Sir Terry Leahy, Chief Executive of Tesco, presented his Ten Commandments for Good Management at a conference I attended yesterday.
Here they are:
Commandment Number 1: Find the truth
It is extremely difficult for any institution to confront the truth. When customers say they don’t like your products or service, it’s tough to face up to. Many companies filter out the truth as they don’t want the senior management to hear it.
This means, in the boardroom, you can get isolated from reality in our chauffeur driven cars and business class flights. But you have find out the truth of what customers think as the starting point. Once you know where you are, you have a compass to start charting the course of your journey.
Commandment Number 2: Set audacious goals
As a leader you have to vision a better future for the company and the bigger you can make that vision, that goal, the more compelling. That way you can engage the whole organisation towards something worth fighting for.
Small incremental improvements do not excite anyone – that’s shuffling deckchairs on the titanic.
Set big targets.
Ours was to beat Sainsbury, which we did in 1997. We then went international and into non-food, into services like financial services, and more. All of these were big stretch targets and the right thing to do because all organisations are capable of major achievements, but most underperform because they are too risk averse.
As I’m in a room of bankers, and I’m a banker, there is one caveat: the organisation has to survive the stretch so don’t set completely unrealistic targets.
Commandment Number 3: Vision, values and culture are critical
The vision of Tesco was to create benefit for customers in order to earn their lifetime loyalty. Our aim was to understand customers’ lives and help them in their lives. From that, all of our success has flowed. In banking for example, when do you offer the best price to the customers? When they open an account or as a reward for lifetime loyalty?
We built our vision by asking employees what they thought we stood for and how they wanted to feel about working in the company.
Their answer was that we stand for a firm where no-one tries harder for its customers – we’re good at customers – and that they wanted the company to treat people with respect in the business – I would like to be treated as you would treat other people
So that’s what our culture stands for and what we did.
Commandment Number 4: Follow the customer
No matter how fleet of foot your organisation, the customer will change direction and leave you overnight unless you continually keep watching their lives, needs, goals and aspirations.
As they change, change your business to keep up with them. They will take you in the right direction.
What are massive changes in society begin with small changes in customer behaviours. That’s why it’s so important to watch the customer.
A lot of Tesco’s innovations and leading moves, weren’t innovations or leading moves at all. We simply stayed close to the customers and followed them. It just looked externally as though we were being innovative and risk taking, but it wasn’t.
Commandment Number 5: Create a steering wheel
Everyone needs to feel the work they do that day matters. And that it matters not in a small way but to be connected to the goals of the organisation. So we use the balanced scorecard but we call it the steering wheel. We use the five most important things for the business: customers, community, operations, people and finance. We set measurements and targets against all of those things and every store, department and country has a steering wheel. That means the very large is directly connected to the very small, and everyone can see where they sit.
Commandment Number 6: People, process and systems
People say it’s not the strategy that’s impressive about us, but how we execute it. How we do it. It’s not difficult to change things so that customers can see it, simply by aligning people, process and systems.
So every time you want a customer to experience it, you just need to link these things so that the right people are doing the right job in the right sequence.
You can then automate it after you’ve achieved that. Unfortunately, most firms go straight to it and forget to write down the work process and flow first. They just jump to the technology and forget how people work in reality. We do it the other way around.
Finally, every change we make has to pass this test: it must be better for the customer, simpler for the staff and cheaper for the organisation.
That’s not a mutually exclusive approach – better, simpler and cheaper – but an inclusive one.
Commandment Number 7: Lean thinking
Most think that lean thinking comes out of Just-In-Time manufacturing in Japan, but it can apply to anything from retail through banking. We apply lean thinking to the complete supply chain, and that is why we are more productive than most.
Commandment Number 8: Competition is good
A good competitor is the best management consultant you will ever get, as they will force you to act faster and smarter. Seek out competition therefore and put yourself up against the best competitors. It will force you to be a better business.
However, there is one word of warning: don’t slavishly follow competitors. Be your own business. You’ve got customers for a reason – they like your business – and don’t lose that.
Watch and learn from competition but keep your own identity.
Commandment Number 9: Simple beats complex
Very often there are two courses you can take – a solution that makes business more complex or one that simplifies things. Most people choose the complex route but, as a leader, get people to find the simpler one. Better, simpler and cheaper. That’s the key.
Get your own people to see your business as simple, and regulators and customers will see it as easy too.
Commandment Number 10: Leadership
Leadership does make a difference, and my definition is that a leader should take you further than you would go on your own.
It’s not what you do as a leader, but what you cause other people to do.
So big organisations in order to be effective needs thousands of leaders, not just one.
You need to build an environment that builds confidence in people, raises their self-esteem and self-worth and allows them to be leaders too therefore.