Lessons learned from Tesla’s 10% job-cut plan

Leading electric vehicle manufacturer Tesla has seen a great deal of success in recent years. In fact, the company has more than 100,000 employees worldwide, and until very recently had plans to hire an additional 5,000 members of staff.

On Thursday, Elon Musk, the CEO of the company sent an internal message, recovered by Reuters, that said to “pause all hiring worldwide”.

According to Musk, the sudden change was because of a “super bad feeling” about the economy. In the email seen by Reuters, Musk said: “Note, this does not apply to anyone actually building cars, battery packs or installing solar.”

Additional messages have now clarified the reasoning behind the decision, but the sudden pivot has not been well-received. The CEO wrote on Twitter that in the next 12 months: “Total headcount will increase, but salaried should be fairly flat.”

The message was sent just days after Musk told his workforce to return to the office or look for work elsewhere.

Safe to say, the messaging from the Tesla CEO hasn’t been clear. However, there is plenty to learn from the twists and turns of the last few days.

Managing employees in uncertain times

In terms of the economic factors that Musk is referring to in his messages, there is some mystery.

While sales of Tesla products remain strong, it has had problems restarting production at its Shanghai factory. The attempts to restart production come after COVID-19 lockdowns led to expensive work stoppages.

Musk’s email also came on the same day that Coinbase announced a hiring freeze and rescinded accepted job offers. Given that Musk has close ties to cryptocurrency some may be concerned about whether the blockchain market is a factor in Tesla’s talent strategy.

Adam Jonas, an analyst at Morgan Stanley, said: “Elon Musk has a uniquely informed insight into the global economy. We believe that a message from him would carry high credibility.”

With this statement in mind, employees will be concerned about job security, and where the dangers in the economy are.

Although not many CEOs carry the weight of Musk, many will want to avoid the confusion that was sparked by his messages. Particularly, as it led to Tesla shares falling 9% on Friday.

It is essential for leaders to communicate clearly and give the reasoning for their decisions. Otherwise, staff will turn to new companies and roles rather than facing the uncertainty that could impact their lives.

In a time when the ‘Great Resignation‘ has seen millions leave the workforce, committing to “fairly flat salaries” and hiring pauses without a reason will unsettle the workforce. The backlash was seen online as many called out Musk’s practices.

I don't get it.

Elon Musk is supposedly flush with enough cash to stupidly buy Twitter for $43B, but he's decided to layoff 10% of Tesla employees?

What a sick, twisted egomaniac.

— BrooklynDad_Defiant!☮️ (@mmpadellan) June 3, 2022

While Elon Musk lays off 10 percent of Tesla employees, he's set to take home $23 billion bonus. Yes, $23 billion.

The economy is somehow always great for billionaires, bad for workers.

— Robert Reich (@RBReich) June 5, 2022

On the back of this incident, every leader should realize that transparency is key to keeping staff happy. Particularly, if tough decisions have to be made.

Otherwise, your company could lose its value, and importantly its staff.