Page 91 - MS Year in Review 2020

Limitations. The primary limitation the application of this method to Tesla or any

company involves the availably of information to apply it. A second limitation is that
this assessment is a matter of interpretation and judgment.

There is also a validated tool for collecting the required information by means of an

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organizational surveys. These surveys are typically used in an organizational
assessment for our clients. However, it is obviously not feasible to apply these

surveys when doing an external assessment without access to company employees.

It must be noted that when we have used these surveys in combination with
judgmental assessment of the kind done for Tesla here, there is typically a high

degree of interrater reliability.

Nevertheless, of we want to increase our confidence in the finding, we can do a
“sensitivity analysis” of our scores. Specifically, if our analysis was “wrong” (that is,

it understated Tesla’s strengths) by 0.5 (1/2) point on all of the seven factors, then
the total score for the seven factors would increase from 21 to 24.5 (21
+3.5). Although this is not a likely result, the revised average score of Tesla

would be 3.5. This hypothetical revised average score would still keep Tesla in
the category of “Marginally Successful Organizations.” This would be a

significant improvement, but it will not likely justify the current extraordinary price
premium for Tesla stock. For example, on august 24, Tesla’s stock was selling at a
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price/earnings ratio of 140 times estimated 2021 (next year’s) earnings.

In order to place Tesla to the next level of category of “Sustainably
Successful" Organizations, we would need to adjust it score by a full point on all of
the seven factors; then the total score for the seven factors would increase from 21

to 28 (21 + 7). Although this is not a likely result, the revised average score of
Tesla would be 4.0, and Tesla would then be classified at the next level of success—

but still not the top level of a world class organization.

74 See: www.Mgtsystems.com.
75 Ben Levinsohn, The Trader “Thanks, Apple for the Stock markets All-time High,” Barron’s, August
24, 2020, p. M1.

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