How Tesco Will Be Affected by the Change in Leadership - Term Paper Example

Introduction Leadership plays significant role in the development of organizational values and its overall character besides setting its future of action. Over the period of time, as organizations grew in more complexity and business models changed, the role of leadership became more significant. Traditionally, leadership was considered to be related with setting the future course of action for the organization however it is now also associated with the deeper and more subtle affects on the overall employee motivation and other business consequences of the leadership change on the organization. Authentic transformational leadership therefore plays significant role in not only transforming the organization but the employees of the organization also by motivating them and completely transforming the way employees used to perceive themselves within the organization. Sir Terry Leahy, one of the most respected business persons in UK was Chief Executive Officer of Tesco for almost 15 years, has recently resigned from his post. His retirement is still considered as a surprise to many despite the fact that he was able to transform Tesco as the fourth largest retailer in the world. Phil Clarke, Head of Tesco’s international and IT business is set to take over the position of CEO of Tesco after the resignation of Sir Leahy.(Sibun & Fletcher, 2010). How Tesco will be affected by the change in leadership, what can be the business consequences of the same as well as how employees will be motivated in the wake of change of leadership are some of the most important questions that this paper will attempt to explore and discuss. Leadership Defined There are various schools of thoughts which place leadership in particular context and as such a closer look at the evolution of the concept of leadership will indicate that the definition and essential role and characteristics of the leadership have changed over the period of time. With the advent of industrial revolution in developed countries, the overall nature of production has changed and more emphasis was placed on technology as the key driver of change and growth in the production. This shift also brought in new emphasis and focus on the leadership because the overall relationship of the organizations with their workers changed. The renewed focus on the leadership as the main and key force behind this change has also redefined the way leadership was generally viewed and perceived. In its simplest form leadership is considered as the core management skill that can motivate employees to achieve a common goal. This common goal is often considered as the goal which organization has set for itself and its achievement becomes the most important objective or mission of the organization. Most recent work on the leadership however has suggested that the leadership has been redefined in relatively different manner. Leadership is now viewed as a set or properties and characteristics which certain set of people have utilized in more effective manner in achieving the organizational goals as compared to others.(Kippinberger, 2002). This view therefore sees leadership as something which is dependent upon certain personality characteristics and attributes distinguishing it from others. There are also various leadership styles which need to be discussed in order to define leadership in a particular context. Leadership styles therefore also need to be viewed as an interaction of leadership’s personal characteristics, values and set of beliefs with followers as well as the situation within which leadership emerges. This therefore puts leadership in the contextual set of reference also and requires that the leadership must rise to the occasion to provide the necessary vision and leadership. Adaptability is also an important leadership concept which advocates that the leaders must be able to change their styles at will and according to the situation. The adaptability of the leadership style therefore allows leaders to respond to different leadership challenges according to the manner they arise. Similarly, integrity is another important tenet of leadership which requires the leaders to act and perform with integrity. Integrity therefore is the main force which creates motivation within the employees and allow the organization and its different stakeholders to gel together to achieve the organizational objectives. It is not only that the leaders should act and speak with honesty and integrity however, leaders also need to be honest with themselves in order to create the motivated subordinates. Finally, a leader either is a craftsman, artist or a technocrat as modern research on leadership categorize leaders into these three major types. Depending upon the overall style and personality of a leader, he or she may fall into these three types of leaderships to lead their organizations. History of Sir Terry Leahy Terry Leahy worked and led Tesco for about three decades and during his tenure as the CEO of the organization, he made Tesco as the fourth largest retail chain in the world and the largest supermarket chain of UK. He attended St. Edward’s Collage in Liverpool and also obtained a BSc degree from University of Manchester in Management. Leahy joined Tesco in 1979 as the marketing executive after first being rejected by Tesco for an entry level position. At the time of his joining the firm as a marketing executive, Tesco used to follow or imitate the strategies of its competitors including Marks & Spencer and Sainsbury and it was his relentless pursuit that allowed Tesco to look beyond its competitors and develop its own unique business model based on the market based information.(Vallely, 2009). He was elected on the Board of Directors of the firm in 1992 and became the CEO of the firm in 1997 thus starting a new chapter in the history of Tesco which made it the largest private sector employer in UK. The rise of Tesco therefore can be largely attributed towards the imaginative and people centered leadership of Leahy as he strongly believed in people and their capabilities given that they are provided adequate opportunity to grow and shine.(Thompson, 2010). A closer look at some of the new and innovative aspects of business that he brought into the Tesco include the introduction of first loyalty card in the country besides introducing what is called Tesco Value lines- a name given to the range of products sold cheaply by Tesco. He also pioneered the idea of Tesco Extra- a hypermarket concept which increased the overall range of products sold by Tesco besides selling the traditional food and other grocery items. What is also significant to note that under his leadership Tesco also expanded into other business lines such as offering insurance, credit cards as well as other financial services thus making Tesco a well diversified group of businesses. He also championed the idea of Tesco Metro shops which revived the idea of smaller high street shops however, backed up by the brand name and power of Tesco. Overseas expansion of Tesco also took place under his leadership as Tesco became known as one of the leading international brands with presence in many countries of the world. (Vallely, 2009). What distinguishes him from others is the fact that he is known for having the great ability to respond to the customers. His ability to read the customers and continue to respond to the needs of the customers made him one of the most respected businessmen in the country. Further he was also considered as the CEO who was really good for his employees and always emphasized to balance the work and family life as he brought the same set of values for himself also.(Pringle & Gordon, 2001). He was declared as “Business Leader of the year” in 2003 and in subsequent year was honored with the award of “Fortune European Businessman of the year”. Objective The question of whether the resignation of Leahy can create lack of motivation within employees as well as lead t other business consequences need to be viewed from the perspective of the way he led Tesco. As discussed above that Leahy emphasized on the low key profile and hands on type of leadership wherein he was actively involved in most of the aspects of the organization. This also made him one of the most respected bosses in the country also because of his charisma and concerns for the employees. His natural style of leadership was therefore considered as one who has the courage to accept the failure of the employees while at the same time showing praise and reward for those who perform exceptionally well. This aspect of leadership therefore gave Leahy a unique position as a boss who was easy to work with and believed in the empowerment of the employees. The overall success of Leahy is deeply rooted into the fact that he was able to create self confidence within the organization and Tesco as an organization grew, under his leadership, as an entity which was self confident. This aspect of organizational growth therefore also allowed employees to grow as more empowered employees who can than contributed more positively towards achieving the organizational objectives. Leahy’s confidence therefore can be judged from comments that “Our people know how to empathise with customers and have terrific optimism”. These comments therefore indicate the manner Leahy put emphasis on his people. The appointment of Leahy’s successor Phil Clarke is also believed to be the move that took place as a result of boardroom reshuffling therefore it is speculated that the Clarke’s rise to power may not be considered as the natural selection. He was leading the international business of Tesco and also had a successful stint in developing profitable businesses outside UK. It is also important to note that just after the resignation of Leahy, another Director, Colin Holmes also resigned from his post further giving rise to the speculations that departure of Leahy may not have been a straight affair.(Rigby, 2010). This departure of Mr. Holmes is also viewed as an indication of cracks within the senior management of the firm which may be finding it hard to gel together in the wake of the resignation of Leahy. What is also significant to note that Phil Clarke is asking for a term of 10 years at least therefore ending the hops of few executives who are in their 40s and 50s and this may result into the blockage of their rise to the power. This internal conflict within the power structures of the firm may therefore prove fatal for the organization as a whole and the overall momentum of the organization may be slowed down specially during these troubling economic times when consumer spending is on decline. The above discussion therefore indicates that the departure of Leahy can create significant business consequences for Tesco and may result into the lack of employee motivation and commitment. It is also important to understand that the change of leadership may result into better and new era for any organization like Tesco transformed itself into a world leading organization under the leadership of Leahy. However, change of leadership can also result into systematic decline of the organization as organizations may have to face internal conflict and stakeholders may wrangle for power thus diminishing the focus on the core competencies and objectives of the organization. Employee motivation depends a lot upon how the management views the employees and creates an environment which can foster the motivation within the organization. Lack of motivation therefore creates an environment which may not encourage innovation and creativity within the organization. Tesco being a retailer owes a lot to the way its employees performed and interacted with the customers to create a unique sense of relationship between the organization and its customers. Leahy focused on both the aspects i.e. empowering employees as well as understanding customers and providing them what they want therefore whether Tesco will be able to carry on that momentum will be a big question that need to be asked and explored in future. The kind of motivation that Leahy brought forward into the employees of Tesco can easily be characterized as the inspirational motivation. Inspirational motivation came as a result of inspirational leadership and Leahy seems to have the basic quality of being an inspirational leader. This was because he crafted a vision for the organization and found a best strategic fit between the employees of the organization and organization’s overall strategic objectives. It is argued that the visionary leadership is must in order to gain the support of the employees so that organization can seize new opportunities and grow. (Densten, 2002). As such inspirational motivation therefore allows a critical link to be built between the leadership and the employees. The question of whether this link will continue to exist after the departure of Leahy is an important strategic insight that new leadership of Tesco need to evaluate. Whether Phil Clarke will be able to provide that necessary visionary leadership and successfully built strong rapport between the organizational leadership and the employees will determine the future course of action for Tesco and will decide its fate in international market. It can therefore be generally argued that with the change in the leadership of Leahy, Tesco’s new management may not be able to achieve range of different outcome such as extra efforts by employees, performing with ethical behavior as well as showing an strong inclination towards learning and creativity. Employee motivation and its relationship largely depend upon management making sense and providing strategic direction to the organization.(Osteraker, 1999). If both these elements are not present in the new leadership of the organization, there may be a systematic lack of motivation within the employees and employees may not be able to perform as expected thus creating serious business consequences for the organization. Conclusion Sir Terry Leahy’s rise to the leadership of Tesco was one of the most important periods in the corporate history of Tesco. Under his leadership, Tesco was able to become the leading retailer and Britain and 4th largest in the world besides achieving phenomenal growth in other segments of the business also. He served as the CEO of firm for almost 14 years and recently resigned from the post. With his departure from the post different questions have been raised as to whether the new management of the firm will be able to keep the same momentum and bring Tesco to its new level of evolution. Leahy’s leadership style was quite unassuming and he built strong rapport between his employees and customers. Due to his visionary leadership and ability to create inspirational motivation, employees contributed more than they were compensated for and as a result he was able to create a unique culture of trust and motivation within the organization. His resignation however, seems to be an internal wrangling within the organization and it’s feared that the new leadership of Phil Clarke who heading international business and IT segment of the firm to inculcate and create same level of motivation into the employees or not. Different opinions indicate that lack of visionary leadership as well as the ability to create inspirational motivation within the employees may result into serious business consequences for the firm and business as a whole may start to drift way from its core competencies. References 1. Danesten, I (2002). Clarifying inspirational motivation and its relationship to extra effort. Leadership . 23 (1), pp.40-44. 2. Kippenberger, T (2002). Leadership Styles. 1st. ed. Oxford: Capitstone Publishing. 3. Osteraker, M (1999). Measuring motivation in a learning organization. Journal of Workplace Learning. 11 (2), pp.73-77. 4. Pringle, H, Gordon W (2001). Brand Manners: How to Create the Self-confident Organisation to Live the Brand. Illustrated. ed. New York: John Wiley . 5. Rigby, B (2010). Tesco executive resigns in wake of Leahy move [online]. [Accessed 23rd July 2010]. Available from: . 6. Sibun, J , Fletcher, R (2O1O). Surprise as Sir Terry Leahy resigns from Tesco [online]. [Accessed 23rd July 201o]. Available from: . 7. Thompson, J (2010). Tesco CEO Leahy: Supermarket Star Retires [online]. [Accessed 23rd July 2010]. Available from: . Read More