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John Engle
John Engle
Articles (345) 

Tesla: The Dark Side of a Mission-Based Company Culture

Employees are being treated as disposable pawns in service of a higher corporate cause

July 12, 2019 | About:

When Tesla Inc. (NASDAQ:TSLA) talks about itself, it often sounds more like a cause than a company. This unusual sentiment is reflected in its official mission statement:

"Tesla's mission is to accelerate the world's transition to sustainable energy."

While most companies usually only pay lip-service to their purpose statements, Tesla has made its mission a core part of its brand. This is clearly reflected in the statements and attitudes of the electric car company’s many devoted fans and consumers. It has also proven to be a powerful tool for recruitment, as well as a means of getting employees to go above and beyond.

But there is a dark side to a sense of overriding mission: It exposes those who are true believers to manipulation. In the first part of this study into Tesla’s dysfunctional corporate culture, we discussed the latest manifestation of that dark side. While an instructive case in itself, that was merely the tip of the proverbial iceberg.

Putting the mission first

Many people are willing to make sacrifices for the sake of a worthy cause, a fact of which Tesla is well aware. The company has used it to encourage workers to push themselves harder and accept less pay.

As one current sales team member told Jalopnik’s Ryan Felton, many employees are pushed by managers to do extra work for the sake of Tesla’s grand mission:

“Whenever Tesla asks you to do overtime or do part of the job that’s really not in your job description, your manager would tell you to do it for the mission.”

Despite their already considerable burden, Tesla’s sales and delivery employees have often found themselves doing a lot more than their job descriptions entail. Yet, for all that extra - largely thankless - labor, many have remained devotees of the company and the mission to which they believe they are contributing.

Rallying the troops

Harkening to “the mission” in order to squeeze more out of employees is not merely a tactic of some overzealous managers; it is a strategy that permeates Tesla’s entire corporate culture. Indeed, CEO Elon Musk has often used it to rally the troops, especially in the final weeks of a quarter, in order to hit delivery targets. In June, Musk exhorted all employees to push harder in an effort to set a new deliveries record for the quarter:

“As you may have noticed, there is a lot of speculation regarding our vehicle deliveries this quarter. The reality is that we are on track to set an all-time record, but it will be very close. However, if we go all out, we can definitely do it!”

Ultimately, Tesla defied analysts’ expectations in the second quarter, reporting 95,200 deliveries, an all-time record. One might be tempted to call this a vindication of the company’s mission-leveraging strategy. It clearly worked insofar as the delivery print defied expectations. But that would be a faulty conclusion, provided one considers the long-term consequences.

The price of callousness

Tesla’s callous approach to its employees was on full display this week. As we discussed in the first part of this study, Tesla intended to leave its employees completely empty-handed, with no prospect of even a partial payment of promised bonuses, despite their having come within 99.4% of their aggressive delivery target.

The company's brand identity is built around the concept it is on the side of the angels, helping to carry humanity into a brighter future. That brand is tarnished when the company acts in such a grubby manner toward its employees.

PR own-goal

It appears Tesla realized that its decision to deny bonuses to its frontline staff was a public relations own-goal, given its rapid decision to backpedal on the bonus issue, but the damage has already been done to a large extent. Tesla’s employees know they are only getting their bonuses because the company has been publicly shamed into paying up, while outside observers have been exposed to an obviously predatory internal culture.

Neither fact will likely sway a true believer from continuing to fight for the mission, but these sorts of antics are not conducive to Tesla’s prospects going forward. Alienating dedicated employees and adoring fans alike is not a great way of doing business or expanding one’s footprint.

Thus, while the decision to deny some bonuses might seem trivial to a casual observer of the stock, it is anything but. Indeed, Tesla has threatened its own future by undermining the story that underpins both its appeal and its valuation.

Verdict

A brand - and a share price - that relies more on narratives than fundamentals risks losing everything if people stop believing its carefully crafted story. The Tesla narrative is premised on a belief in the company’s technological and moral leadership.

Tesla's stock trades at a rich multiple radically in excess of other automakers because it is seen as “a different kind of car company.” Losing that gloss of moral certitude could be devastating to the stock.

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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