Published on: June 27, 2012
Sir Terry Leahy, the former CEO of Tesco, has an essay in the Wall Street Journal
that is based on his new book, "Management in 10 Words." In the piece, Leahy says that in these rough economic times, many businesses "face an existential threat, a threat that challenges the intangible qualities of their managers: judgment, integrity, values." Dealing with such threats, he writes, requires some "principles that are basic and simple yet often overlooked."
• "First, confront the truth. Our instinct is to avoid the uncomfortable reality, as it may mean having to make difficult decisions. Tesco in the early 1990s was floundering: we were ignoring the truth about our business—that we had lost touch with our customers. Painful though it was, only by listening to them, and then implementing difficult change, did we win back their loyalty."
• Loyalty is critical. "In difficult times, the value of loyal customers soars. Much better to reward loyal customers than try to lure in new ones with special offers: do that, and you quickly descend the spiral of rewarding promiscuous customers. Likewise, reward loyal employees: their experience equips them to train others, and makes them the best at retaining customers."
• "Managers face difficult decisions, in which doing the right thing is not always the same as doing what is in the company's financial interest. Hence the importance of values—the beliefs and principles that are a sheet anchor for all businesses. A sense of right and wrong, a wish to treat employees and customers fairly: these things cannot be quantified, but they determine whether a business is trusted, whether its customers will remain loyal and its team committed."
• Embrace competition. "When we confronted the German discounters, Aldi and Lidl, and later Wal-Mart, I realized how much one learns—for free—by simply walking around their stores and looking how they did business: big lessons (how to source goods more effectively) and little things (like wheeling goods into stores on pallets, saving time and money). So if your business is slipping, visit your competitors' websites or stores, look at their products, and see what you can learn."