Understanding Organisational Performance in Tesco Plc

This report compares different performance measurement techniques in Tesco Plc and provides recommendations for enhancing organisational performance.

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Understanding Organisational
Performance in Tesco Plc

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Executive Summary
The report serves as an effective comparison between different performance measurements
techniques regarding organisational performance. It focuses on gathering considerable amount of
information based on consulting diverse literary sources associated to measurement of
organisational performance and also based on evaluation of a case of a retail institution like
Tesco. The report ideally contributes in judging the effectiveness of the performance
measurement schemes and thereby generates effective recommendations for Tesco for enhancing
the present organisational performance practices carried out by the firm’s managers.

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Table of Contents
Introduction......................................................................................................................................4
Overview of Tesco Plc.................................................................................................................4
Description of its activities..........................................................................................................4
Operations and Business Environment........................................................................................4
Detailed Methodology.....................................................................................................................5
Performance Management Systems in use by Tesco Plc.................................................................6
Conclusion and Critical Evaluation...............................................................................................14
Recommendations and Implementation........................................................................................15
References......................................................................................................................................17

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Introduction
Overview of Tesco Plc
Tesco Plc based in United Kingdom operates as a leading grocery retailer in the region. It
operates based on a large network of 6,800 stores both brick-and-mortar and online to address
the need of around 80 million people that tend to visit the physical and online stores of the firm
on an average weekly basis. The firm operates based on total manpower strength of around
440,000 million staffs (Tesco Plc , 2018).
Description of its activities
Tesco Plc focuses on serving the needs of its customers through the generation of quality
products and at affordable prices. The same contributes in enhancing the quality of lives of the
customers in terms of innovating on its service offerings based on the employment of click-and-
collect interface that encourages customers to generate orders online and thereby collect the
same from nearby stores and outlets. Moreover, Tesco’s management also focuses on
understanding the needs and expectations of its customers based on the employment of the
Clubcard and social media based tools and thereby in designing its product and service offerings
in a customised fashion. Tesco’s management also focuses on sourcing products in a sustainable
fashion from quality suppliers. Further, Tesco also works in serving and protecting the needs of
external communities consisting of social groups and external stakeholders (Tesco Plc , 2019).
Operations and Business Environment

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The increase in price inflation of around 2.9 percent during 2017 for food products was restricted
from being transferred to its customers. Tesco focuses on serving customers in a specific fashion
based on fulfilling its promises in terms of quality and price parameters. The same is carried out
by Tesco in terms of working in an effective and integrated fashion its suppliers such that the
same contributes in gaining access to quality food and non-food products. Tesco is also observed
to face potential challenge from discount chains like Aldi and Lidl. Tesco’s management thus
effectively works in shielding the customers from the impact of Brexit where it has caused the
lowering down the value of the Pound which in turn accounted for increasing the level of costs
for the food and non-food products and price inflations (Wood, 2017).
Detailed Methodology
Two different types of methods like secondary or empirical research methodology along with
case study based research are focused on being incorporated for carrying out the study in a
holistic fashion. The application of secondary research based activity is encouraged in the report
in that the same focuses on understanding and evaluating the diverse concepts regarding
performance measurement and evaluation of firms or organisation as a whole. The carrying out
of the research activity in the paper based on gaining potential information from secondary
sources aptly contributes in deriving background information for the undertaking of future
research (Denault, 2018). Further, the application of secondary sources also contribute in gaining
access to quality and authentic information associated to the research issue concerning
performance measurement practices for business organisations. The gaining of such information
in a timely manner and also in a cost-effective fashion ideally helps in meeting the research

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objectives. A blend of different research reports, journal articles, books and other available
articles are to be consulted for carrying out the needed research (Dawson, 2016).
Apart from the use of secondary research based activity, the employment of case study
associated research would also be carried out for meeting the research objectives of the paper.
The case study associated research activity is identified to earn significance for the paper in that
the study of organisational performance from the practical point of view would be based on the
retail institution, Tesco Plc. The incorporation of the case study oriented research activity like
secondary research ideally helps in the deriving of quality information from authentic sources
both in a timely and cost effective manner (Böcher & Krott, 2016). Further, the incorporation of
case study oriented study also enables the research activity to be carried out from a multitude of
different angles. Application of the case study based research activity also amounts in
understanding and evaluating the practical significance of the information gained based on the
use of the secondary research sources (Tight, 2017).
In that the information gained based on consulting of diverse secondary research sources and
also the case study oriented research being of a qualitative nature, the employment of qualitative
research activity is also focused on being undertaken in carrying out the research. The
employment of qualitative research activity ideally suits the case in that considerable amount of
qualitative sources are studied and dealt in the paper for generating potential information in a
narrative and descriptive format (Silverman, 2016). The application of qualitative research
activity also earns significance in that it contributes in undertaking of the research in an in-depth
fashion and thereby contributes in gaining quality information from diverse perspectives
(Klenke, 2016).

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Performance Management Systems in use by Tesco Plc
Different types of Alternative Performance Measures or APMs are employed by the management
of Tesco Plc for measuring the level of its organisational performance.
The measurement of Group Sales of Tesco are carried out in terms of excluding the sales
proceeds generated by the firm associated to the operations carried out at the petrol filling
outlets. The level of growth in sale figures for Tesco is identified as an effective ratio that is
measured as a year-on-year change associated to the total amount of Group sales for a total
period of 52 weeks or 1 month.
Another effective performance measure in use by Tesco is identified as like-for-like that focuses
on recording growth of both online and store based sales for the group as a whole. The
measurement here is carried out for online and physical stores that were opened for over an
annual period. It however discards the sales figure of stores that had been closed during the
previous year (Tesco Plc , 2018).
Further, the level of operating profit before the inclusion of exceptional items is carried out in
terms of estimating the level of the operating profit for Tesco Group with however excluding
some special items (incomes or costs) that are associated with the activities or operations of the
Group but are excluded owing to its size.
The level of operating margin is estimated based on dividing the operating profit excluding the
level of exceptional items by the amount of revenue gained. The level of operating margin is
expressed in the form of a percentage.
The measurement of cash flow associated to retail operations is also identified as an effective
APM by Tesco’s management such that it focuses on estimating the net cash inflows from

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continuing retail operations. It however does not include the cash flows gained associated to the
financial operations of Tesco Bank (Tesco Plc , 2018).
Again, the measurement of Retail Free Cash Flows focuses on incorporating cash flows
associated to both operating and investment functions that are pertaining to retail business.
Further, it also includes the amount of shares that are purchased associated to such schemes.
The measurement of Net Debt for Tesco Plc aims at excluding the amount of debt associated to
the operations of Tesco Bank but aims at including the total amount of debt pertaining to the
retail operations of the firm.
The above highlighted are the most significant Alternative Performance Measures or APMs that
are used by Tesco’s management for evaluating and measuring the level of the organisation’s
performance. The management asserts that the APMs are used for understanding the trend and
position of Tesco’s retail performance. It evaluates the like-for-like position of the company
associated to different annual periods and also contributes in comparing the performance of
Tesco’s units based along different geographical areas (Tesco Plc , 2018).
The identified performance measurement techniques used by Tesco Plc can be effectively
reviewed and evaluated based on the understanding of theoretical knowledge associated to
performance management of firms. It serves as an integrated approach which begins with the
planning function associated to measurement and evaluation of the organisational performance
of the firm and thereby focuses on incorporating effective monitoring standards for tracking the
execution of the planned decisions and its impacts in enhancing organisational performance.
Finally, the stocktaking activities are carried out either annually or along stated periods and

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thereby feedback generated associated to such (Pondicherry University , n.d.). The same is
reflected in the following illustration.
(Pondicherry University , n.d.)
Further, organisational performance is also evaluated by firms based on the application of three
specific measures that are indicated as productivity, effectiveness of the business organisation
and finally associated to the level of organisational ranking. Herein, the productivity or output of
the firm is analysed based on the level of financial and non-financial performances associated to
the business organisation under question. It focuses on the involvement of financial and non-
financial metrics for evaluating the level of business productivity for the firm. Secondly, in terms
of organisational effectiveness the business performance of the firm is evaluated based on the
ability of the firm in exploiting the resource base for generating adequate level of outputs (Adler,
2018). Herein, strategic models like the VRIO Framework or value and rarity of the tangible and

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intangible resource base is studied with also the chances of the degree of imitability that can be
carried out by other competing firms in the industry and also the potency of the existing
organisational framework are all evaluated. The analysis based on the use of the VRIO
Framework would ideally contribute in understanding the potency of the organisation in
generating success in a sustained fashion. Finally, the ranking of the companies in terms of
industry ratings like Fortune 500 companies and the like also contribute in evaluating the
performance position of the firm in the related industry (Kearney, 2018).
Another effective model stands out to be the DSMC/ATI Model that can be used for assessing
the performance improvement of a firm. The model is reflected as under.

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(Pondicherry University , n.d.)
(Pondicherry University , n.d.)

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The mission of the firm herein is developed in a customer centric fashion such that the firm
focuses on designing operational and business objectives for meeting the consumer expectations
and requirements in an effective fashion. Further, the firm focuses on designing and setting of
business and customer servicing goals and targets based on the identified mission such that the
same encourages the firm in allocating the resources base for aptly meeting of the same within
stated periods. Subsequently the model identifies the requirement of the firm in aptly developing
and enhancing the level of business processes while also focusing on the generating of effective
training to the staffs to work in the new business and operational setting. Improvement of the
existing business processes with also its effective evaluation based on the application of effective
tools and techniques and generation of needed feedbacks adequately contributes in generation of
continuous improvement for enhancing the performance of the firm (Chandler, 2016).
Finally, another effective model that can be associated for enhancing the level of organisational
performance for a business organisation is identified as the Multi-Source Feedback Model. The
MSF Model of performance improvement is reflected as under.

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(Pondicherry University , n.d.)
The 360 Degree Feedback Model used by firms in industries is identified as an MSF Model that
can be rightly put to use. The 360 Degree Feedback Model focuses on gaining feedback from
potential stakeholders like customers, suppliers, internal staffs, managers, peer groups and also
from specific individuals (Pondicherry University , n.d.). The same is reflected as under.

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(Pondicherry University , n.d.)
The 360 Degree Feedback mechanism is applied by business units that are observed to possess a
performance driven based culture, employee readiness and participation, team based
performance culture, transparent communication system and also a culture focused on promoting
organisational and individual development based on career tracking and training activities
(Pondicherry University , n.d.).
Tesco’s performance management needs to be improved based on the incorporation of the 360
Degree Feedback Mechanism as an effective example of a Multi-Source Feedback Model. The
same thus requires the company to focus on the identification of business goals and objectives
and thereby to effectively plan on business and departmental targets such that the same could be
percolated along to the different departments along the business institution. Further, the targets
identified need to be used for assigning of different job roles to the organisational teams. The
performance evaluation of the individuals and teams need to be carried out based on a 360
degree performance evaluation system and feedback gained from diverse stakeholders
(Brookhart, 2017). The feedback gained is used for further planning activities associated to
formulation of training for development of individual and group potencies such that it aids in

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future development of the organisational performance. Herein, the MSF Model earns
significance in that it helps in defining and identifying the parameters for tracking of
performances of a business unit and its several departments and also the manner or the
parameters that needs to be employed for carrying out the performance evaluations (Pondicherry
University , n.d.).
(Pondicherry University , n.d.)
Conclusion and Critical Evaluation
The paper reflects that the performance measurement activity for Tesco Plc is essentially carried
out based on a set of Alternative Performance Measures (APMs). The APMs are mainly
observed to contribute in the estimation and evaluation of performances of the organisation
especially from the financial standpoint. To this end, a set of diverse literature associated to
performance measurement and evaluation are studied which reveal a set of different types of

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qualitative instruments that are employed by the firms for evaluation of the current performances
and thereby in generating effective feedback for promoting the future development of the current
performance situation. The application of the multi source feedback model in the form of 360
degree feedback mechanism is studied in a detailed fashion in the paper. The application of the
multi source feedback model in contrary to the alternative performance measures ideally helps in
evaluation of the performance of the organisation from diverse perspectives and angles. It helps
in the generation of detailed and narrative information sets contrary to specific and quantitative
information as gained based on the employment of the alternative performance measures. The
gaining of detailed and qualitative information from diverse stakeholders is taken to help the
management of Tesco in taking quality decisions and in using the feedback loop for the
development of quality training modules for the departmental staffs. Unlike the alternative
performance measures that only suited comparison of the quantitative performances on a year-to-
year or on a period-to-period basis the application of the multi source feedback model promotes
the aspect of continuous improvement for the business organisation. From a holistic standpoint,
unlike the alternative performance measures used by Tesco, the application of the multi source
feedback model serves in generating both qualitative and quantitative information in the form of
raters for better understanding and analysis.
Recommendations and Implementation
The implementation of the Multi-Source Feedback Model can be carried out in Tesco Plc based
on the identification of the key result areas (KRAs) for both the organisation as a whole and also
for the individual departments and strategic units of the firm. After defining the KRAs the
organisational managers are required to focus on the identification of effective goals and

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responsibilities that are needed to be fulfilled by staffs associated to the different departments of
the institution and also along its different brick-and-mortar stores and formats. Further, after
having defined the job roles and responsibilities at the individual and also along the group level
the managers focus on underling the desired level of competencies and also the attitudes and
behavioural parameters that are needed to be reflected by the different staffs to which the tasks or
roles for meeting of business and institutional objectives are assigned. The performance
measurement of the organisation thus can be carried out at the staff and departmental level based
on the formulation of questionnaires and rating systems that would be used by the different
stakeholder groups like peer groups, colleagues, managers, customers, suppliers/vendor firms
and the like. The gaining of 360 degree feedback based on the application of the questionnaires
and the rating systems ideally help in evaluating the level of performance potential of the
organisation as a whole and also the rooms for improvement. It also contributes in the
development of training mechanism for the staffs pertaining to the different levels for helping in
the generation of effective performances at a future period (Ermongkonchai, 2008).

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References
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