CNBC: Tesla’s Real Problem Isn’t Its Shareholders

Elon Musk made a wise decision when he withdrew his proposal to take Tesla private. While Musk’s external advisors showed him a viable path to privatization, the complexities of the process would have been a great distraction from the real issue facing Tesla: its lack of an experienced leadership team to run the company.

Musk may be the most exceptional entrepreneur of this generation, but he has a long way to go from being a creative innovator to building an organization that can run a global automobile company.

In recent months Musk has become increasingly frustrated with his shareholders and the questions they were asking — so much so that he issued a simple tweet on August 7: “Am considering taking Tesla private at $420. Funding secured.”

After a flurry of activity with bankers, investors and the Tesla board, Musk announced last Friday that he had changed his mind and Tesla would continue to be a public company.

All this investor focus has been a giant diversion from Tesla’s real problems. In fact, Tesla’s investors have been its biggest supporters, running its market valuation to $53 billion, higher than either General Motors ($52 billion) or Ford ($40 billion). Meanwhile, Tesla continues to lose billions of dollars with a dwindling cash balance.

In the recent past Musk has lost 40 key executives, including his heads of product development (Doug Field), sales and marketing (Jon McNeill) and finance (Susan Repo), plus Solar City’s Peter Rive and Lyndon Rive. As a result, Musk is trying to do it all himself, even sleeping at the factory to try to get the Model 3 up and running.

No one can run a big company like Tesla alone. Leading a global automobile business is an extremely complex task requiring a strong, diverse team of executive leaders at all levels. Building the top team is precisely what Mary Barra has done in restoring General Motors following its 2009 emergence from bankruptcy. That’s what Alan Mulally did to lead Ford through the 2008-09 recession.

The playbook that Barra and Mulally each used fostered teamwork, promoted healthy collaboration and created cohesion around one team implementing one plan for the entire company’s success.

Musk should stop worrying about beating the short sellers and focus entirely on rebuilding Tesla’s depleted leadership ranks. Most importantly, he should recruit a partner with extensive automobile experience to run the business on a day-to-day business.

An ideal candidate would be Mark Fields, who was CEO of Ford from 2014 to 2017 and who has been in the auto business for 29 years. With his vast knowledge of the business and his proven leadership capabilities, Fields in turn can recruit top performers from auto companies all over the world to get Tesla’s operations back on track.

In addition, Tesla needs a very strong CFO who can put the company’s finances in order. That means stopping the cash drain and getting the company profitable. Doing so will require correcting Tesla’s rampant operational problems, getting Model 3 production up and running and bringing down the cost of its vehicles.

Finally, the Tesla board needs to be upgraded to provide wisdom and insights to Musk and his team about the intricacies of the global automobile business. Tesla’s current board consists of Musk, his brother, the former CFO of Tesla’s Solar City acquisition, three venture capitalists, the COO of Telstra and James Murdoch, CEO of Twenty-First Century Fox. None of these board members has any experience in the automobile business.

Tesla should add two to three experienced executives who understand the business and can advise management as Tesla ramps up and prepares for the next generation of vehicles.

Elon Musk is often compared to Steve Jobs, an equally brilliant entrepreneur with the vision and drive to creative transformative products. Jobs was forced out by the Apple board in 1985 for his erratic behavior. While he was building Pixar, he learned a great deal about leadership from two extraordinary innovation leaders, Ed Catmull and John Lasseter. When he returned to Apple 12 years later, he teamed up with Tim Cook who helped him build the company and turned Jobs’ vision into the world’s most valuable company.

In the middle of his journey, Musk now finds himself a dark wood. Executive departures continue. The stock price gyrates. The media piles on. In these difficult times, Musk needs to transform himself, much as Steve Jobs did in the 1990s.

There are other examples of entrepreneurs teaming with superb business leaders to create great enterprises; most notably, Google’s Larry Page and Sergey Brin recruited Eric Schmidt as CEO and Facebook’s Mark Zuckerberg brought in Sheryl Sandberg as COO. In an earlier era, the teams of David Packard and Bill Hewlett of Hewlett-Packard and Intel’s Gordon Moore, Bob Noyce and Andy Grove created the signature companies that pioneered Silicon Valley.

Only if Musk is prepared to recruit a partner to build Tesla’s leadership team and strengthen his board will he be able to transform Tesla from a breakthrough entrepreneurial company to a rapidly growing automobile company with an enduring legacy.

This content was originally posted on on 8/29/18.