Elon Musk keeps hitting it out of the ballpark... not as a technology guru but as a people-savvy manager. Last month, Musk gave the world's best productivity advice in a single, short sentence and last week Musk finally did what CEOs should have done years ago--call out financial analysts for asking stupid questions.

And now, for his next magic trick, Musk just solved one of the knottiest of all management problems: how to get rid of blood-sucking consultants without accidentally firing the consultants that are actually helping you be successful.

Let's face facts: many of the consultants who work for a company like Tesla are parasites who work on a "time and materials" basis and therefore have a vested interest in drawing projects out as long as possible.

At the same time, in a company the size of Tesla, there are going to be some consultant who are doing work that's crucial to the company's success--usually providing technical expertise that otherwise might be impossible to obtain.

This dichotomy is extremely dangerous because the parasitical consultants are usually in cahoots with executives and are expert at playing corporate politics and thereby maintaining their own survival. By contrast, the truly useful consultants are generally heads-down engineering types who don't know corporate politics from a hole in the ground.

As a result, a CEO like Musk may very well understand at a gut level that consultants are draining the company of resources but there's never been a practical way to sift the wheat from the chaff.

If the CEO asks for a review of all consulting contracts, the result is a protracted political battle where each executive attempts to justify the consulting groups that they've hired. Meanwhile, the regular line employees (who generally know which consultants are useless) never get asked, or must filter their observations through the executives who are covering their own butts.

For example, I once worked in a huge high-tech firm that had a software development group consisting of roughly 800 engineers who, to my knowledge, never created any commercially viable software.

The SVP in charge of this group hired McKinsey to diagnose the lack of productivity. McKinsey interviewed dozens of engineers and managers, held dozens of meetings, after spending around $2 million, produced a 50 page report/slide deck.

My boss, who worked for a peer of the SVP, asked for my opinion of the report. If you've been around the corporate world, you'll not be surprised to learn that the report was full of fuzzy suggestions like "foster more innovation" and "increase intergroup communication." The following conversation ensued:

  • Boss: "So, what do you think?"
  • Me: "Well, there are 50 diagrams in the report and the report cost us $2 million, which comes out to $40,000 per diagram. If we'd taken that money and bought fine art, we'd have something we could sell when we go out of business because we waste money on this kind of bullsh*t."
  • Boss: "But what about the programmers? They aren't creating usable software."
  • Me: "Anyone in that group who is dumb enough to write a piece of software that gets commercially released gets stuck supporting it for the rest of their career. Only people who are 'architects' get promoted. Promote the programmers and demote the 'architects' and you'll get usable software."
  • Boss: "Hmmm. I never thought of that."

So, let's test your understanding of corporate politics. As the result of the conversation above what happened?

  1. My boss pointed out to the rest of the management team that McKinsey was taking us for a ride.
  2. My boss said nothing and McKinsey got hired to implement the pablum they'd recommended in the report.

Obviously, #2 is what happened because even though everyone who had been working directly with the McKinsey consultants knew they were individually and collectively full of crap, the SVP was convinced that McKinsey could help. More important, the SVP's reputation was now tied to the McKinsey report, which was seen as "mission critical."

Apparently, something similar has taken place inside Tesla. Musk could have said "no more spending on consultants," but that would have been insane because that would eliminate the useful consultants along with the parasites.

So, rather than trying to untangle the mess, Musk cut the Gordian knot by putting the decision-making into the hands of rank-and-file employees, rather than making it subject to corporate politics. Musk's exact words:

"Anyone who does not have a Tesla employee putting their reputation on the line for them will be denied access to our facilities and networks on Monday morning."

Freakin' brilliant.