Leahy: The ex-boss lifts lid on Tesco and leadership

In his book, Sir Terry reveals how Field Marshal Viscount Slim helped him build the supermarket into a retail behemoth

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The Independent Online

Sir Terry Leahy, the former chief executive of Tesco, played his cards – at least publicly – close enough to his chest to impress even the most seasoned poker player in more than three decades at the grocery giant.

It is perhaps therefore surprising that he makes a series of enlightening revelations about Tesco in his book out last week, Management in 10 Words.

Drawing heavily on his 32-year career at the supermarket chain, Sir Terry says he feared customers thought that Tesco was a "busted flush" during the early 1990s. He also describes how it considered expanding into education and health services in the same decade.

These are not the only areas where the book may raise eyebrows. Sir Terry admits he became "bored to death" by countless presentations citing Tesco's values during his 14 years at chief executive, although he stresses this repetition was vital to driving the message home.

He also reveals how upon joining Tesco in 1979, he had expected his colleagues to have "better manners".

The Liverpudlian said: "After only a day in the job I felt jaws snapping around me. I faced a choice: kill or be killed."

Less surprisingly, Sir Terry quotes from philosophers, business leaders, military strategists – notably Field Marshal Viscount Slim's memoirs from Burma in the Second World War – about how to galvanise an army of employees behind common goals in business.

If timing is critical for army generals, Sir Terry's book could arguably have been better timed, coming just before Tesco is set to post another fall in UK underlying sales on Monday.

Disappointingly, Sir Terry eschews any advice for his successor, Philip Clarke, on Tesco's recent weak UK performance, but he sticks to his guns about its loss-making US operation.

"I am certain that Fresh & Easy will be a success," he says.

The framework of the book is based on Sir Terry's management beliefs, summed up by 10 words, including courage, loyalty, balance and values.

His learnings borrow from leaders at other companies, such as the retail giant Walmart and the car firm Toyota.

But the majority of his management lessons are drawn from his experience of turning Tesco into the world's third-largest retailer, with operations in 14 countries.

Having been the UK's third-biggest player in the early 1990s behind Sainsbury's and Marks & Spencer, Tesco is now the market leader, accounting for more than £1 in every £7 spent on the British high street.

Sir Terry is honest enough to admit that Tesco had been making plenty of mistakes by the time of the recession in 1992. He said "morale was flagging and a sense of crisis was beginning to set in". As the newly appointed marketing director that year, Sir Terry was given the task of finding out why "Tesco was struggling and fix it".

His extensive research unearthed some "horrible things", which can be summed up by the view that customers felt "we had deserted them".

In his presentation to the board in 1993, Sir Terry's central diagnosis was that the chain "must be prepared to do whatever was necessary to make Tesco the natural choice for ordinary people".

The rest is history and by "relentlessly delivering for customers" Tesco started to put in place the building blocks that made the retail behemoth of today.

Following the launch of its Tesco Value range in 1993, Sir Terry makes no attempt to hide the significance of the launch of its Clubcard loyalty scheme in 1995, which immediately led to an 11 per cent rise in sales that morning.

He said: "I knew at that moment something had changed in the industry forever, and my life along with it."

Today, more than 43 million people globally have a Clubcard in countries from China to Thailand.

After a brief excursion into France in the early 1990s, Tesco first launched stores overseas in Hungary in 1995, which it followed with operations in Poland, Czech Republic and Slovakia.

While Thailand was the grocer's first foray into Asia in 1998, Sir Terry reveals that Tesco had initially believed the US would be its first foreign investment.

Indeed, as far back as the early 1980s, he was sent on a one-week "retail pilgrimage" as a management trainee to the US, where he had been "bowled over" by the "land of plenty".

Sir Terry says: "After an afternoon windsurfing in La Jolla, California, I even contemplated emigrating."

Elsewhere in the book, however, he shows the ruthlessness any chief executive of a large company must exhibit.

For instance, he fired a former chief executive of Thailand, who once cut employees' year-end bonus of an extra month's pay.

"I saw this as beyond the pale, an unacceptable thing to do to people who are working flat out to meet our goals – so we let him go," he says.

Tesco's rapid expansion overseas has taken it past 500,000 employees globally since Sir Terry rode off into the sunset to pursue private investment opportunities and advisory roles, such as at the US firm Clayton Dubilier & Rice.

Given Tesco's scale, one particular reference to Viscount Slim's view of leadership is perhaps the most pertinent.

Explaining the importance of everybody, not only frontline soldiers, knowing the importance of their place, the Field Marshal wrote: "Every one of the half million in the army – and it was many more later – had to be made to see where his task fitted into the whole, to realise what depended on it, and to feel pride and satisfaction in doing it well."

The approach seemed to work for a quietly spoken grocer from Liverpool.

In his own words Sir Terry's quotes

On Fresh & Easy: "For my part, I am certain that Fresh & Easy will be a success, and its success at the end of 2011 was encouraging"

On discounter Aldi: "It has created the purest business model in retailing I have ever encountered"

On the early 1990s: "It seemed Tesco had, in the words of observers, 'reached something of a dead end'"

On colleagues: "Above all, I expected better manners. After only a day in the job I felt jaws snapping around me"

On mistakes: "I certainly made my fair share ... our failed attempt to create restaurants in our stores"

Career Timeline: Leahy's route to the top

1979 Took a marketing job at Tesco after initially being rejected for the same role.

1992 Promoted from commercial director of fresh foods to marketing director on the grocer's board.

1995 Tesco overtakes Sainsbury's to become the UK's biggest supermarket chain, following the launch of its Clubcard loyalty scheme earlier that year. It also enters Hungary.

1996 The grocer introduces 24-hour trading in the UK. Tesco launches stores in Poland, Czech Republic and Slovakia.

1997 Leahy becomes chief executive. Tesco enters the Republic of Ireland and opens its first hypermarket in Essex.

1998 Launches in Asia in Thailand and Taiwan.

2000 Its online grocery website goes live in the UK.

2007 Launches its Fresh & Easy chain in US.

2011 Sir Terry retires and its international boss Philip Clarke takes over as chief executive of Tesco.