Corporate Social Responsibility: Tesla Inc. Case Study Sample
Tesla Inc. is one of the leading electric car manufacturers in the US. The company is based in Palo Alto, California, and specializes in the production of eco-friendly automobiles with the objective of minimizing its carbon footprints. Tesla also manufactures solar panels through its SolarCity subsidiary (Dibble, 2018, 34). Currently, the organization produces Tesla Model X, S, and 3 vehicles as well as solar roof tiles (Dibble, 2018, 44). It was founded in 2003 by Engineers Marc Tarpenning and Eberhard Martin. Tesla is one of the organizations that actively engage in corporate social responsibilities (CSR) to meet its stakeholders’ needs (Dibble, 2018, 45). The company has an integrated supply chain that links all the critical players in the industry. The significant aspect of Tesla’s CSR includes reducing the dependence of petroleum cars by providing green sources of energy to power car engines. Manufacture of the electric car significantly reduces carbon emissions into the atmosphere, thereby combating climate change, global warming, and acidic rainfall.
Corporate social responsibility refers to initiatives that are taken by an organization to positively impact the society or environment (Lecture 1: Corporate Responsibility). Although these activities do not increase the organization’s revenues, they portray an enterprise’s positive image which is necessary to attract new prospective customers. Other organizations engage in corporate social responsibilities to evade tax. As an organization contributes to charity, the government reduces their tax obligations, thereby increasing the firms’ net profit. According to the ISO26000, the seven main dimensions of CSR include governance, fair operating practices, community involvement, human rights labor practices, consumer sales, and environment (Crowther, and Seifi, 2018, 67). Companies such as Tesla engage in ecological practices to reduce their cost of operation and also maintain an attractive work environment (Grayson & Hodges, 2017, 56). Typical environmental issues that contemporary organizations must consider are climate change, child labor, water scarcity, and consumer safety (Schrempf-Stirling, Palazzo, & Phillips, 2016, 700). The organization’s stakeholders should be involved in CRS. The stakeholders include all parties which are affected by the firm’s operations including the employees, suppliers, local community, government, vendors, subcontractors, consultants, customers, stockholders, and creditors (Lins, Servaes, & Tamayo, 2017, 1785). Effective stakeholder management allows the organization to leverage its internal and external environment, thus boosting productivity and efficiency (Hopkins, 2016, 57).
Broad Areas of Corporate Social Responsibility at Tesla
Tesla Inc. engages in a wide variety of corporate social responsibility as it has a stakeholder management strategy. It considers the needs of both energy and automotive stakeholders (Dibble, 2018, 67). Other than manufacturing vehicles, Tesla has a plant for manufacturing solar panels and other energy accessories. Manufacture of solar panels reduces overreliance in unsustainable sources of energy such as coal and nuclear. Solar energy is clean and sustainable and also helps to reduce carbon emissions into the atmosphere. Thus, investing in the energy industry enables the company to protect the environment. Researches indicate that excessive carbon emission into the atmosphere has adverse consequences (Crowther, and Seifi, 2018, 69). First, carbon is part of the greenhouses gasses which form a layer between the earth and the sun (Dibble, 2018, 45). The thick gaseous layer absorbs terrestrial radiations from the ground. As heat is absorbed, the greenhouse gases increase the earth’s temperature, thereby causing global warming. Moreover, excessive carbon emission contributes to the formation if acidic rainfall which has adverse impacts on farming activities. The design of electric cars also directly affects the consumers as it minimizes pollution and also reduces their operational costs (Wang, Tong, Takeuchi, and George, 2016, 95). Hybrid vehicles are more efficient than a conventional vehicle. The cars eliminate the traditional petroleum costs which are incurred in other vehicles. By engaging in corporate social responsibilities, Tesla maximizes consumer benefits and minimizes the negative ecological impacts.
Tesla considers the needs of the local community by taking part in different philanthropic activities. The organization supports community programs and also contributes part of its profit to charity (Dibble, 2018, 56). ‘The norms of charity create pools of resources to support social entrepreneurs, many of whom are also motivated by the same compassionate impulses that drive charity in the first place” (Dees 2012). Tesla engages in social entrepreneurship to address the community’s environmental and social needs. There are three social entrepreneurship theories. The first principle holds that organizations should have a clear environmental and social mission. Secondly, the firm should generate optimal income through trade. Thirdly, a significant part of the profit needs to be reinvested in social missions. Therefore, philanthropic activities boost the local economy and sustainable development.
Tesla’s Business Case for Corporate Social Responsibility
Tesla’s CRS is based on environmental friendliness, energy storage, and sustainability. The firm’s CRS initiatives enable it to develop a competitive edge and also attract more customers. As consumers become enlightened about the need for a clean environment, they are likely to purchase an electric car than the conventional petroleum automobile (Wang, Tong, Takeuchi, and George, 2016, 97). However, they have to be assured that the electric vehicles which adequately meet their performance requirements (Dibble, 2018, 56). For instance, if the consumers desire to move at a given speed and torque, they have to be guaranteed that the vehicle is capable of meeting the performance requirements. Also, most consumers evaluate the product’s costs before deciding whether to buy the item. Thus, consumers compare the unit cost of an electric car with that of a petroleum vehicle and purchase the cheaper brand.
Developing idiosyncratic deals is one form of CSR that the organization embraces. In this approach, the management discusses the work responsibilities with the junior employees. During the discussions, the employer provides their expectations from the employees. Conversely, the employees indicate their desires as well as employers’ obligations in their activities. For instance, the employer is expected to provide a comfortable working environment that is free from hazards. Workplace ergonomics must consider the employees’ physical structure, experience, strength, and fitness (Lins, Servaes, & Tamayo, 2017, 1787). If the employer provides the desired workplace environment, then the employee is expected to meet their objectives. The idiosyncratic deals are then signed and implemented (Dibble, 2018, 78). Developing and signing the idiosyncratic deals with the employees at Tesla helps to motivate the workers as they feel valued. Moreover, the agreement specifies the punishment and rewards that the employees get based on the degree of achievement. Positive reinforcement is used to enhance performance while negative reinforcements discourage unethical conduct in the organization.
Other than signing and implementing idiosyncratic deals with the employees, Tesla also uses transformational leadership, management by objective, and merit-based performance appraisal to motivate its employees. Transformational leadership is part of corporate social responsibility that empowers employees and also improves their industrial and technical skills in the organization. All employees desire growth and development as they are hired in an organization (Dibble, 2018, 68). It is the responsibility of the organization to train the workers and also promote them based on their competencies safety (Schrempf-Stirling, Palazzo, & Phillips, 2016, 707). The human resource department should engage in internal corporate social responsibilities through instituting effective employee management programs.
Tesla uses transformational leadership to inspire its employees and also motivate them to achieve shared goals. In this approach, all managers in the organization undergo extensive transformational and transactional leadership training to equip them with the necessary persuasion skills. In the organization, the employees are not coerced to achieve the set objectives (Dibble, 2018, 56). Instead, Tesla managers develop a shared vision in joint consultation with the employee. The vision is realistic and beneficial to all the supply chain stakeholders (Lins, Servaes, & Tamayo, 2017, 1789). The managers and supervisors are then tasked with influencing the employees to adopt the vision. The use of transformational leadership in the organization has enabled Tesla employees to grow and develop in the organization. The supervisors coach junior employees to enhance their skills. Moreover, the workers undergo annual training and development programs that improve their competencies and performance.
Tesla is one of the organizations that engage in extensive ergonomics study to enhance its employees’ welfare. The workplace environment is comfortable and meets all the employees’ needs. For instance, the organization has both escalators and ramps to enable physically disabled employees to access different offices within the organization. The office seats are adjustable with extra legroom space to consider the needs of diverse employees’ safety (Schrempf-Stirling, Palazzo, & Phillips, 2016, 705). The short workers can adjust the seat to reach the working table comfortably. Also, workers are allocated duties based on physical strength, experience, and competencies (Dibble, 2018, 56). The new employees are first taken through induction training which enables them to familiarize themselves with the machines and other work tools and devices. They are then coached by either the supervisor or a senior employee to develop competency skills before becoming independent. Annual on job training improves the employees’ skills and efficiencies, thereby minimizing workplace accidents and hazards. The extensive induction training in the organization ensures that each employee is conversant with the working tools and is unlikely to make mistakes safely (Schrempf-Stirling, Palazzo, & Phillips, 2016, 711). Moreover, the organization has a robust quality assurance and quality control departments that closely monitor the employees’ productivity.
Tesla has automated most of its repetitive tasks to reduce employee fatigue. Lifting aids are used in the organization, and personal protective equipment (PPE) is used to protect the employees from workplace hazards. For instance, the workshop employees are mandated to wear protective boots, overall, and headgears safety (Schrempf-Stirling, Palazzo, & Phillips, 2016, 706). The industrial boots protect the employees’ feet from the dangers of falling objects in the workshop. The headgears are also used to cover the workers in case the overhead cranes drop the carrying load. The protective equipment is purchased and replaced by the organization as part of its corporate social responsibility to protect the employees’ welfare. Tesla has a comprehensive work-study program that balances the workloads for each worker (Dibble, 2018, 67). The study also eliminates unnecessary movements, lead time, and scrap. The objective of work studies is to optimize the employees’ time and skills in the organization.
Employee compensation is the other significant aspect of corporate social responsibility in the organization. All employees at Tesla are competitively rewarded based on their skills, education, and competencies. The workers have annual paid leave allowances, comprehensive medical cover, overtime-compensation, as well as housing allowances (Dibble, 2018, 87). These benefits motivate the employees to improve their productivity. Consequently, Tesla has a low employee turnover rate as their level of satisfaction of high. Research has also indicated that the workers in the organization have a higher degree of job enlargement compared to other employees in the automobile industry.
Tesla uses robust performance appraisal measures that focus on attracting and retaining competent employees. These performance appraisal techniques include merit-based, 360-degree evaluation, and management by an objective. In the merit-based performance appraisal, the employees are promoted based on their contributions to the organization. Those workers who demonstrate competency and meet or exceed their work targets are granted monetary rewards. The performance appraisal technique has enabled the firm to reduce employee turnover rates and also retain the most competent workers in the automobile industry. The organization denounced the use of promotion by seniority as it demoralized the junior employee (Dibble, 2018, 56). According to the organization’s chief executive officer, the use of merit-based performance appraisal is one of the organization’s critical competitive strategies as well as a corporate social responsibility that rewards workers based on their contributions.
In the 360-degree performance appraisal, workers are assessed based on their peers’ evaluations. However, to eliminate bias in the performance appraisal scheme, both the junior and senior employees who work with a given staff are also allowed to evaluate them. The supervisors provide their assessment based on the employees’ performance, competence, and ability to meet work deadlines. The peers also evaluate the worker based on their ability to work in teams, assist others, and meet the deadline (Dibble, 2018, 50). The subordinate employees are also allowed to offer their assessment. They evaluate the worker based on their leadership capabilities and willingness to delegate duties. Moreover, the junior employees also indicate whether the worker has excellent transformational leadership skills (Lins, Servaes, & Tamayo, 2017, 1789). A transformational leader must be able to set a vision for his team, influence the followers, and coach them to achieve a specific target. The leadership qualities of the employees are critical in the organization as they are used to determine suitable candidates for managerial positions.
Tesla uses management by an objective to track the employees’ performance and also to motivate or reprimand the workers. Researches indicate that management by objective is compatible with transactional leadership as the junior employees are involved in setting their work targets. In this performance appraisal method, the senior managers develop the overall organization’s objectives (Dibble, 2018, 57). They then divide the targets to different departments within the organization. Each department is expected to achieve a given goal within a certain time frame. The departmental heads or managers are then responsible for developing specific targets for its team members. The objectives must be compatible with the overall organization’s goals.
The manager is then required to flow down the set objectives to the employees. In an ideal setting, the manager must discuss specific goals and work targets with each of the team members. During the discussions, the employees should freely offer their views regarding the set targets. If the goals are unachievable, then it is the responsibility of the worker to inform that manager why the set targets cannot be achieved. For instance, the employee may claim that the working tools are defective and cannot meet the objectives (Lins, Servaes, & Tamayo, 2017, 1790). Alternatively, the employee may indicate that inefficiencies within the shop floor result in backtracking of workpieces which adversely affects their performance (Dibble, 2018, 48). The manager should then evaluate the claim and offer a solution. In case an immediate solution cannot be obtained, then the manager may be required to adjust the set objectives based on the available facilities and operations. Both the employee and the managers should compromise their stiff standpoints to obtain an amicable solution.
Ones the two parties reach an agreement, a contract is established. The contract is binding to both parties as there are ramifications for either meeting or failing to achieve the set objectives. Thus, the worker is held accountable over the set goals. Positive and negative reinforcements are used to encourage high productivity (Grayson & Hodges, 2017, 56). For instance, the agreement should stipulate the employees’ rewards if they meet the set targets (Dibble, 2018, 68). Consequently, proportional punishments or penalties must also be defined beforehand. The penalties are applicable if the employee fails to meet the goals. However, the supervisors and managers should closely monitor the employees’ progress to determine whether they are on track or have deviated from the plan.
The set targets should have specific milestones that must be accomplished periodically. The managers compare the agreed plan with the actual execution. In case of any deviations, remedial actions are taken to correct the anomaly. The feedback is essential as it enables the workers to monitor their progress. In case of unforeseen circumstance which adversely affects the employee performance, then the goals are re-adjusted. For instance, the employee may fall sick and fail to achieve the set targets. In other incidences, the production tools and equipment may break, thereby increasing delays in the production systems (Grayson & Hodges, 2017, 59). Such uncertainties should also be accommodated in the plan. However, when the employees meet the set targets, they should be rewarded based on the agreement. Conversely, the workers who fail to achieve the set goals are reprimanded or punished (Dibble, 2018, 36). The use of management by an objective at Tesla is a form of corporate social responsibility as it involves the employees in the decision-making process and also empowers them to achieve their work objectives.
Current Corporate Social Responsibility (CSR) Activities at Tesla
Other than the employee in initiatives, Tesla considers the needs of its customers by developing reliable and affordable products that meet their performance needs. Whereas Tesla is an environmentally friendly organization that minimizes its carbon footprints, it also considers the customers’ performance needs (Dibble, 2018, 46). The company considers customer needs by pursuing cost reduction techniques. For instance, it has automated its entire production line to eliminate backtracking and increase efficiency. The use of machines in the production line ensures that the manufactured products have consistent quality. Unlike human labor, machine to not get fatigued, thus, they produce high-quality automobiles in high volumes, thereby minimizing the unit costs (Grayson & Hodges, 2017, 58). Automation has also reduced the product’s costs as it minimizes the need for manual staff.
Consumers have diverse needs that must be met by the manufacturer. Therefore, organizations should have flexible manufacturing systems that can produce a wide variety of automobiles. Tesla employs flexible and programmable automation to meet diverse customer needs. The changeover time from one batch of product to the other is tremendously reduced in the flexible manufacturing system (McWilliams, 2015, 67). Programmable automation allows the firm to change the products’ features at an affordable cost. Tesla minimizes the inventory costs by establishing strategic partnerships with vendors and suppliers. Unlike in traditional organizations where stockpiles are procured beforehand, Tesla orders small quantities of the inventories at regular intervals (Dibble, 2018, 47). By minimizing the idle stockpile, the organization reduces its inventory control costs, capital depreciation, and administrative overheads. Tesla offers consumer consultation services as part of its corporate social responsibility (Yakovleva, 2017, 87). Customers are advised to purchase products based on their performance needs. Other than just rushing to sell the product, Tesla takes time to study the clients’ needs. The organization has a team of expert engineers as well as customer care employees who respond to the consumers’ needs (Flammer, C., 2015, 68). Moreover, the technical staffs advise the buyers about the maintenance schedule, performance features as well as other parameters such as carrying capacity, torque, and speed.
Suppliers and vendors are the other significant stakeholders at Tesla. They are responsible for supplying the raw materials on time and at an affordable cost. Tesla develops its suppliers and vendors to improve their quality standards and operation (Dibble, 2018, 53). For instance, the organization pays the suppliers on time so that they can generate sufficient revenues for enhancing their processes. Given that Tesla uses just in time and lean production, it demands the suppliers to provide high-quality supplies. Wastes and scraps are not acceptable in lean manufacturing (Grayson & Hodges, 2017, 60). Moreover, the suppliers must be able to meet urgent orders. Tesla focuses on reducing inventory control costs. Thus, it orders small quantities of the stockpiles at regular intervals.
The suppliers are, therefore, required to have the capacity of delivering the orders on time to minimize the risk of stock out. However, to achieve the strategic plan, both the organization and its suppliers corporate on several aspects. For instance, there is joint attention towards the transportation of inventories (Crowther, and Seifi, 2018, 68). Also, Tesla develops its suppliers’ in-house capacity by sharing production goals with them (Dibble, 2018, 54). The development programs ensure that the supplier can meet urgent orders and are willing to supply orders with slight modifications as requested by the client. Tesla also meets the government’s expectations by complying with the national and state of laws and regulations. Further, the organization significantly contributes to the nation’s economic growth by paying taxes to the government as well as employing citizens (Flammer, C., 2015, 68). Tesla also complies with the government’s regulations on material sourcing through its supply chain management system.
Corporate citizenship is the other CRS initiative that has enabled Tesla to compete effectively with other renowned companies in the industry such as General Motors, Toyota, BMW, and Volkswagen. It is integrated into the organization’s management to boost the employees’ morale. Tesla acknowledges that the employees are its critical stakeholders as they sacrifice their time and energy to achieve the organization’s goals (Dibble, 2018, 45). Corporate citizenship in the organization enhances employee interaction and free communication in the organization. The employees are free to share their professional, social, and economic problems with the managers (Crowther, and Seifi, 2018, 67). Moreover, the junior staffs are involved in the decision-making process. Typically, the organization has weekly departmental meetings in which the employees are allowed to share some of the challenges that they encounter in their daily activities (Shamir, 2017, 38). Also, the employees are also requested to develop solutions to some of the problems facing the organization. During the brainstorming session, each worker is at liberty to contribute ideas based on their experience and education. Involving the employees in decision-making motivates them and also improves their productivity.
Areas of Improvement
Although Tesla focuses on environmentally friendly initiatives, it should also consider the product’s costs to develop a competitive edge in the industry. The company can use modern manufacturing technologies to reduce operational costs (Flammer, C., 2015, 69). For instance, instead of using traditional job shops in the manufacture of electric cars, the firm may use mass-production techniques to take advantage of the economies of scale (Crowther, and Seifi, 2018, 69). In the large-scale production system, backtracking of inventories is minimized, and scheduling of operations is simplified, thereby decreasing costs (Dibble, 2018, 58). Mass production employs special purpose machines that do not require technical staff to operate. Thus, the company can reduce its wage costs by using the special purpose machine inline production. Moreover, line balancing can also be used to minimize idle time, eliminate waste, and reduce work in process inventories, thereby reducing the product’s costs.
Based on the analysis, it is evident that Tesla is among the contemporary automobile and energy industry that has adequately addressed the needs of its stakeholders. The firm has a robust corporate social responsibility that satisfies the needs and interests of its stakeholders. By manufacturing electric cars, the organization reduces carbon emissions, thereby protecting the environment.
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Lecture 1: Corporate Responsibility
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