Tesco's finest: Sir Terry Leahy

He's the boss of a supermarket behemoth. And now he is telling the Government what he thinks is wrong with the education system

Are schools failing our children by sending them, after years of increasingly expensive education, into the world of work without the basic skills they need to land a job?

Sir Terry Leahy, the chief executive of Tesco – which is now the country's biggest private-sector employer – certainly thinks so. This week he has been complaining that the supermarket chain is having to pick up the pieces of our "woeful" schools. Some employers are even having to run remedial classes for school-leavers unable to read or write adequately.

There will be some who reflexively dismiss the view of Terry Tesco, much as they dismiss everything the supermarket stands for. How they cheered this month when the plain people of Holmfirth, home of BBC comedy series the Last of the Summer Wine – the mythic embodiment of the golden past – saw off Tesco's plans to open a superstore on the edge of the Pennine town, turning its historic honey-stoned uniqueness into another cloned outpost of lookalike Britain.

But the fact is that, for all the dinner-party damnations of Tesco, with its supposed bullying of suppliers and crushing of small shops, most of us buy into supermarket behemoth – or from it. Our money is not where our moaning mouth is. Of every £8 spent in Britain's shops we hand £1 of it to Tesco because it overwhelmingly delivers what most people want. And a large part of that is down to the man at the top of the firm. So might he be right about our schools?

Sir Terry is probably the nation's most successful businessman. He has turned Britain's third biggest supermarket into the world's third biggest food retailer in just over a decade. And he has done it through a fine-tuned sympathy with the desires of the vast majority of the great British public.

It is perhaps because he lives like most of the rest of the population. He may earn £1.3m a year – not to mention a cash bonus of £1.2m and another bonus, paid in shares, worth £1.7m according to last year's Tesco accounts – but he does not have a yacht or luxurious second homes in France, the Bahamas or anywhere else for that matter. And there is no chauffeur to pick him up from the detached house in Hertfordshire which is the family home to his wife, Alison, a doctor, and their three children.

He drives himself the 15 minutes to work at the firm's head office on a drab industrial estate in Cheshunt. He does not sit on the boards of other companies or dine out in fancy restaurants. If he invites you to lunch it will be in the windowless executive dining room at Cheshunt where the food will be breaded fish, peas and potatoes, like the rest of the Tesco canteens are eating.

The roots of Terry Leahy's extraordinarily ordinariness are to be found in his upbringing in 1950s Liverpool. His father was a greyhound trainer. His mother was a nurse. Both were Irish immigrants and sent their son to St Edward's, the local Catholic grammar school. Leahy was the only one of four brothers not to leave school at 16. He was brought up in prefab on a Liverpool council estate.

His first contact with Tesco was as a shelf-stacker and floor-washer at the Wandsworth branch of the chain during the school holidays. He could find no work in Liverpool so the enterprising Leahy went south to find a job. After A-levels and a degree in management studies at the prestigious UMIST business school in Manchester, he joined Tesco in 1979 as a marketing trainee. His rise was meteoric. By the age of 25 he was marketing manager. By 36 he was appointed to the Tesco board. He became chief executive at the age of 40 in 1997.

Leahy is a marketing genius, though he claims that all he has done is listen to the customers. He introduced the first customer loyalty card in the country. He brought in cheaper goods and called them Tesco Value lines. He put more staff on the checkouts whenever there was more than "one in front" of each customer. He introduced traditional fishmonger and butcher-style departments alongside prepacked selections. He brought in Tesco's upmarket "Finest" labels, creating three levels of quality within a single store.

He built hypermarkets called Tesco Extra, to sell clothing, electrical goods and other non-food items. Then came an even wider range of products – insurance, banking, catalogue and online sales. With Tesco Metro shops he took the brand back into smaller convenience stores on the high street, but with the buying power of a massive chain to keep prices down. Then came overseas expansion.

Leahy has more than doubled Tesco's annual profits. He has created a new job every 20 minutes on average for the past 10 years. Amid a global recession, Tesco's trading profits have continued to rise. In survey after survey, and award after award, his peers dub him Britain's most admired business leader

Through it all, Leahy has demonstrated an uncanny ability to know his customers inside out. "He's always able to look ahead and spot where Tesco might best be placed – clothing, non-food, internet, mobile phones, banking, but keeping the UK core food business very strong," says fellow board member David Potts, Tesco's director of retail and logistics, who has been with the firm since starting as a shelf-stacker in Manchester at the age of 16. "And he has this amazing ability to switch from talking about strategy over the next 10 to 15 years in China to day-to-day stuff like whether our latest meat offer is strong enough."

"He's a very clear thinker," said an insider at Liverpool Vision, the urban regeneration company that is co-ordinating the transformation of Leahy's native city. "He knows how to reduce an issue to its essence." Liverpool Vision is one of the few non-Tesco activities into which Leahy allows to be diverted. He is also an adviser to Everton football club of which he has been a supporter since childhood; he is still a season-ticket holder and travels back to Liverpool for games whenever he can. Characteristically, he sits not in the directors' box but most often among the fans.

This distinct order of priorities is entirely typical of Terry Leahy and goes some way to explaining his intuitive success. "Family is important to him," says Professor Cary Cooper, who was one of his teachers at UMIST. "When he became CEO, one of the first things he asked me to do was to talk to Tesco's senior people about their work-life balance and their need to spend enough time with their families. It was not bullshit. He understands that people perform better for a company when they feel secure and content and valued. That's when they will go the extra mile."

"He's a good boss to work for," said one senior employee. "He manages by praise and reward, not fault finding. He never loses his temper nor raises his voice, though he does have a gimlet-like stare when you have done something that is not right." It is partly temperamental, partly calculation. "If you find it difficult to accept failure," Leahy has said, "then you simply won't get any innovation because employees will be too frightened."

Leahy, says Dr Cooper, "gives the lie to the idea that you need to have a mean streak to be successful. Most of the time he is not on transmit, he's on receive – he's a great listener". And after listening he has an unnerving sense for what the next move should be. "He's not always right," said one senior employee, "but he nearly always is."

It is why his concerns about school-leavers being ill-prepared for the workplace will weigh so heavily with the Government. Leahy, a dinner quest at Chequers in Tony Blair's day, was once reportedly asked to quit Tesco to sort out the NHS. Gordon Brown has consulted him about binge-drinking and the sale of alcohol.

Headhunters have put countless calls into Leahy's office to enquire about his availability for far bigger jobs in the private sector. All in vain, to date at any rate. Terry Leahy knows what he does best. As he told one interviewer: "One religion, one football team, one wife, one firm."

A life in brief

Born: Bell Vale, Liverpool, 1956.

Family: Wife, Alison, and three children.

Education: Attended St Edward's College, Liverpool, and graduated from UMIST (University of Manchester Institute of Science and Technology) with an upper second BSc in management sciences in 1977.

Career: Having stacked shelves for Tesco during school holidays, he got a job with them in 1979 as a marketing executive. He was appointed to the board in 1992, three years before Tesco became the UK's largest retailer. In 1997, he became chief executive. Knighted in 2002, he was Britain's Business Leader of the Year in 2003, Fortune European Businessman of the Year in 2004 and was selected as Britain's Most Admired Business Leader by Management Today in 2005.

He says: "I believe a lot in people. I believe a lot in the potential of people. So I've never lost that belief that people are capable of incredible things if you give them the confidence and opportunity."

They say: "We saw Terry as a high-flier relatively early on. His outside face is a bit stern and cold but inside he is a very charming and warm-hearted guy." Lord MacLaurin, former Tesco chairman

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