Tesco’s success has been based on good people management and the simple act of giving workers what they want, believes Sir Terry Leahy, former chief executive of the supermarket chain.
In his keynote speech at the Chartered Institute of Personnel and Development in Manchester this week, he said that employees fundamentally desired four key things: a job that was interesting to do; to be treated with respect; to have a chance to get on in life as well as a boss who was of some help rather than being their biggest problem.
“If you get all that, you can release enormous potential in your people and organisation,” said Leahy, who stepped down from the top position at the retailer this spring in order to mentor and invest in start-up firms, mainly found in the high tech space and Asia.
But he also told the audience about the series of people management lessons that he had learned since becoming Tesco’s first marketing director in 1993. The company has subsequently leapfrogged the two largest retailers at the time in the shape of Marks & Spencer and Sainsbury’s to become number two in the world. Leahy’s key learnings to date are:
1. Find and speak the truth
Organisations tend to become insulated from the outside world and fail to realise what is happening externally because they filter out a form of the truth that is palatable to them. But the problem with this approach is that “if you don’t know the truth and how others see you, you don’t know what needs to be done”, Leahy said.
As a result, it was very important that the HR function helped create a culture that allowed people in general, and front line workers in particular, to speak the truth as they were the most likely to know what was the real situation was based on customer feedback.
Leahy himself, for example, had spent 40% of his time in Tesco stores simply listening to what people said. But too many companies had an implicit culture that prevents people from speaking out because managers do not want to hear criticism or to do things differently.
2. Big goals get the best out of people
People want to be inspired and to do something that makes a difference. This means that it is vital to stretch them because both they – and the organisations they work for – are capable of much more than they think they are, Leahy believes.
The role of HR in this context is to provide employees with the necessary resources and support, while making it clear at the same time that a lot is expected of them – something that acts as a positive “as people feel valued and want to do it”, he said.
3. Vision, values and culture matter
The ‘soft’ side of the business, which comprises vision, values and culture, matters much more than the ‘hard’ side, which includes technology, figures and marketing.
“It’s the people that make or break it and they have to feel they belong and want to give all of their abilities – not just the narrow ones that they’re contracted to give. But to do that, they have to feel safe and like they belong. It matters terribly,” Leahy explained.
In fact, it was impossible to understand Tesco’s success if one did not understand “the power of values, which has created a group of people that are more motivated and focused than others”, he added.
4. Trust and confidence are key
The key ingredients to business success are trust and confidence rather than money. Creating a situation of “collective intelligence” can only happen if individuals trust each other, but “if you have it, you release exponential energy”, Leahy said.
Because most people lack confidence, however, it was necessary to “work on them” in order to show them that they had the ability to contribute something positive. “That’s all I did – I tried to make people and the organisation feel better about themselves so that they could take on new challenges,” he explained.
Leahy would also trust his senior team and simply “let them get on with their job”, not least because, when he was on the shop floor, he could see the reality of what they were doing by understanding how staff and customers were responding.
5. Link strategy to the lives of employees
To ensure that workers could see how their team was performing, Tesco created a balanced scorecard that it called the “Steering Wheel”. This enabled it to slice and dice data and evaluate metrics for the whole country, while also drilling down to look at the performance of individual offices, depots and stores.
The benefit of this approach was that “people could see how their team was making a difference. We expressed targets in simple English and ensured that we didn’t give them conflicting targets”, Leahy said.
He believes that this kind of internal competition is a “good thing” to “force you to do a better job”, but also acknowledges that for such an approach to work, “it has to be structured and positive”.
6. Ensure workers all know where they fit into the organisation
Another vital consideration is ensuring that workers all know where they fit into the organisation. This means that, if change is introduced, it is important to “systemise it” and ensure that all of the jobs and tasks that have to be performed within a given process are clearly defined, documented and understood.
But Leahy said: “HR has not traditionally been brilliant at knowing where job roles exist in a process to do something, but then the problem becomes, how do you systemise it? If you don’t have a blueprint and process and job roles in place, it won’t work. If they are there, it can be replicable, scalable and repeatable.”
7. Leadership matters
A positive leader will not only take you further than you would be able to go on your own, but most people also “love being led so if they see good leadership, they’ll respond”, believes Leahy.
As a result, a key priority for HR should be to encourage managers to think only about what they can bring out in others rather than their own careers. “It’s about stepping forward and taking responsibility,” he said.
But it was also down to the organisation to “reward people on what they have given to others rather than on what they have taken. Self-praise is no recommendation, as my grandma would have said,” Leahy added.
Moreover, while “command-and-control” leaders such as Alan Sugar in the Apprentice BBC TV show who simply tell people what to do, are “good entertainment”, they have nothing to do with good management. “You have to ensure that the organisation is capable of making decisions, but you don’t have to have macho management or a situation where people progress on the backs of others,” Leahy explained.
8. Do not punish failure
Enabling and supporting creativity within an organisation is important. But innovation cannot occur if staff are afraid to give their ideas and/or take risks. “You can’t have success without failure and if the organisation punishes failure, it will never be a success – if it’s institutionally risk-averse,” said Leahy.
9. Create a culture where everyone feels welcome
To ensure that people reach their full potential, it is necessary to create a culture in which everyone feels welcome, no matter what their gender, ethnicity or background. Providing individuals with mentors and role models can also help by setting aspirational goals and showing what is possible.
10. Devise a clear simple structure
When Leahy worked at Tesco, there were only six levels between his position as chief executive and workers on the checkout, with a series of education and training “ladders” in place to help people progress to the next level.
As Leahy concluded: “Simplicity has its advantages. There are very few things that will kill off a business – you just have to know what they are. Then you can be innovative.”
