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Problem-Solving Application Case—
Leadership Matters!
 
While Tesla CEO Elon Musk enjoys a reputation as one of the most successful entrepreneurs of all time, he has come under fire for a number of
decisions and actions that have affected the growing electric car manufacturer negatively in various ways. This activity is important because it
demonstrates the consequences of a leader’s actions.
 
The goal of this activity is to critically evaluate Musk’s various actions over time, and the positive and negative implications of each of them for
Tesla and for Musk himself.
 
Read about Elon Musk’s controversial actions as Tesla’s CEO. Then, using the three-step problem-solving approach, answer the questions that
follow.
 
Elon Musk is widely regarded as one of the most successful entrepreneurs in history.1 He became a billionaire by age 31 after founding and
selling several successful startups—most notably the company that would later be known as Paypal. In 2004 Musk invested $6.3 million into
Tesla Motors and soon after became the company’s CEO.2

 
Musk has a keen ability to express ideas and get people excited about them and has garnered praise for his inspiring and visionary leadership.3

Author Dale Buss argues that “… a huge part of Musk’s motivational quiver is to come up with and continually express otherworldly goals that
appeal to the passions of his employees as well as to his own ambitions.”4 Todd Maron, Tesla’s former general counsel, said Musk is “someone
who empowers you to be better than you think you can be,” adding that “he has extraordinarily high standards, and so he pushes you to be your
absolute best.” Another former employee described Musk as “the smartest person I have ever met,” adding, “I can’t tell you how many times I
prepared a report for him and he asked a question that made us realize we were looking at the problem completely wrong.”5

 
Musk’s Leadership Style and Behavior
Some have criticized Musk’s aspirations to change the world as outlandish and his ideas as unachievable, but Musk doesn’t believe in
impossibilities. Says author Christopher Davenport, “People are always telling him he can’t do it. But he doesn’t like to hear it can’t be done. He
categorically rejects that. It’s all about, ‘How can we do it?’”6 A recent example of Musk’s stubbornness is the production of the Model 3. After
the company revealed the concept to the public and locked in production dates, Musk called a meeting to tell executives he had a dream that
the entire production process had been fully automated. In other words, vehicle production would require no humans from start to finish. He
wanted to make the dream a reality, he wanted to do it with the Model 3, and he wanted to begin production four months ahead of Tesla’s
original schedule. What followed were several months of what former executives and employees describe as a familiar pattern: executives told
Musk his idea wasn’t unachievable, he disagreed, and engineers resigned when they realized they couldn’t reason with him.7

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Musk eventually conceded that his idea for fully automated production of the Model 3 was a nonstarter, and he and his workers scrambled to
get production back on track by working 80–100 hour weeks.8 Customers waited months past delivery dates for their vehicles and took to
social media to lambast the company. Further, many of the Model 3s that were delivered needed costly and time-consuming repairs.9 Musk
would later refer to the ordeal as “production hell.”10

 
Some blame Musk’s inability to delegate for Tesla’s problems and for the recent exodus of more than 36 VPs and other high-ranking
executives.11 Musk wants things done his way down to the tiniest detail and often rejects industry best practices along with advice from his
senior leadership. For example, Musk once instituted a new workflow management method against the advice of his production workers. The
employees secretly reverted to Toyota’s Kanban method when Musk’s technique ultimately slowed production.12 Author Barry Enderwick
believes Musk’s micromanaging style “… displays a fundamental misunderstanding of what leadership means. No one person can do everything
at a company.”13

 
Others blame Musk’s mental health for his downward spiral and describe him as emotionally unstable and fragile. Musk developed a reputation
on the production floor for openly ridiculing, insulting, and bullying workers who fell short of performance targets. He appeared extremely
sensitive to skeptics, often reassigning workers who questioned his ideas to new departments, uninviting them to important meetings, and even
firing them. Musk also displayed frequent emotional reactions to isolated customer complaints on social media. As a former employee recalls,
“Some customer would tweet some random complaint, and then we would be ordered to drop everything and spend a week on some problem
affecting one loudmouth in Pasadena, rather than all the work we’re supposed to do to support the thousands of customers who didn’t tweet
that day.”14

 
Musk’s recent public appearances and social media posts have raised consumer concerns about his ability to deliver on his promises and
successfully run his companies. In one instance, he angrily tweeted that a diver sent to rescue a trapped Thai boys’ soccer team was a
pedophile after his offer to assist with the rescue was declined. The diver filed a defamation lawsuit against Musk for this damaging and
unsubstantiated claim.15 As another example, Musk chose to smoke marijuana during an appearance on “The Joe Rogan Experience”
podcast.16 In August 2018, in what would prove the most financially damaging of his social media choices to date, Musk tweeted that he was
taking Tesla private and had secured the funding to do so. As a result of his tweet, the company’s shares skyrocketed 11 percent in one day.
Musk had not actually secured funding to take Tesla private and the SEC charged him with securities fraud. He settled the case and agreed to
pay a $40 million fine to the SEC, step down as Tesla’s chairperson, and allow others in the company to regulate his social media activity.17

 
A few months after reaching the settlement, Musk gave a 60 Minutes interview and said “I do not respect the SEC.” While it is not illegal for
Musk to criticize the regulatory agency, experts agree it’s an unwise choice, both in terms of his relationship with the agency and his ability to
attract board members to his companies.18

 
What’s Next for Elon Musk?
Musk’s quirkiness, overconfidence, and volatility resemble the attributes and behaviors of other famous entrepreneurs—most notably, Steve
Jobs.19 As consumers we allow for and even expect a certain amount of idiosyncrasy in our leaders. Yale School of Management’s Dr. Jeffrey
Sonnenfeld argues that some measure of hubris is necessary for entrepreneurs to succeed, saying “The odds are against them succeeding
rationally, so they have to have an unrealistic sense of their own efficacy to beat the odds.” But Sonnenfeld also notes that Musk is likely to “take
himself and the company off a cliff” if he doesn’t dial things back.20

 
Tesla recently unveiled its new electric vehicle—the Model Y crossover—to lukewarm reception. Pre-orders started immediately and required a
$2,500 initial payment—$1,000 more than the company had charged customers to reserve the Model 3. Market analysts see this increase as

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cause for concern about the company’s cash position and predict that initial orders for the Model Y will be much lower than they were for the
Model 3.21

 
As for that tweet that cost him $40 million in SEC fines and his position as chairman of Tesla’s board, Musk says it was “worth it.”22

 
Apply the 3-Step Problem-Solving Approach
Step 1: Define the problem.

A. Look first at the Outcomes box of the Organizing Framework in Figure 13.6 to help identify the important problem(s) in this case.
Remember that a problem is a gap between a desired and a current state. State your problem as a gap, and be sure to consider problems
at all three levels. If more than one desired outcome is not being accomplished, decide which one is most important and focus on it for
Steps 2 and 3.

B. Cases have protagonists (key players), and problems are generally viewed from a particular protagonist’s perspective. Identify the
perspective from which you’re defining the problem.

C. Use details in the case to determine the key problem. Don’t assume, infer, or create problems not included in the case.
D. To refine your choice, ask yourself, why is this a problem? Explaining why helps refine and focus your thinking. Focus on topics in the

current chapter, because we generally select cases illustrating concepts specifically located within the current chapter.
Step 2: Identify causes of the problem by using material from this chapter, summarized in the Organizing Framework shown in Figure 13.6.
Causes will appear in either the Inputs box or the Processes box.

A. Start by looking at Figure 13.6 to identify which person factors, if any, are most likely causes to the defined problem. For each cause, ask
yourself, Why is this a cause of the problem? Asking why multiple times is more likely to lead you to root causes of the problem.

B. Follow the same process for the situation factors.
C. Now consider the Processes box shown in Figure 13.6. Consider concepts listed at all three levels. For any concept that might be a cause,

ask yourself, Why is this a cause? Again, do this for several iterations to arrive at root causes.
D. To check the accuracy or appropriateness of the causes, map them onto the defined problem.

Step 3: Make your recommendations for solving the problem. Consider whether you want to resolve it, solve it, or dissolve it (see Section 1.5).
Which recommendation is desirable and feasible?

A. Given the causes you identified in Step 2, what are your best recommendations? Use material in the current chapter that best suits the
cause. Consider the OB in Action and Applying OB boxes, because these contain insights into what others have done.

B. You may find potential solutions in the OB in Action boxes and Applying OB boxes within this chapter. These features provide insights into
what other individuals or companies are doing in relationship to the topic at hand.

C. Create an action plan for implementing your recommendations and be sure your recommendations map onto the causes and resolve the
problem.

 
Footnotes
1. D. Buss, “For Insights into Elon Musk’s Leadership of Tesla, Look at How He Leads SpaceX, Author Says,” Forbes, August 31, 2018, https://www.
forbes.com/sites/dalebuss/2018/08/31/for-insights-into-elon-musks-leadership-of-tesla-look-at-how-he-leads-spacex-author-says/#6ad83fb763a4.
2. C. Duhigg, “Dr. Elon & Mr. Musk: Life Inside Tesla’s Production Hell,” Wired, December 13, 2018, https://www.wired.com/story/elon-musk-tesla-life-
inside-gigafactory/.
3. J. Wingard, “Elon Musk and the Pitfalls of Creative Leadership,” Forbes, April 10, 2019, https://www.forbes.com/sites/jasonwingard/2019/04/10/elon-
musk-and-the-pitfalls-of-creative-leadership/#6317b78f3f3e.
4. Dale Buss, “For Insights into Elon Musk’s Leadership of Tesla, Look At How He Leads SpaceX, Author Says.” Forbes Media LLC, August 31, 2018,
https://www.forbes.com/sites/dalebuss/2018/08/31/for-insights-into-elon-musks-leadership-of-tesla-look-at-how-he-leads-spacex-author-
says/#2aea54f263a4.
5. Charles Duhigg, “Dr. Elon & Mr. Musk: Life Inside Tesla’s Production Hell.” Condé Nast, December 13, 2018, https://www.wired.com/story/elon-musk-
tesla-life-inside-gigafactory/.

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6. Dale Buss, “For Insights into Elon Musk’s Leadership of Tesla, Look At How He Leads SpaceX, Author Says.” Forbes Media LLC, August 31, 2018,
https://www.forbes.com/sites/dalebuss/2018/08/31/for-insights-into-elon-musks-leadership-of-tesla-look-at-how-he-leads-spacex-author-
says/#2aea54f263a4.
7. C. Duhigg, “Dr. Elon & Mr. Musk: Life Inside Tesla’s Production Hell,” Wired, December 13, 2018, https://www.wired.com/story/elon-musk-tesla-life-
inside-gigafactory/.
8. C. Duhigg, “Dr. Elon & Mr. Musk: Life Inside Tesla’s Production Hell,” Wired, December 13, 2018, https://www.wired.com/story/elon-musk-tesla-life-
inside-gigafactory/.
9. R. Mitchell, “As Tesla Struggles to Exit ‘Production Hell,’ Buyers Com plain of Delivery Limbo,” Los Angeles Times, September 14, 2018,
https://www.latimes.com/business/autos/la-fi-hy-tesla-sales-delivery-problems-20180912-story.html.
10. S. Fairyington, “What We Can Learn About How NOT to Lead from Elon Musk,” Thrive Global, January 10, 2019, https://thriveglobal.com/sto ries/elon-
musk-leadership-style-hamper-tesla-growth-lessons-tips/.
11. C. Duhigg, “Dr. Elon & Mr. Musk: Life Inside Tesla’s Production Hell,” Wired, December 13, 2018, https://www.wired.com/story/elon-musk-tesla-life-
inside-gigafactory/.
12. L. Kolodny, “Elon Musk’s Extreme Micromanagement Has Wasted Time and Money at Tesla, Insiders Say,” CNBC, October 19, 2018, https://
www.cnbc.com/2018/10/19/tesla-ceo-elon-musk-extreme-micro-manager.html.
13. B. Enderwick, “What Elon Musk Gets Wrong About Leadership,” Medium, August 24, 2018, https://medium.com/s/story/what-elon-musk-gets-wrong-
about-leadership-b97794a0e330.
14. Charles Duhigg, “Dr. Elon & Mr. Musk: Life Inside Tesla’s Production Hell.” Condé Nast, December 13, 2018, https://www.wired.com/story/elon-musk-
tesla-life-inside-gigafactory/.
15. C. Duhigg, “Dr. Elon & Mr. Musk: Life Inside Tesla’s Production Hell,” Wired, December 13, 2018, https://www.wired.com/story/elon-musk-tesla-life-
inside-gigafactory/.
16. M. Castillo, “Elon Musk May Have Violated Tesla’s Business Conduct Policy by Smoking Weed,” CNBC, September 7, 2018,
https://www.cnbc.com/2018/09/07/elon-musk-may-have-violated-tesla-conduct-policy-by-smoking-weed.html.
17. J. Wingard, “Elon Musk and the Pitfalls of Creative Leadership,” Forbes, April 10, 2019, https://www.forbes.com/sites/jasonwing ard/2019/04/10/elon-
musk-and-the-pitfalls-of-creative-leadership/#6317b78f3f3e.
18. J. McGregor, “Elon Musk, The Say-Anything CEO,” The Washington Post, December 13, 2018, https://www.washingtonpost.com/
business/2018/12/13/elon-musk-say-anything-ceo/?utm_ term=.9eaf03d4ee48.
19. A. Pressman, “Data Sheet—Why Elon Musk’s Visionary Leadership Falls Short,” Fortune, November 8, 2018, http://fortune.com/2018/11/08/ data-
sheet-elon-musk-tesla-chairman-robyn-denholm/.
20. Stephanie Fairyington, “What We Can Learn about How NOT to Lead from Elon Musk,” Thrive Global, January 10, 2019, https://thriveglobal.
com/stories/elon-musk-leadership-style-hamper-tesla-growth-lessons-tips/.
21. D. Hull, “Tesla Sinks After Model Y Unveiling Rekindles Concerns over Cash,” Bloomberg, March 14, 2019, https://www.bloomberg.com/news/
articles/2019-03-15/elon-musk-reveals-tesla-model-y-crossover-to-start-at-39-000.
22. C. Duhigg, “Dr. Elon & Mr. Musk: Life Inside Tesla’s Production Hell,” Wired, December 13, 2018, https://www.wired.com/story/elon-musk-tesla-life-
inside-gigafactory/.

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