While most small business owners will think that the issues facing a huge multinational supermarket chain have no bearing on the management of their own business, I think that there are three important lessons that can be taken from the problems currently experienced by our favourite supermarket (we still use them!).
The first one is a strategic lesson.
If one is to believe comments in the press and observations from those in the know, Tesco’s main mistake in recent years has been to continue a strategy which was appropriate 5 to 10 years ago but has now been overtaken by events and technological change. Rolling out large out of town stores, at which Tesco was supreme, was market leading for many years, taking them to the pinnacle as the largest retailer in the UK, but that strategy should have been revisited more than a few years ago.
Following a thoroughly researched strategy is always desirable if not essential; but you need to review your strategy, and particularly the impact of changes in the marketplace, on a very regular basis. For most small businesses this sort of review annually can generate significant benefits as you are in a position to be far more flexible than the larger competitors. Changing the strategy of a business such as Tesco which plans decades in advance cannot be easy, but should probably have been attempted.
The second lesson relates to the management style.
Observations in the press suggest that Philip Clarke, the CEO of Tesco who left earlier this year, was not a great listener. He was an incredibly driven individual, but apparently did not particularly like to hear news or views that differed from his own.
How does this relate to an entrepreneur? One of the most common attributes of entrepreneurs is their drive and dedication to the particular marketplace or technology out of which the business has arisen; that same attribute can be a distinct disadvantage at times when the marketplace is changing. They must listen both to their employees and external influencers to ensure that they are not missing a major trick. One of the things I would advise any small business to do is to involve an external mentor, adviser or non-executive director to share the load and to help keep the vision fresh.
The third lesson relates to employee rewards.
One suggestion in the press is that the reward system for some Tesco executives persuaded them to be too optimistic about their income recognition calculations – and the fact that the Serious Fraud Office is involved suggests that this may be more than just idle speculation; we will have to wait and see.
But the lessons for those of us setting targets against which bonuses are paid are clear – make the targets SMART – that is Specific, Measurable, Achievable, Relevant and Timely.
