Ops Management at Tesla - why workplace injuries matter

Elon Musk, CEO of Tesla, is one of those business leaders who is frequently in the news - this morning, this is because he refused to answer financial questions from analysts on a routine 'earnings call' yesterday, describing them as "boring bonehead questions". Investors don't like that sort of message and shares in Tesla fell by 8% as a result. His evasion, as reported by the FT, left his investors uneasy about the electric automaker’s cash burn as it charts an ambitious ramp-up of production of its mass market Model 3 vehicles. Crucially, one of the reasons for that cash flow problem is that the production line is suffering regular shut-downs, with a very high number of workplace injuries being recorded.

The company confirmed this week that it has had to dial back its use of automation and has shut down production periodically for a few days. A worker safety website reported that Tesla’s injury rate was 31 per cent higher than the industry average in 2015, and the company is under investigation by the state of California. In the FT, a former chief administrator of the US Occupational Safety and Health Administration has some advice for Elon Musk, which starts with a statement that implementation of a safety and health management system is the best way to achieve operational excellence.

He acknowledges that hitting production goals can often feel like the most pressing priority, but is clear that, in his experience, "Businesses that strive for operational excellence are better, safer places to work. The process of making them safer makes them more productive and more profitable." He quotes the example of Hasbro, which instituted a programme of cooperation between workers and management to improve safety, and as a result became so productive that they didn't need to follow their competitors by moving to China to lower their production costs.

Should managers bonuses be based on safety performance, rather than on profit?