- Marc Benioff told Insider that more executives should consider Elon Musk’s playbook.
- Since taking Twitter private, Musk has more than halved his staff and expressed this publicly.
- Insider spoke to five experts who said it’s the wrong strategy that could have consequences.
Salesforce CEO Marc Benioff said more executives should ask themselves whether it’s time to “unleash their inner Elon” when it comes to layoffs and a ruthless management style, but some experts say that’s exactly the wrong way to go. to run a company.
Scott Latham, a professor of strategic management at the University of Massachusetts Lowell, called Musk’s leadership “incredibly dysfunctional.” Latham has studied layoffs in technology since the beginning of the Internet boom. He said he’s never seen a company recover from the kind of drastic cuts Musk launched at Twitter.
Since Musk bought Twitter in October, he has more than halved its workforce, slashed many perks, called on employees to work “extremely hard” hours, set fast deadlines for projects and repeatedly stacked staff ranks . Aside from cutting the number of employees, it’s a similar strategy to what the billionaire has used at Tesla and SpaceX — where he’s known for his lofty production goals.
Benioff said the tech world is paying attention. “Every CEO in Silicon Valley has looked at what Elon Musk has done and asked themselves, ‘Do they need to unleash their own Elon?’ 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, as I’ve said, you can’t underestimate what he’s done.”
Benioff isn’t alone in saying that more executives could emulate Musk — or at least some of it. Last year, tech investor David Friedberg said the Twitter layoffs set a new standard for the industry and showed more companies needed to “think deeply.”
“Who would want to work for a company like that?”
But “it’s a terrible strategy,” Harry Kramer, a leadership professor at Northwestern University, told Insider. “Who would want to work for a company like that? If you’re going to have a successful company, you need good employees, and good employees usually have options. They’re not going to work for a company that treats them like garbage.”
Layoffs may bolster a company’s balance sheet in the short term, but they can have long-term consequences. Some studies show that remaining workers may suffer from lower performance and higher turnover rates due to a phenomenon known as “survivor’s guilt,” said Julie Palmer, a professor of management at Webster University.
Cuts can also cause reputational damage, making it harder to hire employees in the future and contributing to higher costs down the road when the company might be looking to grow, said Ayelet Fishbach, a University of Chicago management professor.
“Layoffs are a shooting mess,” Latham said. “You take a blunt instrument and hope you’re cutting the right people. You risk losing good employees to competitors — and those who get left behind, the first thing they’re going to do is open their resume.”
Twitter is one of several companies to begin a series of layoffs in recent months amid signs of an economic slowdown and a correction from a hiring boom during the pandemic.
Sometimes, downsizing is inevitable — Musk said Twitter was headed for potential bankruptcy if it didn’t cut costs — but experts say there’s a right and a wrong way to do it. In particular, leaders need to make sure they don’t cut back so deeply that they are forced to spend more money to rehire and train new staff.
They also need to treat workers with compassion and show that layoffs were a last resort, experts said.
“A very bleak future”
“If you’re an effective leader, you realize that your employees aren’t just human capital. You’re dealing with people’s entire lives — their families,” Kraemer said. “The reason one is ruthless is that he was a poor leader to begin with. If you managed things properly, you should not be so ruthless.”
Salesforce seems to have already taken at least part of a page out of Musk’s playbook. The company announced in January that it was cutting about 10% of its 84,000 employees and closing some offices. Insider also saw a draft business plan, which called on employees to “run lean and lean” and not let corporate culture get in the way of what needs to be done.
But some human capital experts couldn’t disagree more with the sentiment.
“Sometimes, culture is the only asset a company has,” said Fishbach, the University of Chicago professor. “Anyone can emulate a business strategy, but culture is much harder to replicate. If your company isn’t a place where people want to work, it’s not going to be very productive or successful.”
Of course, not everyone is buying the idea that Musk’s way of running a company is problematic. For better or worse, Musk has become something of a “beacon” for executives grappling with how to reorganize their workforces, said Tamara Holder, a workplace discrimination attorney who has served as corporate counsel.
“It has the potential to create a toxic workplace,” Holder said. “But at the same time, what CEOs are doing by cutting their workforce is a little bit inevitable,” he said. “There’s a lot of fat to be trimmed in tech and in Silicon Valley. Elon has shown he can be ruthless, and companies are following suit.”
Anat Alon-Beck, a professor of corporate law and governance at Case Western Reserve University, said companies should not follow Musk’s slash-and-burn playbook. “If more companies start treating their employees like Musk, 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 — won’t put up with it.”