As the Wall Street
Journal and other news media reported recently, Tesla’s 46-year-old founder
Elon Musk is waging a war on middle managers. In a memo to employees, he has
vowed to flatten the management hierarchy in an effort to improve
communication. As he put it in his memo, “… people
are forced to talk to their manager, who talks to their manager, who talks to
the manager in the other dept, who talks to someone on his team. Then the info
has to flow back the other way again. This is incredibly dumb. Any manager who
allows this to happen, let alone encourages it, will soon find themselves
working at another company. No kidding.”
Removing layers of management became fashionable in the
80s (famously at GE) and lately, with many companies looking at start-ups as
their management models, this has become a popular topic once again. In fact,
as Neilson and Wulf (2012) have pointed out, executives’ span of control has
been increasing – from an average of 4.7 in the eighties to 9.8 in the past ten
years. This is borne out by my own experience; one division head I work with
has over 15 direct reports (not uncommon in her industry). And it is certainly
not surprising that Musk, a very hands-on entrepreneur, would embrace this practice
since it gets him even more involved with all aspects of the business. It’s his
company and he alone can solve its problems!
But is this structural solution a key answer to what is
ailing Tesla, a company that has been confronted with production delays and
quality issues although its brand image continues to be solid? Removing middle
managers, while it may save some costs and improve communication in the short run,
has some unintended negative consequences. Google found this out a few years
ago when it questioned the value of middle managers and removed some layers.
But after a careful study of what made for effective managers, the company
decided that middle managers added value after all, provided that they had the
right skill sets. Google’s own research has identified the eight things that
good managers do, and the company is using this framework to select and develop
its managers. What are these eight behaviors? No surprises here; good managers:
are good coaches, empower their team and do not micromanage; express interest in
and concern for team members’ success and personal well-being; are productive
and results-oriented; are good communicators; help with career development;
have a clear vision and strategy for their team; and have key technical skills
that help them advise their team.
Neilson and Wulf’s research also found that flattening
layers ironically enough has centralized decision-making even further. Imagine
this happening at Tesla, where Musk (who is already reported to be sleeping on
the factory floor many nights) now becomes the central point for all
decision-making. And Tesla is only his day job, since he is also CEO of SpaceX!
I don’t have first-hand knowledge of what is going on at
Tesla to recommend what its organizational solutions should be but, in my
experience, changing the structure alone is seldom sufficient in adequately
addressing a company’s issues. If there is a pattern of bureaucracy and lack of
sharing information at Tesla, then good management practice suggests creating
cross-functional teams and empowering them so they can decide and act quickly.
In addition, I would make sure Tesla has the right managers with the right
skill sets in place. Having a strong bench of such leaders will also help the
company build for the future. In the long run (or even in the medium term),
these will be more effective solutions than getting rid of all those manager
positions.
Neilson, G. and Wulf, J.
(April 2012). How Many Direct Reports? Harvard
Business Review.
