Application of Leadership Practice Concepts

Introduction

Organizations in the contemporary societies are operating in an unstable environment. The rapid changes in the economy, market, technology and customers choices, and preferences imply that businesses must keep abreast with the pace to remain competitive, sustainable, and viable. Achievement of organizational goals and ambitions are inspired through effective leadership. Organizations with sound leadership have a competitive edge over business rivals. The essence of leadership in firms is exemplified by the actions taken on leaders of business following the poor performance of businesses. Business leaders must be equipped with excellent skills and abilities to spur the growth and development of respective organizations. As such, the leadership style that an executive adopts matters significantly in influencing all the stakeholders. Organizational leaders are tasked to provide directions concerning particular issues that are affecting effective performance of the business. Changes in the economy affect the efficacy of businesses. Leadership response to changes in an economy determines the market viability and sustainability of business organizations.

Tesla, Inc. Leadership Practices

Tesla, Inc. is an organization that is based in Palo Alto, California. The company was founded in 2003. The organization specializes in the production of electric vehicles, solar panels, and lithium-ion batteries. The formation of the company is predicated on the need to solve the imminent environmental crisis (Moritz et al., 2015). By utilizing electric energy to power the cars, the company aims at reducing the environmental pollution that is attributed to the use of fossil fuels. Solar panels use solar energy to produce electric power for domestic and industrial use. The primary stakeholders in the company are the environmentally conscious consumers, non-governmental organizations, and governmental agencies. The company is operational in a market environment that is still untapped by many organizations due to the massive capital and skilled labor that is required. The mission of the business is to produce the best products that will enhance customers’ satisfaction in the dynamic market. The vision of the organization is to work to achieve greener energy and products to ensure the world remains sustainable for the future generation. The operations of Tesla, Inc. are guided by a strict code of ethics that have been formulated and ratified by the business executives and the key stakeholders (Moritz et al., 2015). The company espouses honesty, integrity, and accountability for all members. Any person who works or associates with the business must adhere to the code of ethics. The codes of ethics are instrumental in enhancing the public image of the organization. The company distance itself from any unlawful or unethical act that fails to reflect its beliefs and culture.

Effects of Economic Changes to Organizations

The economies of most nations change to due to seen and unseen factors. For instance, the global financial crisis that occurred in 2008 affected companies significantly. Managing organizations during an economic downturn is an uphill task considering a myriad of challenges that the business encounters. Business organizations operate with a goal of maximizing profits through increased sales (Van Wart, 2014). By exploring new market frontiers, the firm will acquire new clients for their products. Economic changes affect both the firm and the stakeholders. The rate of unemployment increases as most organizations strive to remain operational during the crisis. A remedy that most firms take to remain afloat is reducing the number of employees. Likewise, the effects of the global economic crisis affect all the businesses. Such implies that other businesses will take similar measures. The resultant effect of such action is the reduced income and low sales. The slumping profit margins in organizations affect the financial stability of organizations. The public domain is aware of the severe impact of the economic crisis, as some notable organizations have been declared bankrupt. Economic changes affect the stock prices of the company. The operation of a business is affected by the level of investment. During an economic crisis, the number of investors reduces, as few would want to lose their money. Conversely, the dividends that are obtained at the end of every financial year also reduce. Investors and potential investors tend to avoid transacting or associating with businesses whose stoke prices have declined significantly. As economic changes take a long period, most of the investors prefer disposing of their shares with the anticipation that the company’s stoke will continue to depreciate. Again, in this situation, the strategies that are adopted by the business leaders determine whether the company will sail through the economic storm or capsize. Companies have reduced access to customers during economic the crisis as it cuts down expenses that are channeled toward marketing and advertising (Van Wart, 2014). Limited access to customers implies that the organization will experience slow sales. The quality of goods and services are critical for businesses. Research shows that during an economic crisis, the quality of good or services that are produced are compromised. The affected quality may be affected by the mitigation measures that are taken by the business leaders. Cutting the cost of production affects the desirability of the products. For instance, manufacturing companies may fail to acquire an advanced technology of production due to the fear of spending limited funds the company has on its reserves. On the other hand, the company will miss the benefits that arise from the use of new technology of production. Suppose a rival company acquires the new technology, then it is clear they will have a competitive edge over the business. Business executives are responsible for strategic decisions, especially the decisions that are made during difficult economic times. Stable and sound leadership that is demonstrated by transformational leaders shapes business viability and sustainability during economic phases.

Impacts of Global Financial Crisis on Tesla, Inc.

The global financial recession affected both small and big enterprises. Tesla, Inc. as a multinational corporation encountered grave economic ramifications due to the changes in the economy (Moritz et al., 2015). First, the sales of the different models of electric cars declined drastically. Before the economic changes, the company had invested massive financial resources in the production of new cars. Most of the funds were appropriated in the research and development department, which is tasked with the production of new products. The success of the department was evidence in the auspicious and futuristic model that would meet the changing demands of the loyal clients. The management anticipated the company to make enormous profits out of the sale of its new and innovative products that were unrivaled. Unfortunately, the economic recession caught both the world and the company flatfooted, with limited options to remain profitable during that period. The cumulative effect of the economic recession of 2008 on Tesla, Inc. was low productivity, declining shares, employee reduction, and loss of customers trust (Moritz et al., 2015). The challenges that were attributed to economic changes affected the performance of the business. With the prevailing situation exerting pressures on the leadership of the organization, it was necessary that steps to mitigate to the problems will be taken. The leadership played a critical role in changing the fortunes of the company during and after the economic recession. Currently, the organization is performing quite well considering the tumultuous path it has traveled since its inception (Moritz et al., 2015). Response to Economic Recession by the Leadership of Tesla, Inc. The economic recession tested the leadership capabilities of many organizations. The leadership of many organizations was striving to strike a balance between two critical roles. The roles included keeping the organization on track to achieve its mission when the world economy was disintegrating and keeping the company operational until the economic recovery is achieved. These two discrete leadership challenges motivated the leaders of the organization to formulate strategic plans that would ensure the company remains viable. Economic recession threatened many organizations. In fact, research has shown that numerous organizations are still grappling to remain stable since the economic downturn (Van Wart, 2014). On the other hand, an organization like Tesla, Inc. has continued to experience exponential growth despite facing the same predicament. The effectivity of leadership in the organization was exemplified through the creation of short-term strategy and long-term strategies. The short-term strategies would solve the prevailing issues while the long-term strategies would ensure that the business prospects of the organization are consistent and in line with the organization goals and objectives. Whereas the economic recession is an external factor that is difficult to control or predict, the leadership of the organization must manage the internal factors of the business. The performance of the organization is premised on employee engagement. Economic changes imply that the effects are resonated on employees’ satisfaction. By retrenching workers to cut down operation costs, the company instills fears in workers. The job security of workers is a priority. Employees would want to remain with an organization whose goals and missions align to theirs. Intrinsic and extrinsic motivators of employees play a great role in defining employees’ satisfaction in a particular organization. Employees can only engage with the business if the senior leadership of the business has shown commitment to enhancing their welfares.  Tesla, Inc. seemingly applied the findings of the study on employee engagement. According to the research, business with enhanced employee engagement system experience higher profitability, customer advocacy and productivity compared to those business units with low employee engagement system (Grant, 2016). The leadership of Tesla understood the needs of the employees during the economic recession, as such; the management created and implemented plans for making sure that their top talents remained in the organization. The organization revised its compensation plans to ensure that all the employees were awarded for their input justly. This move by the organization is vital for many reasons. First, Tesla, Inc. is operating in a sector with few players. However, Tesla has gained a competitive edge over other players due to diversified and quality products that the company has been producing over the years. The productivity of the organization is attributed to the top-notch talent and skills of the employees. During the economic crisis, failure to maintain the welfare of the critical people who are driving the organization to the next level is suicidal. The company was aware that failing to retain their top and most prized employees would give its rivals a competitive advantage by tapping on their talents through enticing remuneration packages. Review of the reward systems encouraged the workers to stay at the organization despite approaches from other organizations with similar business interest. Studies have consistently shown that most employees are motivated by financial reward (Grant, 2016). Whereas it would be expected that the organization would cut down the wages of the employees during the economic changes, the company adopted a rather different path that is unparalleled. The leadership of the organization reviewed the salaries of the engineers and other business executives. The introduction of career development programs further compounded the employees' engagement. The career development programs allow employees to enhance their training and expertise. The leadership of the organization opted to apportion a significant amount of finances to benefit employees who wanted to further their careers. Provision of career enhancement opportunities to the employees was another way of making the workers emotionally, attached to the organizations (London & Mone, 2012). The results of the reward package strategy paid as retention of the experienced workers have catapulted the organization to greater heights. Bad economy implies that the profitability of the organization is significantly affected. The leadership of the organization understood very well that the organization would require its employees to be focused. As such, the organization’s leaders reached out to the workers. Most organizations have a fixed communication system where communication is usually horizontal in different hierarchies (London & Mone, 2012). Initially, the leadership of the organization would only pass boardroom decisions to the junior staff for execution. However, the decision of the senior management would fail to attract the support of the junior workers. Whereas strict rules would mean that the junior workers would meet the demand of the managers, the results would be greatly affected. For instance, a meeting of the senior management team to discuss the unveiling of the new product would specify the timeline. On the other hand, the product can only be launched once it has undergone comprehensive research, development, and certification by relevant regulatory bodies. The management would exert pressures on the team working on the products leading to occupational stressors. However, during the economic crisis, the leadership of the organization changed tactics in dealing with the employees. Employees can enhance or sabotage the operations of the organization depending on how they feel treated in the organization. The workers implement the strategies that have been ratified by the organization’s top management team. However, at times, the organization fails to incorporate the concerns and inputs of the junior employees when making critical decisions (Huxham & Vangen, 2013). The exclusion of junior employees in the decision-making process underscored the rigidity of leadership. Tesla, Inc. in a bid to encounter the economic changes opened communication doors to all the key stakeholders, and especially the employees who had been ignored in the past. The move was probably compelled to the negative consequences the company would battle with supposing the employees went on an industrial strike. Such implies that the employees were allowed to contribute to the issues and actions that the company was planning to solve or take. By gaining the employee's trust and faith, the leadership of the organization enhanced its credibility. The last element of employees’ engagement that the leadership of Tesla Motors employed was enhancing the hope of the workers. During the economic crisis, fear is instilled in many of the workers. Employees who are fearful of the uncertain future will likely slow down their performance and productivity (London & Mone, 2012). The effects of fear will be illustrated by the poor performance of the organization. The leadership of Tesla, Inc. was concerned about the fear among the employees. As such, the leadership became committed to making the employees hopeful of a better future. It is imperative to note that the employees of the organization were justified to have fear for their future for two reasons. First, the company was operating in a sector that lacks a positive historical reference for success. In reality, the first company that was founded in 2003 dealing with the same product line failed terribly. Again, the GM motors also were unable to make an impact on electric car models after all its first electric cars were recalled for defects. Second, the employees were uncertain whether the organization would remain sustainable after the economic recession considering many consumers are still locked in the conventional cars. The leadership of the organization made the employees enthusiastic about the future (Huxham & Vangen, 2013). By raising the hopes of the employees, the workers put their efforts to remain focused in the organization. The assurance of employees that the company will survive the economic downturn motivated the workers to continue with the journey of achieving organizational goals.  The employee engagement strategies that the organization employed during the economic recessions were effective in keeping the company on track and functional. However, one thing that is noticed in the change of strategy is the leadership style that was in place before. The good thing is that a change of leadership style positively affected the operations of the business. Seemingly, two leadership styles are evident in the organization during the economic recession period (Huxham & Vangen, 2013). The leadership styles include collaborative and transformational leadership. The leadership of the organization relied on appreciative inquiry to maintain its prized assets, which are the employees.

Recommendations to Future Leaders on Avoiding Economic Challenges

Economic challenges are hardly predictable for many organizations. For instance, today an organization may be operating in a stable environment and the next day unexpected event might destabilize the economy. Despite the unpredictability of economic changes, organizational leaders can institute measures that can ameliorate the business, in case, it finds itself in the tight economic corner (Bratton & Gold, 2017). The first recommendation for the future leaders is to adopt the right leadership style (London & Mone, 2012). Leadership styles that have been implemented in the organizations are aligned to the organizational cultures. Each organization has a unique set of corporate cultures that defines its missions and visions. However, according to the research conducted by numerous scholars, transformational leadership is an effective and robust leadership style that inspires the organization to stay on course during hard economic times. Through transformational leadership, the leader inspires the employees to adopt radical changes that affect the business long-term and short-term period. For instance, studies have shown that organizations whose management team has adopted transformational leadership styles are three times more likely to survive both internal and external impediments that adversely affect the functionality of the business (London & Mone, 2012). The assertions have been proved consistently over the years leading to a logical conclusion that transformational leadership is the appropriate proactive leadership style that will ensure the viability and sustainability of organizations. The second recommendation is enhanced corporate social responsibility. The consumers are steadily becoming sensitive to social issues that are affecting the societies. The businesses operating in a particular community should strengthen its image through involvement in corporate social affairs. Such will imply that the organization will appeal to the surrounding community, which is also the source of current and potential consumers. The benefits of organization’s involvement in corporate social responsibility will be demonstrated during economic changes (Bratton & Gold, 2017). For instance, the society will do whatever it takes to ensure that the company remains viable and sustainable. With many organizations engaging in corporate social responsibility, it takes the flexibility of the leadership to adopt the strategy considering that it requires a significant amount of money for the program to run smoothly.

Conclusion

Economic changes are inevitable for any organization. The ramifications of economic changes on business organizations can derail the organization. However, it takes sound leadership for the organization to navigate through the economic crisis and remain viable and sustainable in the future. Tesla, Inc. is an example of an organization whose change in leadership strategy enabled it to overcome the economic crisis of 2008 and remain sustainable in the market. It is evident that leadership is of core importance to organizations. The ever-changing market environment requires organizations to review and adopt an appropriate leadership style. More specifically in the event of economic changes, transformational leadership is paramount for the organization to overcome the economic obstacles. Through transformational leadership, employees would be inspired and motivated with the hope that the situation will revert to normal. Employees’ engagement is imperative for the organization to overcome economic challenges.

References

Bratton, J., & Gold, J. (2017). Human resource management: theory and practice. Palgrave. Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons. Huxham, C., & Vangen, S. (2013). Managing to collaborate: The theory and practice of collaborative advantage. Routledge. London, M., & Mone, E. (2012). Leadership for today and the future. Retrieved from https://content.ashford.edu/. Moritz, M., Redlich, T., Krenz, P., Buxbaum-Conradi, S., & Wulfsberg, J. P. (2015, August). Tesla Motors, Inc.-Pioneer towards a new strategic approach in the automobile industry along the open source movement. In Management of Engineering and Technology (PICMET), 2015 Portland International Conference on (pp. 85-92). IEEE. Van Wart, M. (2014). Dynamics of leadership in public service: Theory and practice. Routledge.