Rescinding Internships to Cut Costs is a Bad Move, HR Experts Say

By Jennifer Alsever, Fast Company (TNS)

Earlier this month, news circulated on social media that Tesla rescinded internship offers, reportedly as part of a larger cost-cutting measure as the EV maker faces sagging profit. HR experts say that was a big mistake.

“There are cost savings, but there definitely is a cost to rescinding offers both internally and externally, which is a betrayal of trust,” says Jennifer Dulski, CEO and founder of Rising Team, a team performance platform. “It sends the signal that the company will say one thing and do another. Top-tier talent, who will always have multiple options, will be less likely to want to work for you.”

Times have indeed been turbulent at Tesla, which has seen profits sink to a six-year low. The company laid off thousands of workers in recent weeks, including the majority of its 500-person Supercharger division. At least five high-profile executives have either resigned or plan to resign later this year, and the company faces investor scrutiny, environmental protests, safety investigations, and slowed demand.

Fast Company reached out to Tesla for comment but did not receive a response.

Big companies are looking for more ways to cut costs

Despite unemployment hovering at just 3.9% last month, a number of other major U.S. companies are slashing their payrolls or cutting other costs this year, including Google, Microsoft, Nike, and Apple. In fact, nearly 40% of business leaders say they think layoffs are likely at their companies this year, and half will likely implement a hiring freeze, according to a survey by ResumeBuilder.

However, employers facing cutbacks would be wise to avoid Tesla’s intern debacle. Previously, the company had one of the more sought-out internship programs in the country, typically hiring 3,000 students. They pay a median of $22 an hour, according to Glassdoor.

“Internships might be a quick way to cut costs, but it’s not going to be the most substantial way. And the reputational damage done is huge,” says Annie Rosencrans, director of people and culture at HiBob, a global HR tech firm. “There are a million other places that companies can look to minimize costs, whether it’s subscriptions to software seats that people aren’t using.”

Training opportunities are more valuable in the era of hybrid work

The number of internship programs have declined since the pandemic, says Rosencrans, because the lack of an office environment makes it more difficult to train and mentor young people. “They need more direct guidance and hand-holding and that’s harder to do remotely,” says Rosencrans.

Tesla’s move botched plans for interns who have a finite period of time to work, many of whom lining up housing and flights. But most anticipated learning from top managers and putting Tesla on their resumes, says Dulski, who also teaches business management courses at Stanford University.

Rescinding internships can also be a problem internally, too, because interns allow teams to get more work accomplished and create an opportunity for rising leaders to get their feet wet in managing people, says Dulski.

Over the last three decades, Dulski has seen companies cut internship programs as a way to avoid other major cost-cutting measures. Employers can avoid this kind of reputational damage by planning early, making fewer internship offers or thinking more creatively about how young people can still get valuable experience. That might be shortening the duration of an internship from 12 weeks to six, allowing students time to seek an additional internship for the latter half of the summer, sharing internships with another student, or reducing the salary offered.

“Compensation is usually only one piece of the pie for their internship,” says Dulski.

In the meantime, General Motors is turning Tesla’s loss into its gain: As Business Insider first reported, a recruiter last week posted on LinkedIn an invitation to those interns to come work for the auto giant this summer instead.

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