Mendoza School of Business

Admire Elon Musk all you want, but please don’t manage like him

Published: January 21, 2015 / Author: Rick Wartzman

Elon Musk roared into the Detroit Auto Show last week and made plain that it’s not only his Tesla  TSLA 2.30% electric cars that are expected to meet the very highest performance standards, gunning from zero to 60 miles per hour in a McLaren-like 3.2 seconds. He rides his employees awfully hard, as well.

“If you are fighting a battle, it’s way better if you are at the front lines,” Musk told the Wall Street Journal, describing himself not as a mere micromanager but as something far more intense—a “nano-manager.”

Indeed, Musk makes no apologies for what the Journal described as “a hands-on obsession with the tiniest operational and car-design details at Tesla.” It’s safe to say that his domineering style doesn’t differ at SpaceX, the rocket company he founded and runs.

Musk is the envy of many—and why not? He’s a billionaire. He was married (twice) to a beautiful actress. He has plans to visit Mars someday. He nonchalantly tosses around the word “Hyperloop.” Heck, he’s the model for Tony Stark, the swashbuckling genius played by Robert Downey Jr. in the “Iron Man” films.

But before legions of executives start trying to be nano-managers, here’s a note of caution: This is a terrible way to get the most out of your people.

Workers perform best when they’re in what Paul Zak, my colleague at Claremont Graduate University, describes as a “high-trust environment.” By looking at some 5,000 employees at about 50 companies, Zak and his team at the Center for Neuroeconomics Studies have found that those in high-trust situations are 19% more productive than those in low-trust workplaces. One crucial aspect of being in a high-trust setting, Zak explains, is having “the freedom to take on projects the way you choose to.”

When people’s autonomy in the workplace is sharply curtailed, they feel as if they’ve lost control—and, in turn, their brains react as if they’re being threatened. That raises their level of stress, which often causes them to perform poorly. “Feeling in control, even if it’s an illusion, is key to … cognitive ability staying intact,” Amy Arnsten, a professor of neurobiology and psychology at Yale, has pointed out.

Great managers have always known the trouble with dictating to employees. Successfully motivating employees “involves teaching rather than telling,” William B. Given Jr., the president of American Brake Shoe Co., wrote in his 1949 classic Bottom-Up Management.

This dynamic is especially important in today’s fast-moving world, when organizations need everyone, from top to bottom, to continually come up with fresh ideas. “The tighter the controls you enforce, the lower the innovation,” says F. Asis Martinez-Jerez, a business professor at Notre Dame. In a 2011 study, he and two colleagues studied casino workers under different degrees of management oversight. Their conclusion: “Employees in ‘tightly monitored’ business units face strong implicit incentives to experiment less by deviating less often from explicit decision guidelines.” As a consequence, they “have fewer opportunities to learn” new ways to serve their customers.

Read the entire story on the Fortune website.