustainable, both from the perspective of employee morale and performance, and from public goodwill and support. This is a lesson Tesla may end up learning the hard way.

Disclosure: Author is short Tesla.

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About the author:

John Engle
John Engle is president of Almington Capital - Merchant Bankers. John specializes in value and special situation strategies. He holds a bachelor's degree in economics from Trinity College Dublin and an MBA from the University of Oxford.

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