The Tesco Syndrome

The Tesco Syndrome

Tesco, the tiger of the UK retailing world for the last half of the 20th century, is in trouble. From leader of the wolf pack it has fallen to follower, possibly terminally sick follower, lagging behind new developments. But I remember Jack Cohen saying ‘Pile it high and sell it cheap’. Odd that Tesco is now falling prey to those who are piling it high and selling it cheap.

A disclaimer. I know nobody in management in Tesco today, I have done no detailed researches, just a little shopping on a recent visit to Britain. So what I am going to say is based on observation, not just of Tesco but of several corporations and organisations. The cycle of birth and death applies to corporations as well as to humans. It is strange to see the organisations themselves precipitating their demise. Here’s what seems to happen.

Success breeds arrogance. Arrogance manifests itself as greed for power and money. Power develops risk-taking beyond common sense – “We’re going to do it because we can”. Subordinate colleagues observe greed, risk-taking, arrogance and imitate their bosses – “We can get away with anything”. Then something goes wrong, seriously wrong. With Tesco it was an accounting hole that led to an embarrassing distortion of the figures. With Volkswagen it was duping the emission tests. The incidents of the same syndrome with banks and financial institutions are too many to recount.

What happens then? A desperate lurch to impose tighter controls from the centre. So compliance becomes the objective; following the rules, however inapplicable, the basis for bonus payments. Head office will do all the thinking, you just obey. Demotivated employees, clever juniors who spend their worktime working round the rules, a culture of mistrust.

It happens to even the best. One of the greatest airlines in the world cannot now satisfy the bottled water requirements of its first class passengers. “The rules prevent us from carrying enough.” The No 1 mobile phone producer in the world is not aware of what is on its inventory. “We’re in partnership on this even though our name is on the product so we don’t know if we have stock. You’ll have to contact the retailers to find out.”

That’s why you cannot find your favourite products in Tesco. “Head office has decreed that we should only stock a small amount based on last year’s uptake.”

How do consumers perceive all this? Very badly indeed. First they see a loss of confidence, often exhibited by management adopting bullying tactics towards employees and customers. Managements have an extraordinary tendency to forget that employees are also customers. Second, it becomes clear that the needs of the customer now take second place to what the management demands. Third, an air of defeat – poor morale perceived through the social media and daily gossip about the business.

What should management do when an organisation is on the downward path? First, quit the spurious surveys purporting to discover what the consumers and employees think. Even when objective these only lead to excuses and blame-passing. Second, go and see customers, suppliers and employees. All have something to say, all should be listened to. Every company that has participated in an ‘Undercover boss’ programme has benefited from a few home truths. Third, rebuild the culture of the business, valuing the consumers as much as the products and services.

As we often say ‘Management gets confused when the need to aim competes with the need to see’.

The three steps shown above will start to turn the business round.