When I last gave a lecture on leadership I chose to highlight Elizabeth I, Nelson, and Terry Leahy of Tesco. My audience was ready for praise of Elizabeth’s skill in standing up to Spain, the international bully of the day. They grasped the brilliance of Nelson’s band of brothers in delivering the greatest sea victory of the modern era at Trafalgar. They were more surprised by my choice of a grocer.
Terry Leahy led a quiet revolution as Marketing Director, then CEO at Tesco. In the mid 1990s, when he first gained some power, Tesco was lagging behind the giants of the British High Street, Sainsburys and M and S. By 2011 when he left Tesco, the Group had grown to six times the size of both its leading rivals. It became the world’s third largest retailer, with access to more than half the world’s population through outlets in 14 main countries. It did this mainly by organic growth, building and fitting out stores and buying the right ranges of product.
I was sent a book a little while ago written by Terry Leahy to review. I have been too busy with Parliament in session to read it. Today I picked it up, and could not put it down until I had finished it. It says so much so well about how to lead large organisations. If its simple messages were adopted by public sector leaders, we could have so much better public services at less cost.
Terry Leahy’s ten words for success are truth, loyalty, courage, values, act, balance,simple, lean, compete and trust. If he had to choose just one, it would be “truth”. How right that is, and how well he grasped it to transform Tesco.
When he took on the task of making Tesco number one in a highly competitive market when it was well behind Sainsbury, he began with a brutally honest appraisal of Tesco’s stores, service, product and prices by asking customers what they thought. He believed them when they said they did not like the layout of the shops, did not think the prices were good enough, and did not think Tesco was sufficiently on their side. He set about changing all of that.
He discovered that if he asked representative loyal local Tesco shoppers how the store budget should be spent to improve the shop, they not only gave him good ideas, but ended up spending less because they had the canny householder’s sense of having to live on a realistic budget for improvements. His customers told him they needed special foods for allergies if he wanted to keep that family’s entire shop. They wanted to feel valued.
The big break through came when he introduced the Tesco Clubcard. He took the risk with his boss who some years earlier had dropped green shield stamps, and faced a withering comment from his main competitor about it. It worked. People liked getting 1% back from their purchases as vouchers to cut the cost of their next shop. It was a way of saying Thank you. Even more importantly, it was a way of transforming the company’s knowledge of its customers and what they wanted. It took retail merchandising and marketing onto a new level. It meant the business could be customer friendly.
The public sector remains so far detached from its forced customers, the taxpayers. It does not use these great modern techniques to serve the customer better. Mr Leahy when he ran Tesco pleased millions of customers and showed how to do it. Leadership starts and ends with truthfulness about what you are doing and what the customer wants. Customer wishes drive good businesses, and are ignored by bad.
If only something like our national roads service was run with the drivers’ interests in mind. Just think how much better, and better value it would be.
Terry Leahy: Management in ten words (Random House)