Just when you thought performance management was getting soft, along strolls Tesla hitting the headlines with its no excuses approach.
If you believe the hype, Tesla has been managing its extreme growth and aggressive goals as an old-school taskmaster.
Back in 2017, the global automotive company reportedly fired hundreds of staff with little or no warning following annual reviews. It was an unexpected move and one that left everyone wondering whether the notorious rank and yank approach would be making a comeback. Then, in 2018, Tesla announced it was planning to cut another 9% of its 46,000-person workforce, citing the "normal ebb and flow of hiring and firing in a business."
Tesla stands out amongst its tech star peers for a less cushy approach to performance management process. Here's what we know about it.
What’s going on at Tesla?
Tesla is one of those mysterious companies we’re all intrigued by.
What’s it like to work there? What do employees do all day? What do they get rated on?
Unfortunately, we can’t answer all of these questions.
Here's what we do know. The company was founded in 2003 and is currently estimated to be worth $60 billion. Led by the enigmatic (and let's face it, controversial) Elon Musk, Tesla is an organization like no other. Its business is luxury cars, but its ambitions are much higher. Under Musk's guiding hand, Tesla wants to revolutionize the entire automotive world in ways we can’t even imagine.
Explaining his master plan for Tesla, Musk writes “the overarching purpose of Tesla Motors (and the reason I am funding the company) is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy.”
The man has grand aspirations. And Musk has made it no secret that the company faces challenging production targets. (He recently apologized to a customer who was waiting for her new Tesla car by tweeting “we’ve gone from production hell to delivery logistics hell.”)
As Tesla ramps up production to hit a target of 5,000 Model 3 cars every week, its priority is 100% delivery execution. Given the goal, maybe a cutthroat performance management approach is the best way to get those results and keep customers happy? We'll let you be the judge.
A glimpse into performance management at Tesla
Like most organizations of Tesla's size and influence, its performance management system is somewhat of a mystery.
But if you know how to read between the lines, there are some interesting strands to follow. For starters, it seems that the performance management culture has changed quite dramatically over the last few years as the company has grown.
From employee development to stack ranking
Back in 2016, when Juliana Bednarski was HR Business Partner and Louis Efron was Head of Global Employee Engagement, the picture looked quite different. In a presentation for Talent Week, Bednarski and Efron outlined Tesla’s dynamic approach to leveraging the best talent.
They recognized the importance of engaged employees and their impact on customer engagement. In response, they created the Tesla360 Summary. This was essentially a staff survey that used the Maslow Hierarchy of Needs to guide performance management. The survey was a massive success and achieved an impressive 91% participation rate.
So it's strange that during the tenure of Gaby Toledano, the Chief People Officer who left late last year, Tesla appears to have embraced an entirely different approach. Details are thin, but it seems that they've gone back to using a traditional annual review to determine promotions, demotions and firings.
That's a stark switch up from their previous engagement-focused approach aimed at helping employees reach the top of the self-actualization pyramid.
Changing priorities, changing process
In an email statement submitted to Fortune, a Tesla spokesperson confirmed that performance reviews happen annually and employees meet with managers to discuss their achievements over the past 12 months.
As a result, top performers are rewarded with either compensation, equity awards or promotions. And we saw what happens to the low performers.
Not much to go on there. But it's clear that Tesla is driving hard to deliver what former employee, Spencer Gore (now CEO of Impossible Aerospace) describes as “industry-defining product on a limited budget."
And, to deliver on such a promise, Tesla needs to run a manufacturing operation that is lean and mean.
With Tesla’s formidable production goals, it might make good business sense to remedy the bottlenecks as firmly and swiftly as possible. And if that's the goal, what could be more effective than the good old rank and yank approach?
But to be fair, even the grandfather of rank and yank performance management, Jack Welch would say that this is approach is as much about employee growth as it is about assessment. And it is possible that Tesla's current performance management framework somehow marries the two. But with the layoffs still hot off the press, it may be awhile before they start opening up about their latest performance strategy.
Is Tesla’s approach good or bad?
It depends on who you ask.
If you defer to Tesla's current and former employees, some seem to accept that working for Tesla is a competitive and stressful environment. Others are less complimentary.
But for many, the prestige of having Tesla on your resume supersedes the downsides. One anonymous employee writes “having the opportunity to work for a company that is changing the world is exhilarating and rewarding.” But another reviewer warns “Tesla is a high-stress, fast-paced environment. People here work really hard and get things done. I wouldn’t say it is for everyone.”
It’s hard to say where Tesla's performance management process will go from here. For a company with such high aspirations, it’s clear that its employees hold the key to success. But how they attract and nurture that talent seems to be a moveable feast. As the new VP of People and Places, Kevin Kassekert, settles into his role, it will be interesting to watch how Tesla’s performance management evolves in the future.
Tesla is not the only organization going its own way. These days most great organizations are thinking critically about performance management and coming up with innovative new solutions. Here are a few more examples to help inspire your own strategy.
And if you're ready to take the next step, check out our guide to creating your own modern performance management process.