James Hyndman

3 leadership lessons from Tesla’s terrible third quarter


 

Lawsuits, fines, Instagram stories and narcotics jokes on Twitter. Tesla’s Q3 2018 has been in the news for almost everything but the company’s cars. CEO Elon Musk’s behaviour has been erratic, to say the least, and it has had a resounding impact on the company as a whole.

But with every mistake, there is a lesson to be learned – so what does Elon Musk’s controversial quarter have to teach other business leaders?

1) Your organisation is no joke

On September 29, the Securities and Exchange Commission (SEC) settled with Elon Musk on a securities fraud charge. This follows a tweet Musk made on August 7, in which he announced that he would take Tesla private at the price of $420 per share – a number that implicitly refers to the use of marijuana. The meaning was certainly not lost on Musk, who even more recently made an appearance on the Joe Rogan show, smoking the drug.

Beyond the juvenile nature of the joke, the SEC found that Musk made the statement without consultation with any financing partners, and that the tweet resulted in “significant market disruption” – not to mention a 6 per cent jump in Tesla’s stock price. The result of the SEC settlement? A $40 million fine between Musk and Tesla, to be given to investors.

2) Your decisions affect others’ livelihood

Tesla has a revolving door of senior executives, so much so that Business Insider has begun a running tally. But Q3 saw these numbers spike, with no fewer than five executives moving on from the company. This included their Chief People Officer, Vice President of Communications and Senior Director of Production and Quality.

These departures didn’t just come amid Musk’s tweets about taking Tesla private. The CEO is known to debate individuals on Twitter, and was also in the news during Q3 due to allegations about one of the Thai cave rescuers. Bloomberg reported that during her time at Tesla, former Chief People Officer Gaby Toledano would regularly check Twitter just to ensure Musk’s tweets were on message.

As a leader, the consequences of your public actions aren’t just yours – they are for the entire executive to face. Sometimes, staying silent can protect your most important staff.

3) Standing down can be a good thing

One of the SEC’s key settlement requirements was that Musk stands down as Chairman of Tesla, and be ineligible for the post over the next three years. Further to this, the company must implement independent directors and oversight for all of Musk’s actions.

While this is strict, it also bodes well for the future of the company. Tesla’s production continues to break its own records, and investment companies continue to up their allocation in the business. But strong performance doesn’t make for strong leadership – every executive should consider Tesla’s last quarter a cautionary tale.