Tesco: Continuity in Leadership, but what about Strategy?


When the internal candidate Philip Clarke replaced Sir Terry Leahy [left] as head of Tesco, The first reports were almost exclusively focused on the departing leader rather than on the arriving one

The lament was understandable.

Profits, dividends and earnings per share doubled and then doubled again during Sir Terry Leahy’s 14‑year tenure. It works out at a compound annual growth rate of 10%. Very few large companies improve these measures at double-digit pace for a decade and a half without blowing up at some point.

Part of the secret, you suspect, is that long [leadership] reigns have always been part of Tesco’s culture. As every football follower knows, changing managers frequently is a losing strategy. Leahy is only the fifth chief executive of Tesco since the company was formed in 1929. He has seen four chief executives at both Sainsbury’s and at Asda [UK arm of Walmart] during his time at the top.

Praise from his predecessor

Within hours of the announcement, [June 8th 2010] Lord McLauren, Leahey’s predecessor, was on BBC’s Five Live lunchtime radio programme. He gave a glowing account of Leahy’s efforts and the merits of another internal appointment ‘from the Tesco family’. On being pressed, he added he had drawn up a private short-list of three internal candidates, and that Philip Clarke was ‘up there at the top’. He refused (naturally) to name the other two executives.

The endorsement ended abruptly when the interviewer suggested that Sir Terry may have eclipsed Lord McLauren’s leadership contributions.

“Didn’t eclipse me at all” he growled “he built on the successful company I established … and Phil will build on what Terry has accomplished” [quoted from memory].

Other BBC eulogies followed
:

Under Sir Terry, Tesco led the way in offering banking services and introducing the Clubcard, the store card that has been copied right across the High Street. He has also overseen the store’s expansion [overseas]. The company now employs almost half a million staff worldwide, with stores in China, the Czech Republic, Hungary, Japan, Malaysia, Poland, the Republic of Ireland, Slovakia, South Korea, Thailand, Turkey and the US.

Enter Philip Clarke

Philip Clarke said he was “honoured and delighted” to succeed Sir Terry. Mr Clarke has worked for Tesco for many years and joined the board in 1998. He had held responsibility for the supermarket’s Asian and European operations, as well as for IT.

The Guardian was quick to provide an informed account of Philip Clarke and the challenges he was facing:

Clarke, who has been on the Tesco board since 1998, was judged one of the frontrunners to replace Leahy. The son of a Tesco store manager in the Wirral he has reached the top rung 36 years after he did his first shelf-stacking shift for the supermarket as a schoolboy.
Analysts said that the biggest challenge in Clarke’s inbox come next year [2011] would be deciding what route to take with its loss-making US arm Fresh & Easy which is run by Tim Mason, who was also promoted to deputy chief executive. Fresh & Easy made a loss of £165m on sales of £354m last year and outgoing boss Sir Terry Leahy hinted at its annual results in April that its scope might be “hundreds” rather than the “thousands” of stores first envisaged when it was launched in 2007.

“Pile ‘em high ….?”

Tesco’s diversification both geographically and in product offerings has become a model for Business School study. Will the one-time local retailer get back to its original ambitions in America with the less than successful Fresh and Easy chain? Will it become more involved in the challenges of the financial sector? Will continuity in selection of a leader be followed by continuity of strategy? Whatever happens, the firm has come a long way from its original “pile ‘em high” philosophy.

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One Response to Tesco: Continuity in Leadership, but what about Strategy?

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