Elon Musk uses an unusual layoff strategy that sends all the wrong messages, HR expert says

“Desperate times call for desperate measures,” Musk told CNBC’s David Faber in May 2023. “So there’s no question that some of the people who were let go probably shouldn’t have been let go.”

This fire-and-rehire tactic has been suggested to be a deliberate gambit by Musk.

In an interview with Lex Fridman, Walter Isaacson, Musk’s biographer, said the mass layoffs at Twitter were part of Musk’s “delete-delete-delete” approach to managing his companies. The author said the CEO believed “if you don’t end up adding back 20% of what you deleted, then you didn’t delete enough in the first round because you were too timid.”

Since founding his first company in the late ’90s, Musk has risen to become one of the most prominent entrepreneurs of the 21st century — and arguably one of the busiest. On top of Tesla and X, Musk also runs SpaceX, Neuralink, AI startup xAI, and an underground tunnel company. His business ventures have made him one of the richest men in the world.

Still, that doesn’t mean Musk is particularly good at running those companies, critics say.

“Organizations can be poorly run and still be financially viable,” Alec Levenson, a senior research scientist at the University of Southern California Marshall Center for Effective Organizations, told Business Insider.

“If you have good enough margins, if you have strong enough loyalty from your customers, then you can still have good financial results,” Levenson added. “But I guarantee you the results would be that much better if the management practice is improved and you can do it without hurting the bottom line.”

A culture of distrust

When it comes to Musk’s fire-rehire approach, Levenson told BI that the tactic is an ineffective way of managing bloat at an organization and may only sow distrust within a company.

“If you have good management practices and good leadership from top to bottom in the organization, then the people who are in different leadership positions at different should know who are the better employees and who are not in terms of their contribution,” he said.

Other management practices by Musk have been criticized before and, in some cases, accused of breaking labor laws.

At Tesla, for example, Musk told his employees that he would personally approve all new hires, according to an email obtained by Business Insider.

Human resources experts argued that the practice is an inefficient use of a CEO’s time and tells workers responsible for hiring personnel that they can’t be relied on to do their job.

“To have one of the most successful entrepreneurs and someone who’s running two very important organizations get down into the weeds like that is the worst use of his time,” Levenson said of Musk’s role at X and Tesla. “What that says is that you don’t trust anybody that’s sitting in management — all the layers between you and them.”

Musk is also known to have fired employees who disagreed with his decisions.

Weeks after his takeover of Twitter, now known as X, Musk had a team look through the company’s internal messages to find employees who appeared to be insubordinate and later fired those workers, The New York Times reported.

Several ex-employees who previously spoke with Business Insider’s Kali Hays also said they felt they were fired because of their thoughts on Musk.

A similar incident occurred at SpaceX when a group of employees were fired shortly after they sent an open letter in 2022 to the company’s leadership, calling Musk’s behavior “a frequent source of distraction and embarrassment for us.”

The National Labor Relations Board filed a complaint against Musk, accusing the SpaceX CEO of unlawfully firing the employees.

Levenson told BI that one way to address employee concerns or disagreements, at least within the company, is to establish open lines of communication for employees to express any internal issues.

In March, the NLRB also accused Musk’s SpaceX of forcing fired or laid-off employees to sign illegal severance agreements that barred them from speaking against the company or joining class-action lawsuits.

Musk’s management practices have also been challenged in court.

Former janitors at Twitter’s New York office sued Musk in June 2023, claiming they are owed “hundreds of thousands of dollars in back wages.”

Other former Twitter employees and executives have sued Musk, accusing him of unpaid severance pay.

“This is the Musk playbook: to keep the money he owes other people and force them to sue him,” according to a lawsuit filed by four former Twitter executives. “Even in defeat, Musk can impose delay, hassle, and expense on others less able to afford it.”

Spokespeople for Musk, Tesla, X, and SpaceX did not immediately respond to a request for comment.