- Marc Benioff told Insider more executives should consider Elon Musk's playbook.
- Since taking Twitter private, Musk has more than halved its staff and vented about them publicly.
Salesforce CEO Marc Benioff said more executives should ask themselves whether it's time to "unleash their own Elon within" when it comes to layoffs and a ruthless management style, but some experts say that's exactly the wrong way to run a company.
Scott Latham, a strategic management professor at the University of Massachusetts Lowell, called Musk's leadership "incredibly dysfunctional." Latham has studied layoffs in tech since the start of the internet boom. He said he's never seen a company recover from the type of drastic cuts Musk initiated at Twitter.
Since Musk bought Twitter in October, he's more than halved its workforce, cut numerous perks, called for employees to work "extremely hard core" hours, set quick deadlines for projects, and repeatedly stack ranked staff. Aside from chopping headcount, it's a similar strategy to what the billionaire has employed at Tesla and SpaceX — where he's known for his lofty production targets.
Benioff said the tech world is paying attention. "Every CEO in Silicon Valley has looked at what Elon Musk has done and has asked themselves, 'Do they need to unleash their own Elon within them?'" Benioff said during an interview with Insider on Thursday. "You have to look at him and say, 'Wow, it's a very unorthodox management style,' but, as I've said, you can't underestimate what he's done."
Benioff isn't the only one who's said more executives could emulate Musk — or at least part of him. Last year, tech investor David Friedberg said Twitter layoffs have set a new standard for the industry and show that more companies need to "cut deep."
'Who would want to work for a company like that?'
Still, "it's a terrible strategy," Harry Kraemer, a professor of leadership 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 typically have options. They won't work for a company that treats them like garbage."
Layoffs might boost a company's balance sheet in the near-term, but they can have long-term consequences. Some studies show remaining employees can 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.
The cuts can also cause reputational damage, making it more difficult to hire employees in the future and contributing to higher costs down the road when the company may look to grow, said Ayelet Fishbach, a professor of management at the University of Chicago.
"Layoffs are a crap shoot," Latham said. "You take a blunt instrument and you hope you're cutting the right people. You risk losing good employees to competitors — and the ones that are left behind, the first thing they're going to do is open up their resumes."
Twitter is one of many companies to initiate a series of layoffs in recent months amid signs of an economic downturn and a correction from the hiring boom during the pandemic.
Sometimes, a workforce reduction is unavoidable — Musk has said Twitter was headed for possible bankruptcy if he didn't cut costs — but experts say there's a right and wrong way to go about it. Namely, leaders need to make sure they're not cutting so deep they're forced to spend more money rehiring and training new staff.
They also need to treat employees with compassion and show the layoffs were a last resort, the experts said.
'A very grim future'
"If you're an effective leader, you realize your employees are not just human capital. You're dealing with people's entire lives — their families' lives," Kraemer said. "The reason someone is ruthless is they were a poor leader to begin with. If you were managing correctly, you wouldn't have to be so ruthless."
Salesforce appears to have already taken at least part of a page out of Musk's playbook. The company announced in January that it was cutting around 10% of its 84,000 staff and closing some offices. Insider also viewed a draft business plan, calling for employees to "run lean and mean" and not to let company 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 advantage a company has," said Fishbach, the University of Chicago professor. "Anyone can imitate a business strategy, but culture is much more difficult 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 who are struggling with how to reorganize their workforce, said Tamara Holder a workplace discrimination lawyer, who has acted as a corporate adviser.
"It has the potential for creating a toxic work place," Holder said. "But at the same time, what the CEOs are doing by cutting their workforce is a little inevitable," she said. "There's a lot of fat that needs to be cut in tech and in Silicon Valley. Elon has shown he can be ruthless and companies are following his lead."
Anat Alon-Beck, a corporate law and governance professor at Case Western Reserve University, said companies shouldn't follow the slash-and-burn playbook of Musk. "If more companies start treating their employees like Musk has, that would be a very grim 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 — they won't put up with it."