Background to Tesla

Tesla Inc. is a USA-based multinational automotive and clean energy company which is headquartered in Austin Texas. With its working model, the company has steered a revolution in the automobile industry and within a decade it has become one of the world's most valuable companies and remains the world's most valuable automaker. Most of its success is attributed to the well-designed organizational structure that helps it in implementing efficient decision-making processes and facilitates the completion of projects (Chen & Perez, 2018).

Tesla's Organizational Structure - Functional organizational structure

Although, Tesla Inc. itself does not have made its management structure publically known but evaluation can be done through its corporate governance structure and the information from its annual reports. (Uygun & Sudhakaran, 2021) has characterized Tesla as a functional organizational structure with aspects of hierarchy that divides the organization into different departments based on their functions.

This implies that Tesla employs functional centers to cover all its business activities including finance, technology, engineering, sales and marketing and design and Human resources and communications. Each of the functional areas is headed by the vice president except the software department which is headed by the Artificial Intelligence director. (Uygun & Sudhakaran, 2021) highlights that the heads of the different functional teams made the core of Tesla’s centralized control at its headquarters which decides the strategic direction of the company with the international divisions provided with little autonomy.

Within the functional organizational structure, it has divided its managerial functions within different functional departments into three management levels including the Top level management which consists of the heads of different functional units like CEO, CFO, Chairman and VPs who develop the goals, strategic plans, and company policies and make decisions in the best interest of their respective functional areas.

Subsequently, middle-level management in different units is composed of Managers, Head of the departments and chief officers of different departments which directly control all operations and the lower-level management. Lower management further includes supervisors, Foremen, Specialists, Assistant Managers and team leaders from respective functional units. They focus on controlling and directing and have the responsibility of assigning tasks, supervising the employees, ensuring quality and quantity and up- channeling the problems.

Moving ahead, the functional organizational structure can be well highlighted by the following organizational chart which shows different heads responsible for managing their respective functional departments.

Organizational structure chart of Tesla

Advantages of functional organizational structure at Tesla

There have been several studies that have attributed half of Tesla's success to its unique and comprehensive organizational structure. (Clausen, 2021) has highlighted the following advantages for the organization aroused from its functional organizational structure with the hierarchical prospects in its functional departments.

  • This organizational structure has made Tesla Inc. facilitate extensive control over the stakeholders of the organization and provide support for the implementation of new strategies for business growth and improvement. With this structure, the company maximizes its ability to implement new strategies and manage operational activities and objectives through its management.
  • With the functional organizational structure in place, it has been arguably achieving great operational efficiencies as it is making employees with shared knowledge, skills and interests work together and perform similar functions. When the departments focus on one area of work, there are clear lines of management which increases accountability and clarity.
  • The functional organization structure has been also helping Tesla to save costs in multiple ways. With the organization of employees with similar skills and expertise into the groups, the departmental heads can concentrate on the bigger goals with the middle-level managers focusing on overseeing their team goals.

Challenges faced by functional organizational structure at Tesla

Despite creating numerous benefits for Tesla, its organizational structure has the certain following deficiencies:

  • There have been increasing incidents and reports of cross-departmental workplace harassment which translates that Tesla has been struggling with team cohesion and collaboration. Therefore, the functional structure of the organization responds well to the lack of teamwork and collaboration of different departments necessary for longer-term success.
  • Because of the strong hierarchy and bureaucracy within its functional organizational structure, there have often been communication breakdowns from lower employees to the top management which often demoralizes them and makes Tesla one of the highest companies in the industry in terms of employee turnover.

Recommendations for Tesla regarding their organizational structure

To overcome the challenges and remain competitive in the industry in the future also, the organization is proposed with the following recommendations.

  • The organization is recommended to establish channels of communication that makes it easy for the low-level managers and the staff to communicate their concerns with the top-level management by facilitating the flow of information by eliminating the middlemen. This will help organizations that everyone's concerns are being heard which comparatively will contribute to the reduction of higher turnover.
  • The organization must take a decentralized approach to decision-making by giving more autonomy to the international functional managers with key decision-making responsibilities, thus freeing up the core management to remain focused on strategic planning and big-picture decisions.
  • In addition, within its functional structure, it must ensure to offer employees choices and the ability to personalize their work and make arrangements for their cross-departmental training which would help the organization to make sure that employees do not feel boredom which functional structures are often vulnerable to. For this, the company can look for an effective change management process to ensure smooth changes in the organization.

Adopting these recommendations would help the organization to mitigate the deficiencies and remain competent and more relevant in the industry for longer times.

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Chen, Y. and Perez, Y. (2018) “Business model design: Lessons learned from Tesla Motors,” Towards a Sustainable Economy, pp. 53-69. Available at:

Clausen, J. (2021) Tesla as a start-up in the automotive industry. from a candidate for ..., Available at: (Accessed: December 30, 2022).

Uygun, H. and Sudhakaran, P. (2021) (PDF) Tesla Inc management report - researchgate, Available at: (Accessed: December 30, 2022).