This paper examines Tesla's high executive employee turnover rate as a key business challenge, approached from the perspective of an HR Partner. Using the 5 Ws problem-framing framework, the analysis identifies the Board of Directors' concern over the disproportionately high turnover among executives who report directly to CEO Elon Musk — reported at 44% compared to a 9% cohort average. The paper identifies and evaluates three data sources — overall executive turnover rate, industry average turnover, and cost of turnover — weighing the pros and cons of each. It also addresses internal and external benchmarking strategies and acknowledges the limits of available data, concluding that a multi-source data approach is essential for effectively resolving the problem.
Tesla is considered by many to be one of the most innovative companies today. The company is headed by Elon Musk — its CEO — and is presently headquartered in Palo Alto, CA. It operates in the automotive industry and is one of the pioneers in electric vehicle manufacture. Its key competitors include, but are not limited to, Nikola Corp., Ford Motor Co., General Motors Co., and Li Auto Inc. This paper seeks to assess and evaluate one of the key business challenges that the company currently faces, approached from the perspective of an HR Partner.
Like many businesses, Tesla faces a wide range of business challenges. Three of the most prominent are highlighted below.
Competition from established automakers: This is one of the most significant business challenges Tesla faces today. Although the company had little competition when it was starting out as a small electric vehicle manufacturer, big players in the industry have come to terms with the fact that electric vehicles are the future — especially given the push by environmental conservation groups and scientists to reduce CO₂ emissions. Traditional players in the automotive industry who have entered the electric vehicle market could give Tesla a run for its money, given the extensive global networks and industry experience they have accumulated over time.
Attracting top talent: According to Tillemann (2016), it has historically been challenging to find skilled and competent employees in certain high-demand fields. In the words of the author, "in high-demand fields like engineering, software development, and nursing, employers are fighting to find people with the specialized skills and qualifications necessary to perform the job at hand" (Tillemann, 2016, p. 216). This is a challenge that Tesla faces owing to the technical skills required to develop feature-laden electric motor vehicles. As the company continues exploring opportunities for global expansion, it also needs to find and hire a diverse pool of employees — something that is especially important in promoting cultural competence.
High employee turnover: This is another significant challenge that Tesla grapples with today. Employee turnover can be conceptualized as "the loss of talent in the workforce over time" (Sims and Bias, 2019, p. 95). Tesla's employee turnover rate appears to be significantly higher than that of its peers in the industry — especially at the executive level. In one recent assessment of the company's executive-level turnover rate, specifically among executives who report directly to the CEO, it was found that compared to a cohort average, Tesla had a turnover rate of 44%, while the cohort average was only 9% (Assis, 2019). The high executive turnover rate is the specific problem this paper addresses.
The problem of high employee turnover is largely concentrated at the executive level and has drawn the attention of the company's top leadership. Matousek (2019) indicates that various data sources — including analyst reports, executive profiles, and executive departure reports — show that executives who report directly to Tesla's CEO are more likely to quit than their counterparts at peer companies. This pattern has been attributed to the leadership style and personality of Elon Musk. As Matousek (2019) notes, "reports from Business Insider and other publications have described Musk as an intelligent but demanding and temperamental boss."
Over the last decade, the company has lost key executives who reported to the CEO, including the head of global security, general counsel, and the chief accounting officer (Matousek, 2019). Such a high turnover of key executives could have a significantly negative impact on Tesla, given that it operates in a highly competitive industry where experienced leadership is a critical asset.
In developing a concise problem statement, the 5 Ws framework was applied. This framework has been highlighted by Waters, Streets, McFarlane, and Johnson-Murray (2018) as a useful tool in HR data evaluation. The 5 Ws are as follows:
Who: The company's Board of Directors, led by its chairwoman, Robyn Denholm.
What: High employee turnover.
When: Over the last 10 years.
Where: At the executive level.
Why: If the issue remains unaddressed, Tesla could gradually lose its ability to compete effectively in the electric vehicle marketplace.
Problem Statement: The Board of Directors, led by chairwoman Robyn Denholm, is concerned about the high executive employee turnover over the last decade — specifically among employees who report directly to the company's CEO. The loss of crucial talent affects the company's ability to compete effectively in the electric vehicle marketplace, as the departure of well-trained and highly skilled executives could negatively affect the company's bottom line if the problem remains unresolved.
Three primary data sources were identified as relevant to addressing this challenge. Each is presented below along with an evaluation of its respective advantages and limitations.
Overall turnover rate at the executive level: The relevant metrics include the number of executives (reporting to the CEO) who left and the average number of executives reporting to the CEO over the ten-year period — calculated by adding the number at the beginning of the period to the number at the end, then dividing by two.
Pros: The relevant data is relatively easy to obtain and would help determine how effectively Tesla is retaining its top executives.
Cons: This metric does not capture company-wide employee turnover, and it would not be meaningful in isolation — there would be a need to compare it against turnover rates at similar companies.
Automotive industry average executive turnover rate: This metric would be derived by calculating the turnover rates at the executive level for Tesla's five main competitors and dividing the sum by five.
"Three data sources with pros and cons evaluated"
"Benchmarking strategy and missing data needs"
Sims, R. R., & Bias, S. K. (2019). Human resources management issues, challenges and trends. IAP.
Tillemann, L. (2016). The great race: The global quest for the car of the future. Simon and Schuster.
Waters, S. D., Streets, V. N., McFarlane, L., & Johnson-Murray, R. (2018). The practical guide to HR analytics. SHRM.
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