Elon Musk is not an example for CEOs to follow, some experts say

  • Marc Benioff told Insider that more leaders should consider Elon Musk’s playbook.
  • Since taking Twitter private, Musk has more than halved his staff and spoken publicly about them.
  • Insider spoke with five experts who said it was the wrong strategy that could have consequences.

Salesforce CEO Marc Benioff says more executives should ask themselves if it’s time to “unleash their own Elon within” when it comes to layoffs and a ruthless management stylebut some experts say that’s exactly the wrong way to run a business.

Scott Latham, a professor of strategic management at the University of Massachusetts Lowell, called Musk’s leadership “incredibly dysfunctional.” Latham has studied tech layoffs since the start of the internet boom. He said he’s never seen a company recover from the type of drastic cuts Musk initiated on Twitter.

Since Musk bought Twitter in October, he’s been more than halved its workforce, cut many benefitss, called on employees to work “extremely hard core” hours, set fast turnaround times for projects, and on several occasions stack classified personnel. As well as downsizing, it’s a strategy similar to one the billionaire has employed at Tesla and SpaceX – where he’s known for ambitious production targets.

Benioff said the tech world is paying attention. “Every CEO in Silicon Valley has looked at what Elon Musk has done and thought, ‘Do they have to unleash their own Elon inside of them?'” Benioff said. during an interview with Insider on Thursday. “You have to look at him and say, ‘Wow, that’s a very unorthodox management style,’ but, like I said, you can’t underestimate what he’s done.”

Benioff isn’t alone in saying more executives could emulate Musk — or at least part of him. Last year, tech investor David Friedberg said Twitter layoffs had set a new standard for the industry and show that more companies need to “cut deep”.

“Who would want to work for a company like this? »

Still, “it’s a terrible strategy,” Northwestern University leadership professor Harry Kraemer told Insider. “Who would want to work for a company like this? If you want to have a successful business, you need good employees and good employees usually have options. They won’t work for a company that treats them like garbage.”

Layoffs can increase a company’s balance sheet in the short term, but they can have long-term consequences. Some studies show remaining employees may suffer lower performance and higher turnover rates due to a phenomenon known as “survivor’s guilt” said Julie Palmer, professor of management at Webster University.

Cuts can also damage reputation, making it harder to hire employees in the future and contributing to higher costs as the company seeks to expand, said Ayelet Fishbach, a management professor at the University. from Chicago.

“Layoffs are a crapshoot,” Latham said. “You take a blunt instrument and hope you cut the right people. You risk losing good employees to competitors – and those who are left behind, the first thing they will do is open their CVs .”

Twitter is one of many companies to launch a series of layoffs in recent months in the middle signs of an economic downturn and one hiring boom correction during the pandemic.

Sometimes downsizing is inevitable — Musk said Twitter is headed for possible bankruptcy if it doesn’t cut costs — but experts say there’s a right way and a wrong way to go about it. Namely, leaders need to make sure they don’t cut so far that they’re forced to spend more money rehiring and training new employees.

They must also treat employees with compassion and show that layoffs were a last resort, experts said.

“A Very Dark Future”

“If you’re an effective leader, you realize that your employees aren’t just human capital. You’re taking care of people’s entire lives — their family’s lives,” Kraemer said. “The reason someone is ruthless is that they were a bad leader to begin with. If you managed properly, you wouldn’t have to be so ruthless.”

Salesforce appears to have already removed at least part of a page from Musk’s playbook. The company announced in January that it was cut about 10% of its 84,000 employees and the closure of some offices. Insider also viewed a business plan draftcalling on employees to “run lean and mean” and not let company culture get in the way of what needs to be done.

But some human capital experts couldn’t disagree more with that sentiment.

“Sometimes culture is the only benefit of a company,” said Fishbach, a professor at the University of Chicago. “Anyone can mimic a business strategy, but the culture is much harder to replicate. If your business isn’t a place people want to work, it won’t be very productive or successful.”

Of course, not everyone buys into the idea that the way Musk runs a business is problematic. For better or worse, Musk has become something of a “beacon” for executives struggling to reorganize their workforces, said Tamara Holder, a workplace discrimination lawyer who has acted as an adviser to ‘business.

“It has the potential to create a toxic workplace,” Holder said. “But at the same time, what CEOs are doing by downsizing is kind of inevitable,” she said. “There’s a lot of fat that needs to be cut in tech and in Silicon Valley. Elon has shown he can be ruthless and companies are following his lead.”

Anat Alon-Beck, professor of corporate law and governance at Case Western Reserve University, said companies shouldn’t follow Musk’s slash-and-burn playbook. “If more companies start treating their employees like Musk did, that would be a very bleak future,” Alon-Beck said. “But I don’t think it’s going to fly. They’re going to pay for it. The next generation of workers – Gen-Z – they won’t tolerate it.”

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