Diversity a pillar of success

February 20, 2010

Times are tough – even at Tesco – but not as tough as elsewhere in British retail, according to figures out last week which showed the grocery giant had racked up an 11% rise in first-half profits despite what chief executive Sir Terry Leahy called “powerful economic headwinds”. The announcement came as Tesco, which is already the UK’s biggest private-sector employer, would be adding another 6,000 jobs to its 273,000 strong workforce.

“I started with Tesco as a Saturday boy. I became a store manager, then a regional manager and now I’m the retail director and a board member,” said David Potts who, like Leahy, started work as a shelf stacker.

Strong staff retention and the home-grown nature of Tesco management are some of the retailer’s key strengths, according to analysts.

Andrew Kasoulis of Credit Suisse said: “Tesco has consistently good management, the top tier have all worked for the company for at least 20 years and they have laid long-term business plans that are now coming to fruition. Terry Leahy has employed the same strategy since the mid1990s. You haven’t seen the chopping and changing that has taken place in other retailers.”

One of the biggest transformations in Tesco’s business model has been the company’s rise from a relatively small UK supermarket chain to the world’s fourth-biggest retailer. Analysts estimate that 65% of future growth will come from overseas, with Tesco making inroads into central Europe, Korea and America.

As a consequence, Potts believes staff can now expect a career trajectory that can compete with other multinationals. “We are now a large international company and can offer our employees much more variety and development. You can work for us and go to China or America. You do not need to leave Tesco to advance your career. We also work hard to attract people from all sectors,” he said.

Sukwinder Bassi joined Tesco four years ago after working for B&Q and J Sainsbury. “I’m now the manager of a large Tesco Extra hypermarket in east London. I chose Tesco over other retailers simply because it’s the biggest company with the most opportunity. I’m an ambitious guy and I want to get on,” he said.

Bassi’s store, at Gallions Reach, has staff from 30 different ethnic backgrounds and is working to introduce more products for the local Asian and Polish communities.

According to Chloe Smith of The Grocer, the trade magazine for the sector, Tesco’s “classlessness” and diversity works on the level of both products and employment. She said: “Tesco has avoided being associated with any one economic group like those who shop at Waitrose or Asda. You can shop in Tesco without feeling that you are making a statement about yourself.”

Management has encouraged the ethos that “whatever your background, you can get on,” said Potts. In addition to traditional graduate-training schemes, Tesco has 1,000 apprenticeships as well as projects to bring the long-term unemployed back into work.

“We redevelop brownfield sites and in those areas operate schemes for people who have been out of work for a long time – or who have never worked,” said Potts. “One of my most satisfying moments came when a man who had been on one of those schemes told me he’d had the confidence to go to his daughter’s school open day for the first time.”

With more than a fifth of its workforce coming from the overfifties, Tesco is also an important employer of older people. The company has no fixed retirement age and has seen the number of oversixties on the payroll double in the past 10 years. Age and experience may bring better customer service but most late-joiners will not at first have seen employment with Tesco as a career.

Personnel manager Linda Avis admitted: “We have a lot of people who join us as a second career. They often think they’re coming as a stop-gap to get some money but stay for years and retrain in a new area. We take a significant number of ex-Service people, for example.”

About 20% of the staff enrolled in the company’s Options career-development plan are over 50.

Retail analysts attribute Tesco’s success to innovation and data-driven customer information, applied with an efficiency that can sometimes appear inflexible. Kasoulis said: “Tesco has been at the forefront of the loyalty card, Sunday trading, large out-of-town shops that sell other goods in addition to food, and smaller city-centre stores.”

In a business that now accounts for £1 in every £8 spent on the high street there is little room for quirks and deviation, either instore or in its employment practices. “Our benefits package is market leading, but not flash,” said Avis.

With Tesco’s announcement that it will buy the remaining half of its own banking operation from Royal Bank of Scotland, the likelihood of Tesco becoming a serious financial-services employer appears to be not far off.

However, with scale and increased size comes greater risks, retail experts warn. “Tesco mustn’t rest on its laurels,” said Kasoulis. “The top people still have the ethos that they are a small food retailer, fighting its way to the top. They have an advanced sense of paranoia, and keep everyone focused on what the customer wants. In the current climate that is probably the right way to be.”

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