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The mistake Elon Musk made in his memo about layoffs at Tesla

Tesla CEO Elon Musk
Reuters/Brian Snyder
Did I really say that?
  • Heather Landy
By Heather Landy

Executive editor of Quartz

Published Last updated This article is more than 2 years old.

Elon Musk’s latest memo to Tesla employees wasn’t pretty—it announced a 9% reduction in the company’s workforce—but it got a lot of things right.

Musk was transparent about why the electric-car maker was cutting jobs, mainly in salaried positions:

“Tesla has grown and evolved rapidly over the past several years, which has resulted in some duplication of roles and some job functions that, while they made sense in the past, are difficult to justify today.”

And he was honest about the realities facing a company with 15 straight years of losses:

“What drives us is our mission to accelerate the world’s transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable.”

But the penultimate paragraph of Musk’s eight-paragraph memo veered into a pledge, however well-intentioned, that no CEO of a still-unprofitable startup should make. After assuring employees that the company would still hire to fill critical roles and meet production goals, Musk wrote of the job cuts:

“I also want to emphasize that we are making this hard decision now so that we never have to do this again.”

It’s clear why Musk, Tesla’s founder and CEO, felt the need to emphasize this. Layoffs are frightening. An empathetic leader might logically assume that surviving staffers need to hear that their own jobs are secure.

But this logic is based on two problematic assumptions.

Assumption 1: Tesla will never need to cut jobs again

Musk may hope that Tesla will never need to do another round of layoffs. He may even believe it (although given the auto industry’s long history of restructurings, he definitely should not). But it’s inconceivable that a company of any size, let alone one on Tesla’s hoped-for growth trajectory, would keep its org chart stagnant ad infinitum.

If employees are willing to ignore common sense, the “never again” pledge might help with retention efforts in the short term. If Musk ever finds himself needing to break this promise, however, it will likely damage the trust that Tesla’s workers put in him.

Assumption 2: Employees need to know their jobs are secure

Unless they want to be complicit in the fantasy of lifelong job security, most workers don’t actually need to be told their employment is secure.

That’s not to say good leaders should fixate on the dicey-ness of it all. Dangling the sword of Damocles over your workers’ heads might produce decent results in the short term, but this will quickly be negated by the effects of anxiety and low morale.

A better strategy would be to give employees a different kind of proposition from the get-go: not “work at our dynamic company and you’ll never have to worry about job security again, but rather “work at our dynamic company and whatever you do here will be something valuable you can take with you wherever you may go in your career.”

Patty McCord, author of the famous Netflix culture deck, described this very concept in a recent episode of The Reboot Podcast as the idea of building “a company that was a great place to be from.” She sees this as a productive alternative to building the illusion of a workplace where everyone’s job is safe, telling Reboot host Jerry Colonna, “If you think safety means job security, then not only is it demeaning, but it puts you in a constant combat zone. You have to protect yourself.”

The distractions that arise when people conflate workplace safety or success with job security—corporate fiefdoms, bureaucratic infighting—already seem to be baked into the corporate cultures of big Detroit automakers. If Tesla is so eager to disrupt the industry, it might want to switch up this recipe.

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