Solutions to Tesla's Scandals and Business Model Analysis

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28th Feb 2020 Report Reference this

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Introduction

Tesla is one of the most innovative companies of the world (Forbes.com, 2018). It has 45,000 employees worldwide and its record of promising the impossible is matched by a track record of delivering the wildly improbable. Whether its creating the safest car ever tested by NHTSA (Tesla.com, 2018), using an unconventional structure for its assembly line (Financial Times, 2018), or creating self-driving software (Tesla.com, 2018), it is boldly going where no company has gone before every step of the way. However, recent allegations show that the company is operating on the back of an aggressive business model that is shrouding in unethical behaviour towards its workers (Wong, 2018 and U.S., 2018) The Guardian published an investigation into the Tesla's factory, where some workers alleged that ambitious production goals set by CEO Elon Musk have resulted in unsafe conditions and avoidable injuries. They stated that the hard, manual labour that 5,000-plus workers put in to make Tesla successful is done at great risk to their bodies. In fact, Tesla's total incident rate was 15% higher than the industry average in 2014 and 31% higher than the industry average in 2015. Workers believed more injuries occurred because the company does not take worker safety seriously, with some managers belittling their complaints and pressuring them to work through pain (Wong, 2018). These scandals on the company's bruising workplace have tainted its public image and negatively influenced its relationships with stakeholders (Ferris, 2018). This situation should spark an internal debate on its corporate culture. The growing concern for Corporate Social Responsibility asks more than just profit out of companies: responsible behaviours and accountability are non-negligible aspects of business and careful management is required to maintain a firm's brand image. Yes, companies exist primarily to create a product or service, which is used to generate profit. However, that intention must be balanced with controls that ensure a company pursues profit without crossing over the line into the realms of unethical behaviour. Business ethics is about the examination of the ethical problems that can arise in the business environment and solving them by doing the right thing (Business Ethics, 2008). The company must learn from its mistakes and focus on re-building its internal relationships and culture. I am committed to help Tesla change for the better, and I will start doing it by addressing the main issues the company is facing. I will then present the actions that we must undertake in order to solve them and move towards Tesla's vision in the best way possible.

Problems

1) Injuries on the workplace

Ambulances have been called more than 100 times since 2014 for workers experiencing fainting spells, dizziness, seizures, abnormal breathing and chest pains, according to incident reports (Wong, 2018). Furthermore, workers told of a culture of long hours-12 to 16-hour shifts-under intense pressure, sometimes through pain and complained that machinery is often not ergonomically compatible with their bodies, causing injuries to happen often (Bizjournals.com, 2018). I think the new board would agree that the plant doesn't function as well as it could. The company struggled to ramp up the production of the Model 3 (Bloomberg.com, 2018) that is key to the company achieving long-term profitability, but it can't let workers pay for it. As highlighted by Freeman in 1984, all stakeholders must be included when creating value, especially if Tesla's projection that the company will make 500,000 cars in 2018 (Nytimes.com, 2018) (a 495% increase from 2016) relies mainly on workers sweat and muscles. Tesla is working hard to build the world's #1 car — not just electric, but overall. However, I feel like this is a company of the future under working conditions of the past. Corporations cannot achieve long-term success and sustainable growth in the absence of motivated, safe, healthy, and effective workers (Essay UK Free Essay Database, 2018). Workplace injuries and illnesses caused by working conditions or environment can also lead to lawsuits, high costs, and deterioration of the corporate image (Hrymak, Victor & Perezgonzalez, Jose, 2018). Regarding the work schedules, research shows that "working in jobs with overtime schedules is associated with a 61% higher injury hazard rate compared to jobs without overtime. Working at least 12 hours per day is associated with a 37% increased hazard rate and working at least 60 hours per week was associated with a 23% increased hazard rate. A strong dose-response effect was observed, with the injury rate increasing in correspondence to the number of hours per day (or per week) in the workers' customary schedule" (Dembe, 2005). In my opinion, this unpleasant situation happened because of the false conception that welcoming workers requests would have slowed down the production process. This is not a decision made by malice, but ignorance. Research clearly shows that injuries, poor morale, high turnover, and other issues aren't just bad for workers — they also impact the quality and speed of production (Hesapro, 2013). Economics and ethics are not two distinct forms of discourse in describing management and corporate practices. Thinking them as separate, forces false dilemmas, creating the illusion that doing well and doing good are often incompatible (Freeman, 1994). The old board did not have to decide between profitability and workers health, because both can be pursued at the same time.

2) Bad Management

Michael Sanchez, a Tesla worker, alleged that when he told managers about his pain, they responded: "We all hurt. You can't man up?" (Wong, 2018). Ochoa, another Tesla worker who is currently on a medical leave with an injury, alleged that superiors "put the production numbers ahead of the safety and wellbeing of the employees" (Wong, 2018). It looks like Tesla has suffered from a "defining myth of effortless superiority." This narrative—based upon the Tesla's history of excellence and seemingly validated by a slew of records—made it difficult for the board to see that the type of unethical activities committed by the management could actually take place within their culture (Litz and Werhane, 2000). Tesla is a great example of a company with a strong moral identity, as its mission is to reach a zero fossil fuels emission future. Strong organizational cultures are susceptible to what psychologist's term groupthink— "a strong concurrence-seeking tendency that interferes with effective decision making." In particular, groupthink encourages the illusion that an organization lacks certain vulnerabilities or is inherently more moral than others (Litz and Werhane, 2000). What is missing at Tesla is a highly developed moral imagination that would enable managers to critique and correct the sense of superiority that prevents them from making effective decisions. Moral imagination entails an ability to consider a situation from the perspectives of various stakeholder, it is a facility that can help managers avoid the ethical trap of confusing reality with what they want it to be. Going back on the specific issue, most of the injuries they experienced could have been prevented if workers suggestions were welcomed. We can't go forward without letting them have a voice and being included in the process. If Tesla focuses on the shareholders and not the others also impacted by the company's activity, such as its stakeholders, the company will risk going bankrupt. The company's duty should be to balance the shareholders' interests with other stakeholders' interests and avoid this kind of conflicts. If this happens, profit will be made. Profit should be the consequence of the company's activity, not its primary cause (Freeman, 1984). The management must carefully evaluate and answer workers problems, and we must give them the necessary tools to implement this change.

Solutions

The new board must implement these superior corporate governance practices to deal with issues concerning how Tesla is administered and conducts day to day business:

1) Comprehensive hazard identification and control

- Research (Dembe, 2005) suggests that special attention needs to be paid to establishing protective measures for people working overtime. Periodic safety inspections should be focused on jobs in which workers work overtime schedules. - Periodic rest brakes must be added, and more people should be employed in order to work fewer hours each. - Machinery must be redesigned by ergonomic experts and by taking in account workers' suggestions. - Periodic medical surveillance examinations for ‘‘at risk'' workers (40+ years old or with some specific health issue).

2) Safety incentive programmes

- Safety incentive programmes should be carefully designed to ensure that they provide a stimulus for safety-related changes, and to discourage under-reporting. Managers should be rewarded with a raise for listening to their subordinates and for solving their problems.

3) Culture improvement

- Managers must attend a coaching session about optimal safety and health in the workplace in order to sensitize them about ethical decision making. - Careful selection of HR managers, aligned with the new values of the company, to ensure that future managers will also follow the same ethical path and thus improve the workplace environment and the corporate culture.

Conclusion

Sustainable business can only be built on a culture of trusted partnerships with each and every stakeholder group. If Tesla wants to become a successful company it must understand that it does not mean reaching a goal at any cost, but instead creating the highest business value while maintaining the highest ethical and governance standards. There is no clear moral compass to guide leaders through complex dilemmas about what is right or wrong. But attention to ethics in the workplace sensitizes leaders and staff to how they should act.   Bibliography
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