tesla-organizational-structure

What Is Tesla’s Organizational Structure? Tesla Organizational Structure In A Nutshell

Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.

Understanding Tesla’s organizational structure

Tesla is an automotive company like no other, headed by the enigmatic Elon Musk and consistently pushing the boundaries of what many in the industry believe is possible. As a result, it should come as no surprise that the organizational structure of the company is more difficult to define when compared to its peers.

Musk provides little information on how the organization is structured or on the executives that make up Tesla’s senior management. He has made comments in the past that speak of a desire to incorporate a flat organizational structure – a desire no doubt reinforced by his inability to delegate. Indeed, according to a report published by tech news site The Information in 2018, Musk had no fewer than 29 executives reporting directly to him.

From what information does exist, it is likely Tesla uses a dominant functional organizational structure. For instance, there may be a group of employees structured around sales with another structured around engineering. The company may also exhibit other structures or indeed no structure whatsoever, with some former employees noting there was very little bureaucracy or politics in the workplace. To speak to someone from another department, for example, all they needed to do was walk over there and start a conversation.

A lack of structure can also be seen in the way Musk refers to himself as “Technoking” of Tesla to demonstrate how little importance he places on the title of CEO.

Function-based hierarchy

As hinted at earlier, Tesla does employ functional centers that cover all business activities. These include finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Functional team heads form the core of Tesla’s centralized control at its headquarters in Austin, Texas, with international operations given little autonomy.

Each center, in turn, supports two key corporate divisions:

  1. Automotive – which incorporates the design, production, sales, and leasing of electric vehicles and environmental offset credits.
  2. Energy Generation and Storage – a much smaller segment that deals with the design, production, installation, sales, and leasing of solar energy generation products. This also includes relevant environmental incentives and credits.

In terms of financial reporting, Tesla is also comprised of four geographical divisions:

  1. United States.
  2. China. 
  3. Norway, and
  4. Other.

Key takeaways:

  • Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Musk’s preference to avoid delegation means the company embodies characteristics of a flat structure with a higher ratio of subordinates to managers. In certain scenarios, Tesla may exhibit flexible or very little structure whatsoever.
  • With that said, Tesla’s dominant organizational structure is functional. One group of employees, for example, may be structured around sales with another structured around engineering.
  • Functional heads are based in Austin, Texas, and control most aspects of the company’s domestic and international operations. Each functional group supports two key corporate divisions with financial reporting also occurring in four additional geographic divisions.

Read Next: Organizational Structure.

Read Also: Tesla Business Model, Tesla Competitors, Tesla Mission Statement and Vision Statement, Who Owns Tesla, How Does PayPal Make Money?, Elon Musk Companies, Who Is Elon Musk.

Read Also: Tesla Business Model

Related to Tesla

Is Tesla Profitable?

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Yes, Tesla has been profitable since 2020. Indeed, Tesla generated $862 million in 2020. And it further generated $5.6 billion in net income by 2021.

Tesla Production

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Tesla Production vs. Delivery

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Who Is Elon Musk

who-is-elon-musk
Elon Musk, seen as one of the most visionary tech entrepreneurs from the Silicon Valley scene, started his “career” as an entrepreneur at an early age. After selling his first startup, Zip2, in 1999, he made $22 million, which he used to found X.com, which would later become PayPal, and sell for over a billion to eBay (Musk made $180 million from the deal). He founded other companies like Tesla (he didn’t start it but became a major investor in the early years) and SpaceX. Tesla started as an electric sports car niche player, eventually turned into a mass manufacturing electric car maker.

Who Owns Tesla

who-owns-tesla
Elon Musk, an early investor and CEO of Tesla, is the major shareholder with 21.7% of the stocks. Other major shareholders comprise investment firms like Baillie Gifford & Co. (7.7%), FMR LLC (5.3%), Capital Ventures International (5.2%), T. Rowe Price Associates (5.2%), and Capital World Investors (5%). Another major individual shareholder is Larry Ellison (co-founder and CEO of Oracle), with a 1.7% stake.

History of Tesla

history-of-tesla
Founded in 2003 by Eberhard and Tarpenning, eventually, the initial co-founders left the company, and by 2004, Musk first became the main investor. After that, by 2008, he took over as CEO of the company. Tesla would go through many near-death experiences until 2018. And yet, by 2021, Tesla will become a trillion-dollar company.

Tesla Business Model

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Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory, which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.

Tesla Competitors

tesla-competitors
As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with self-driving software.

Real-Time Insurance

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A real-time insurance business model enables Tesla to build its insurance arm by dynamically adjusting the premiums based on real-time driving behavior. Reduced insurance premiums hooked with the leasing arm enable Tesla to scale its demand side of the business.

Tesla Business Model

tesla-financials
In 2021, Tesla generated over $53.8 billion in revenues, compared to $31.5 billion in 2020. The largest segment in automotive sales (comprising regulatory credits revenues), followed by leasing (as part of the automotive), generated $1.6 billion in 2021. Outside automotive sales (non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, and more) accounted for $3.8 billion. And energy generation and storage accounted for $2.8 billion. US and China are the primary markets, with almost $24 billion and nearly $14 billion, respectively, in 2021. In 2021, Tesla generated $5.6 billion in Net Income, a net margin of over 10%.

Organizational Structure Case Studies

Airbnb Organizational Structure

airbnb-organizational-structure
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.

eBay Organizational Structure

ebay-organizational-structure
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.

IBM Organizational Structure

ibm-organizational-structure
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.

Sony Organizational Structure

sony-organizational-structure
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.

Facebook Organizational Structure

facebook-organizational-structure
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).

Google Organizational Structure

google-organizational-structure
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.

Tesla Organizational Structure

tesla-organizational-structure
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.

McDonald’s Organizational Structure

mcdonald-organizational-structure
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.

Walmart Organizational Structure

walmart-organizational-structure
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

Microsoft Organizational Structure

microsoft-organizational-structure
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.

Read Next: Organizational Structure

Read Also: Business Model

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