In the weeks since Elon Musk took over as CEO of Twitter, the corporate has laid off almost half of its staff and supplied the remaining staff an ultimatum: Commit to being “extremely hardcore” going ahead or go away the corporate. According to The New York Times, tons of of staff have opted for the latter.
On Wednesday evening—because the deadline loomed—Andy Wu, an assistant professor of enterprise administration at Harvard Business School, advised me that Musk’s powerful, authoritarian administration fashion “generally doesn’t work in most situations.” However, he argued, it has seemingly labored no less than considerably at Tesla and SpaceX. Wu pressured that Twitter had been in bother previous to Musk’s acquisition, so its odds of long-term survival have been already restricted.
We caught up once more this morning to debate the fallout from the ultimatum. Wu was nonetheless hesitant to rely Musk out. “I’ve been consistently wrong about projecting out Musk’s potential, so I really don’t want to bet against him this time,” he mentioned. “He’s always exceeded my expectations.”
Our conversations have been edited and condensed for readability.
Caroline Mimbs Nyce: What do you make of Musk’s administration fashion, as demonstrated prior to now week?
Andy Wu: Musk is certainly a hard-charging, impulsive, and risk-tolerant chief, and he’s prepared to go for the sorts of modifications at Twitter that I can’t think about some other CEO or entrepreneur going for. I do assume there’s some logic to the insanity.
That mentioned, Musk undoubtedly has a sure desensitization to the broader affect on the skin world, which different executives could be extra involved about.
I feel Musk is correct in that he must take some probabilities right here and check out some new issues.
Nyce: So you don’t essentially assume the technique is improper?
Wu: Well, particular person decisions could also be improper. It’s unclear if the blue-check-mark factor will become the proper technique. And it’s unclear if chopping particular groups is the proper technique. But at a excessive degree, I’ll simply spotlight that Twitter is a enterprise that, for a really very long time, has been very, very weak. And so what we’re seeing right now is simply that weak spot uncovered to the general public. But it’s really been weak for a very long time. And the 2 weaknesses are—one, it’s a really inefficient value construction relative to some other social-media enterprise. And two, it’s very, very sluggish at really producing new options and innovating.
Nyce: Like, from a software program perspective?
Wu: From a product standpoint as effectively, as within the options out there to us.
And so that you’ll see what he’s carried out within the early days right here is, first, to aggressively minimize prices. And second, to start the method of fixing the tradition in order that it’s acceptable to experiment in public and check out new issues and take dangers and sometimes fail.
Nyce: That’s fascinating. I’ve been considering so much about Agile, the iterative approach of working popularized in software program. Moving in an agile approach appears to contain some belief among the many crew members. When we take a look at Musk as a supervisor—the ultimatum he gave, feuding with a developer on Twitter—are these issues that might empower software program groups to ship options shortly and transfer in that “build fast” approach?
Wu: It typically doesn’t work in most conditions. But it appears to have had some success at Musk’s prior firms. It is fairly clear from prior firms he’s managed that he’s fairly authoritarian, in addition to hard-charging and aggressive in his targets. There are undoubtedly rumors that he doesn’t tolerate dissent and can react to it fairly negatively. We know this occurs inside Tesla and inside SpaceX.
I feel we’re nonetheless within the section of value chopping at Twitter proper now to get the monetary scenario in form. Twitter does want to chop staff. And I do assume a few of these ultimatums are designed to see if he can organically shake out a few of the staff.
Nyce: Does this type of—you referred to as it authoritarian; I would name it hard-ass—administration fashion usually work for an employer in the long term?
Wu: It’s undoubtedly a troublesome setting, and it doesn’t work for most individuals. It undoubtedly wouldn’t work for me. I also can inform you that in 2019, the annualized turnover of executives reporting to Musk at Tesla was 44 p.c, which is 4 instances greater than that of a equally sized agency. So there’s an enormous quantity of churn in his organizations.
Nyce: So, is he a superb CEO? Just to ask a point-blank query. What are the metrics you’ll take a look at to evaluate whether or not somebody is a profitable supervisor and CEO?
Wu: Musk is a one-of-a-kind CEO.
Nyce: [Laughs] That’s very impartial.
Wu: I’ll say, on the upside, what Musk has achieved to date at Tesla and SpaceX is absolutely unbelievable and spectacular and actually particular, so far as his era of enterprise leaders by way of the quantity of scale and assets wanted to mass-produce electrical automobiles and construct business spaceships. It’s unfathomable, and he really obtained there. The problem now could be that Musk has by no means been held to a benchmark of truly being worthwhile.
Nyce: Isn’t profitability fairly vital in case you’re a enterprise govt?
Wu: We take into consideration progress and profitability individually. When you’re within the progress section of the enterprise, buyers worth you on progress, and you may justify rising with out excited about profitability. At some level, inevitably, any enterprise has to shift to excited about profitability. And we don’t know but if that’s inside Musk’s talent set.
As one illustrative instance, for no less than a 20-year window, Amazon was given a free cross by Wall Street to not take into consideration profitability, and that has really allowed Amazon to do a whole lot of wonderful issues. But as you’ll be able to see, lately, profitability is certainly extra on the minds of executives at Amazon.
Twitter is definitely an incumbent, established enterprise. And given the monetary construction of Twitter—and its debt scenario—I think about profitability is definitely on Musk’s thoughts.
Nyce: Quite a lot of tech firms actually pitched themselves as different work cultures to Wall Street or conventional companies. Musk’s administration fashion is a little more conventional and a bit extra top-down.
Do you assume a frontrunner can realistically change a spot whose staff anticipate that different tradition? Can you set in a frontrunner who has a completely totally different administration fashion and get that tradition to vary?
Wu: So cultural change is among the many hardest, if not the hardest, administration problem attainable. There are usually not many examples I can level to the place managers efficiently shift the tradition of a complete agency from the place it began.
Nyce: Right. Like, are you able to flip a Facebook right into a Goldman Sachs?
Wu: Some of my colleagues are of the opinion that full cultural change is barely attainable when everybody leaves or dies.
What’s regarding right here is that cultural change isn’t one thing Musk has actually carried out prior to now. In the previous, he’s been the early worker or founder. He’s been in a position to set up a whole lot of the tradition. Here, he’s obtained to make a shift occur.
Nyce: With software program, it’s most likely fairly vital to have legacy staff round, proper? Can you simply shuffle out folks of 1 tradition and shuffle in folks of one other tradition with out having the corporate fully collapse?
Wu: Doing that form of swap may be very, very harmful. So we’re going to have to attend and see what’s going to occur right here. My sense is that they’re prioritizing the interior core of the know-how of Twitter, the social graph. And a whole lot of what we’re seeing is absolutely on the external-facing features and the product-user interface—just like the blue verify mark and stuff like that.
So, for instance, certainly one of Musk’s huge issues coming in is that he needs to vary the tradition round moderation. And that’s a kind of the place Musk would most likely lean towards chopping everyone and changing them along with his personal crew. Because that’s a kind of matters the place there’s a very sturdy cultural affinity to the way you do this job.
The key punch line right here is that Twitter was really in very unhealthy form and didn’t fairly have a future anyway. In phrases of actually powerful issues, that is the form of CEO you most likely must check out. Twitter is definitely a really, very troublesome enterprise problem that no one else has been in a position to remedy. So at this level, we would must, like, swing the automotive round and see what occurs.
Nyce: That’s fascinating. There are real-world penalties to a whole lot of this—to constructing quick and breaking issues within the software program sector.
Wu: I do assume that shifting quick and breaking issues undoubtedly has its limitations. There are two distinctions right here. First, after we take a look at SpaceX or Tesla, lots of people agree, on a societal foundation, that electrical automobiles and going to house are typically good issues—whereas folks have sure political and ideological views on what Twitter must be doing, and that’s essentially divisive in a approach that wasn’t true at SpaceX and Tesla within the early days.
The different distinction is that Twitter performs a crucial position in communication, particularly in elite circles of our world. It’s not so clear whether or not we wish to have this type of technique for one thing that some may take into account public infrastructure.
Nyce: What letter grade would you give Musk the supervisor, in case you needed to?
Wu: The option to do the deal, I might give a D or an F. Assuming the deal is finished, I might give it perhaps a C+, B–.
Nyce: So he’s not completely failing in your ebook.
Wu: It’s principally the sport. He’s taking part in the sport it’s a must to play to make this work. There’s nonetheless a excessive likelihood of failure. But in case you have been on this place, you would need to make a whole lot of these actually, actually powerful decisions, as a result of this can be a powerful firm to handle that has struggled for a very long time. I’m attempting to consider the truth that the corporate was weak already after which give him some good thing about the doubt from that perspective.
The purpose I’m hesitant to offer you decisive predictions right here is that Musk has surpassed my expectations already on Tesla and SpaceX many times and once more. And I don’t assume we are able to rely Musk out.
Last evening, information broke that tons of of staff had declined to take Musk’s ultimatum and determined to go away Twitter, elevating considerations that the positioning might fail. I referred to as Wu again on Friday to ask whether or not these occasions had modified his opinion.
Nyce: Do you continue to assume Musk has a shot at turning this firm round?
Wu: I nonetheless assume Musk has a preventing likelihood at turning Twitter round. That mentioned, from what we’re seeing on the skin, the cultural mismatch between Musk and the prevailing Twitter group appears to be fairly giant—and bigger than I might have anticipated entering into.
Nyce: Are you stunned by how many individuals reportedly didn’t take the “extremely hardcore” mandate?
Wu: No, the quantity of those who we’d anticipate to reject the “hardcore” mandate is smart. The solely query for me is whether or not or not Musk and his crew anticipated that degree of individuals rejecting the “hardcore” scenario.
I feel we now have to bear in mind right here that there are a variety of causes that Musk would need sure folks to depart the corporate past their official layoffs. And a kind of causes—which I feel we’ve forgotten within the tumult—is that Musk does care about folks working in individual. There is an efficient argument that—in a time when you want to be very agile, and you want to coordinate and innovate—having folks shut collectively and dealing in a co-located approach makes a distinction. This really creates a window for these folks—the individuals who don’t wish to come into the workplace—to go away. And I think about some fraction of [the outgoing employees] are these folks.
Nyce: But if he’s actually attempting to create a window for individuals who don’t wish to work in individual to go away the corporate, are there no more efficient methods of doing that?
Wu: Well, there are undoubtedly extra causes than that. But this can be a good approach of letting folks self-select it.
Nyce: Is it a pleasant approach?
Wu: I feel he needs to be straight-up right here about precisely what the expectation is. I feel giving folks the possibility to choose out is definitely, in some methods, form of well mannered. That mentioned, you’ll be able to argue that this administration fashion is broadly rude and unprofessional. But that is how he’s managed at Tesla and SpaceX. So giving folks the possibility to determine to not be a part of that regime is trustworthy.
The “hardcore” factor is certainly unconventional, however that is an unconventional deal. A personal-equity agency would by no means put themselves on this specific form of monetary scenario. This is an organization that private-equity companies have checked out and continuously rejected taking up as a result of the financials look unhealthy, and the corporate’s potential seems unhealthy.
And one of many key challenges, after all, is that any private-equity agency that might are available in on this deal must closely restructure the workforce. And that’s not one thing anybody needs to do. There’s no one who could be on this place and look good popping out of it. At the tip of the day, you could possibly put anyone in cost right here. In one 12 months, lots of people is not going to be at that firm anymore.
Nyce: On Wednesday, we talked slightly bit about how this authoritarian administration fashion doesn’t work at most locations, however that it appears to have discovered some success at Tesla and SpaceX—and that perhaps there’s this Elon exceptionalism, the place he can get away with it. Do you assume final evening’s information casts any doubts on that line of considering?
Wu: I feel it undoubtedly calls into query a few of the religion we had in each Musk’s means to attract folks in with this cult of persona and his means to get folks aligned round a imaginative and prescient. What’s totally different, taking a look at it now, is that at Tesla, SpaceX, and the opposite companies, the people who find themselves aligned on the mission and the cult of persona are individuals who chosen that setting. Whereas right here, these are individuals who didn’t choose into that setting—they have been pressured into it. And what’s clear now could be that Musk isn’t changing folks. He’s simply discovering the individuals who could be simple to transform.
Cultural change is simply as exhausting as I might anticipate it to be. It’s happening in a really dramatic approach. But I do wish to level out that, largely, Twitter continues to be functioning as a technical product. The web site nonetheless exists, and you may nonetheless submit. So I feel it’s really wonderful that it nonetheless features. I feel we’ve obtained to offer some credit score to Musk there, despite the fact that he’s misplaced a good portion of the corporate.
Nyce: Would you give credit score to Musk there, or would you give credit score to the individuals who work on Twitter?
Wu: That’s truthful. The individuals who constructed the Twitter product undoubtedly constructed a fairly resilient infrastructure to outlive by way of all of this. The technical half can function with out a whole lot of the folks.
Nyce: Do you assume a few of the “RIP Twitter” hashtag stuff is overblown?
Wu: No. I feel that’s a reliable danger right here. I feel it’s very attainable Twitter might go down within the coming weeks or months. But I do wish to level out that it’s wonderful it hasn’t gone down already. This is big turmoil on the firm. And once more, the turmoil is important to make this type of transformation. But it’s not the transformation that any private-equity agency or myself would have ever gone for. But Musk has traditionally gone for every kind of issues that folks mentioned have been inconceivable. I’ve been constantly improper about projecting out Musk’s potential, so I actually don’t wish to guess towards him this time. He’s all the time exceeded my expectations.
Nyce: I requested you to grade him earlier this week. What do you give the previous 24 hours?
Wu: I might change my first grade—for the selection to do the deal—to a strict F, as a result of I feel the mismatch between Musk and Twitter is one thing that might have been found out in due diligence.
Assuming the deal is finished, and it’s a must to handle the corporate, I’d downgrade this to a C. There are undoubtedly a whole lot of tough edges right here. This could possibly be carried out extra professionally and extra cleanly. But on the identical time, it’s not strictly an F for me, as a result of I feel there’s nonetheless an opportunity right here. And cultural change is tough for anybody.
Nyce: You talked about earlier than that you just don’t rely Musk out. Is that the place you continue to stand?
Wu: I nonetheless stand by that. I feel we are able to’t rely Musk out. What stands out to me is, in case you comply with the newer tweets from Musk, he’s really taking this in amazingly good spirits, and in a position to poke humor at himself in an irreverent approach. And I can guarantee you that, like, I otherwise you or anyone wouldn’t have that means to poke enjoyable at ourselves in this type of scenario, when the entire home is burning down.
Musk has been by way of a whole lot of turmoil in his previous, and he can deal with so much. And I feel that’s actually particular in his management. We have to recollect, he was fired from PayPal. Even from the very starting of his profession, he’s gone by way of so much. And that form of resilience, I feel, is particular. And truthfully, I’d wish to see that in additional leaders. Not essentially the loopy conduct—however the resilience is sweet.