Strategic HR Challenges in Tesco

This report analyzes the business strategy of Tesco and identifies key HR challenges faced by the company. It provides recommendations for Tesco to become more strategic and effective in achieving its corporate objectives.

The Strategic HR Professional
Work-based Report
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Executive Summary
The aim of this report is to analyse the business strategy of Tesco and identify key HR and
people challenges which are faced by the company that resulted in hindering its ability to
achieve strategic objectives. The business strategy of Tesco is directional which focuses on
expanding its operations overseas, reducing operating costs and creating a positive impact
on society. Key HR challenges in Tesco include high employee turnover rate, difficulty in
meeting seasonal demands, long shift hours and lack of effective diversity management.
This report identified various changes that HR of Tesco should adopt to become more
strategic and effective in achieving its corporate objectives such as adopting strategic
planning process, Mintzberg’s 5P’s for strategy and HR Value Proposition.
Recommendations are given in this report and challenges are identified which executive
team of Tesco might face while implementing those recommendations such as using
strategic human resource management principles to link HR strategies with desired goals
and prioritising the interest of employees to address the issue of high turnover and job
dissatisfaction.

Table of Contents
1. Introduction........................................................................................................................3
2. Tesco PLC............................................................................................................................4
3. Business Strategy of Tesco PLC...........................................................................................4
4. HR and people challenges in Tesco....................................................................................5
5. Changes for HR to become more strategic.........................................................................8
6. Conclusion.........................................................................................................................12
7. Recommendations............................................................................................................12
8. References........................................................................................................................14

1. Introduction
In today’s competitive business world, corporations are facing fierce competition in their
respective industries, and they are struggling to generate and maintain a competitive
advantage to stay ahead of their competition. One of the key areas through which
companies generate a competitive advantage is the effective management of human capital
in the organisation (Noe et al., 2017). The demand for a talented and skilled workforce has
increased across the globe which requires companies to adopt policies that enable them to
build and retain a talented workforce that dedicatedly works towards the achievement of
organisational goals. In order to achieve this goal, companies implement strategic human
resource management (SHRM) policies while aligning them with the business strategy to
ensure that they address key HR issues in the workplace to effectively achieve their strategic
objectives. Strategic HRM is defined as all activities which are implemented by companies to
formulate the behaviour of individuals and implementing strategic needs to achieve
corporate objectives. It focuses on clear long-term goals, creating linkages with strategic
plans and organisational performance (Kramar, 2014).
The objective of this report is to evaluate key HR challenges faced by Tesco PLC and
understand how the company can align its HR objectives with strategic policies to generate
a competitive advantage in the market. This report will begin by providing an introduction of
Tesco PLC along with its business strategy. The key HR and people challenges faced by the
company will be evaluated in this report to understand how they make it difficult for Tesco
to achieve its strategic objectives. This report will analyse the changes which Tesco must
make its HR practices more strategic and effective in supporting the business to achieve its
goals. Lastly, a conclusion will be drawn, and recommendations will be given for the
executive team of Tesco and challenges will be identified which they might face while
implementing these recommendations.

2. Tesco PLC
Tesco PLC is a British multinational corporation that operates in retailing sectors, and it
offers it has established its operations in over 6,809 locations which are situated in 12
countries (Tesco PLC, 2017). It is British multinational grocery chain which is a major player
in the grocery market; although the company operates in many major markets such as
Malaysia, Ireland, India, Czech Republic, Thailand, and Hungary; however, its operations are
mainly situated in the United Kingdom. Currently, the company is the second largest retail-
based organisation in terms of profit generation. The motto of the company is to deliver
value and convenience while offering fresh local products to its customers which it achieves
with the help of a large workforce of 440,000 employees (Tesco PLC, 2019a). The company
hires employees for both store-based as well as non-store based jobs. Positive customer
relationship and loyalty is one of the goals of the company which it achieves with the
effective performance of its employees who are responsible for directly dealing with
customers and resolving their queries. The importance of attraction and retention of
talented employees has increased in the company because it is opening new stores outside
the UK to become a global leader in the retailing sector (Wood, Wrigley, and Coe, 2016).
3. Business Strategy of Tesco PLC
The business strategy of Tesco is heavily linked with retailing operations, which contributes
to around 60 percent of the total sales and profits of the company (Wood, Wrigley, and Coe,
2016) (Wood, Wrigley and Coe, 2016). Tesco is a company built around customers and
colleagues, and these values are also linked with its vision which provides that wanted to be
the most highly valued business by serving its customers, communities, colleagues, and
shareholders. The business strategy of Tesco is influenced by its values which are embedded
in all business levels of the company. As Tesco is a community-based global business, its
values are focused on catering to the needs of customers and providing them healthy
products through its talented employees (Mollah, 2014). Tesco has implemented directional
strategies in the business in which it mainly focuses on ‘concentration strategies’ as it
focuses on increasing market share and reducing operating costs by creating and
maintaining a strong range of products and services. The business strategy of the company

divided into seven parts. The values of the company set the tone for its decision-making
process which reflects on its business strategy as well. The first part of its business strategy
is to grow in the core retailing market of the UK and to achieve this goal the company has
increased its staff number in the country by 20,000 over two years (BBC, 2012).
The second part of the strategy is to create highly valued brands which include developing
its own-label brands that become a staple for quality such as F&F clothing, Tesco Finest, and
Everyday Value. The third section of its strategy focuses on becoming an outstanding
international retailer in terms of physical stores and online shopping due to which the
company has expanded its operations in markets such as Georgia, Middle East, Azerbaijan,
Armenia and Saudi Arabia (Mollah, 2014). The fourth part of the strategy focuses on
growing its retailing services in all of its already established markets. The fifth part is to
become responsible towards the community which it serves by implementing effective
corporate social responsibility (CSR) practices. The sixth part focuses on creating a team that
keeps up with its vision and values and effectively lead them to achieve corporate
objectives. The seventh part focuses on building a heritage by becoming a strong enterprise
that has a positive image in the market (Wood, Coe and Wrigley, 2016). The key qualities of
the employees which Tesco requires to achieve its corporate objectives are dedication,
sincerity, hard work, friendliness, engagement and others. The business strategy of the
company requires it to build a workforce that is highly dedicated and focused on achieving
the goals of the company. This goal cannot be achieved if the company did not implement
effective HR practices that are targeted towards addressing key HR challenges and
generating a competitive advantage in the market.
4. HR and people challenges in Tesco
Since the business strategy of Tesco heavily relies on its human capital, the company is
required to implement strategic policies which are focused on identifying key HR and people
challenges in the workplace to ensure that they are addressed in an appropriate timeframe.
Following are key HR and people issues faced by Tesco while managing its operations in
domestic as well as international market.
 High Turnover

One of the key challenges faced by Tesco is the high attrition rate of employees which leads
to high employee turnover in the company that makes it difficult to achieve its strategic
goals. This is a problem faced by most retailers because the salary packages are low and
employees have to work for long hours (Harrison and Gordon, 2014). Business strategy of
Tesco focuses on reducing operational costs; however, a high attrition rate increases the
overall costs of the HR department. For example, Tesco provides training to its employees
before assigning them a job; however, the training costs go to waste as soon as an
employee leaves the organisation (Tesco PLC, 2011). Training and development of
employees are difficult and time-consuming process, and the company had to face these
issues every time it recruits new employees. Most of the employees in Tesco are young
because only one in five employees is above the age of 50 (Crush, 2008). The company also
employs students for handling its operations since they did not demand higher salary
packages and they are easy to train. However, it is also difficult for the company to retain
these students since they quickly change the corporation as soon as they complete their
studies or get another high paying job.
 Diversity
Tesco is a global brand which has hired employees in many countries, and it also hires
employees from different caste, religion, gender, age, race and colour in its stores situated
in the UK. Maintaining a diverse workforce is a good thing for companies since it helps them
in better connect with the customers that lead to better ideas and positive results (Singh et
al., 2016). However, the lack of effective diversity management makes it difficult for
management to handle the employees or motivate them to discharge their duties in an
effective manner. Tesco has implemented diversity and includes the policy in the
organisation through which it focuses on hiring women, retired individuals, black people,
LGBT people and individuals who are from armed forces (Tesco PLC, 2019b). However, the
diversity also leads to discrimination between employees which make it difficult for the
management of Tesco to avoid. For example, Tesco faced a record £4 billion lawsuit for
failing to pay an equal salary to its employees (Butler, 2018).
Even after the implementation of diversity and inclusion policies, it is a male dominating
company in which women face many challenges. They did not have equality when it comes

to salary packages because male workers earn over £11 an hour than whereas female
workers earn around £8 per hour. This claim is brought by over 200,000 Tesco employees
that show how big the issue of discrimination is in the company (Davey, 2018). The company
also faced another challenge when its employees filed a suit against the company for
discrimination because their pay and benefits of July were cut by the corporation due to the
implementation of its new rules that were negotiated by their union (Topham, 2016). This
shows that discrimination is a major issue which the company which makes it difficult for it
to effectively implement its business strategy to achieve its corporate goals.
 Seasonal Demand
Tesco’s HR department faces of the key challenges because the demand for workforce
fluctuated in different seasons. In the case of holiday seasons such as Christmas, Black
Friday or Thanksgiving, the demand of workers increases across its stores because the
number of customers increases substantially and handling them require the company to
hire more employees (Hubner, Kuhn and Sternbeck, 2013). However, this is not the case
with other seasons when the number of customers is low, and a large number of employees
resulted in increasing the operating costs of the company. Tesco often tries to hire
temporary staff during the festive times; however, they often wind up with employees who
are low skilled and without training which makes it difficult for the company to deliver a
high standard of services to its customers (Pike, 2018).
These workers also affect the performance of other employees since they become
discouraged to effectively perform their duties as well. Due to the seasonal demand, the
company had to rapidly hire new employees also fire them when they are not needed which
creates HR challenges since employees are demotivated in the workplace. For example, the
company hires over 15,000 employees in order to meet the HR requirements for Christmas
which resulted in putting immense pressure on the HR department to hire them and train
them to ensure that they provide high-quality services to customers (Stevens, 2016).
Moreover, the company recently fired over 9,000 employees in February 2019, right after
the Christmas season, as the demand of workers decreases and the company no longer
required to maintain a high workforce (Miller, 2019).
 Shift hours

Long shift hours are a major problem in the retailing sector which also affects the business
of Tesco as well. Previously, the company remained open for 24 hours to ensure that its
customers are able to purchase products whenever they want (Fraser, 2016). In order to
meet the demand of customers, many employees have to work in long shift hours to make
sure that they are available when customers come in the store to purchase products. In
order to make sure that employees stay longer than their working hours, Tesco provides
them extra pay, bonuses or incentives. However, the long working hours resulted in
negatively affecting the health of employees in the company, and it makes it difficult for
them to stay in the organisation for a longer period of time (Coe and Lee, 2013). Many times
employees have to work on weekends and other holidays to meet the demand of high
workforce. In order to tackle this use, the company initiated a ‘four-hour shift system’ in
which employees have the chance to work for extra cash for Christmas by working for
longer hours (Wood, 2010).
Due to a lack of supervision, it becomes easier for employees to avoid work while working in
long shifts hours which makes it difficult for the company to provide high-quality services to
its customers. For example, a survey found that many employees pretend to help
customers, but they actually did not help them (Pike, 2018). When they pretend to check
the storeroom for the availability of a product, they often take a short break rather than
finding the product. It becomes difficult for the HR department to ensure that they
effectively handle the workplace in longer shift hours (Pike, 2018). The company also faced
the issue of unpaid overtime workers in which more than 500,000 employees reported that
they were not paid by the company even after they did overtime (Edwards, 2014). It shows
that challenges faced by the company and how it is affecting its performance in the market
which makes it difficult for it to effectively manage the shift timing of its workers. Therefore,
the company recently closed its facility to open its stores for 24-hours since its HR
department was not able to keep up with the challenges of heavily workforce demand and
the operating costs to run the operations in the night (Fraser, 2016).
5. Changes for HR to become more strategic
Although Tesco has implemented effective HRM policies in the company; however, most of
them did not strategically link with its business strategy which makes it difficult for the

company to achieve its corporate goals. In order to adopt effective SHRM policies, the
company should make the following changes in its HR framework which will help it in
becoming more strategic this is crucial for the company to achieve its objectives.
 Adopting strategic planning process
Tesco should adopt an effective strategic planning process in the company to make sure
that it is able to adopt SHRM policies that are focused on eliminating obstacles in the
company and achieving desired goals. The company has to focus on scanning the
environmental conditions (both internal and external) to identify key factors that affect the
HR practices and employees in the company (Jackson, Schuler and Jiang, 2014). While
conducting the environment scanning, the company can rely on different tools such as
SWOT analysis (for internal) and PESTLE analysis (for external). The internal analysis of the
company focuses on identifying key strengths and weaknesses of the company whereas the
external analysis focuses on evaluating macroeconomic and microeconomic factors to
identify key opportunities and threats in the company (Leatherbarrow and Fletcher, 2014).
This process will enable the top level management of Tesco to consider HR as a more
strategic process that can enable the company to achieve its corporate objectives. The
company will be able to rely on internal and external strength and weaknesses in order to
avoid threats and exploit opportunities. For example, it can use its strong training process to
reduce weakness of employees by investing more in training and development facilities to
exploit the opportunity of increasing the customer base (Tesco PLC, 2011). Another example
is exploiting the opportunity to expand online sales of the company by hiring employees in
the technical department to build a strong online presence of the company (Butler and
Neville, 2013). The company should clearly define its organisation’s philosophy (mission,
vision, values, and goals) while identifying its strengths and weaknesses. It should develop
objectives and goals to formulate suitable strategies and KPIs and communicate them with
its stakeholders.
 Mintzberg’s 5P’s for strategy
Tesco should make changes in its business strategy as well as HR practices to make it more
strategies for which it can use Mintzberg’s 5P model. The first ‘P’ is plan which provides that

the plans of the company should be consciously intended course of actions that are taken by
the management to achieve specific goals (Tafti, Jalili and Yahyaeian, 2013). The second ‘P’
is ploy which provides that the company should introduce specific manoeuvre to outwit
opponents. The third ‘P’ is pattern which provides that they should follow a specific stream
of actions when it comes to implementation of the strategy of the company to ensure all
relevant parts are fulfilled. The fourth ‘P’ is position in relation to the organisation’s
environment which means all the roles of the company should be considered by the
management to meet specific goals (Elmes and Barry, 2017).
It means that the roles and responsibilities of each individual should be clarified by the HR
department to ensure that they know their objectives, and they are targeted towards
achieving the goals of the company. The fifth ‘P’ stands for perspective towards the
organisation’s shared market which means that the company should identify all of its
stakeholders along with their interest to ensure that its employees have similar perspectives
and they are working while complying with the values of the company (Oscar Benitez Nara
et al., 2013). The strategy of the company should be about larger perspective to determine
what different stakeholders think about the company and how they are affected by its
decisions. Therefore, the management of Tesco should incorporate these five P’s into its
strategy to ensure that it covers a wide range of topics which are necessary to be evaluated
by the company to achieve its desired goals (Evans and Mason, 2018). Through this strategy,
the company will be able to address the issue of discrimination among employees since the
strategy will incorporate policies that promote and foster diversity in the workplace as it
focuses on the interest of stakeholders.
 HR Value Proposition
Tesco can adopt HR value proposition model in the business to makes its HR practices more
strategic. According to Ulrich and Brockbank (2005), roles assist in defining what work must
be done in the workplace, and it also assists in identifying competencies to define how the
work is done. As per this theory, the HR professionals can deliver value by understanding
the role receiver more than the giver to become master in certain roles and competencies.
This model can be applied in the case of Tesco since the company finds it difficult to hire
appropriate employees to deliver high-quality services to customers. The issue of long shift

hours and seasonal demand can be addressed by this model since the company will be able
to design jobs that deliver higher value to stakeholders (Wood, Wrigley, and Coe, 2016).
Through this model, the HR department should focus on understanding challenges faced by
customers due to lack of employees and incorporate training facilities that enable the
companies to prepare a talented workforce which offers high-quality services to customers.

6. Conclusion
In conclusion, the importance of implement of SHRM policies has increased substantially for
companies which enable them to address their HR problems and achieve their corporate
objectives. Tesco is also facing many challenges relating to the management of people in the
workplace which makes it difficult for the company to ensure that it achieves its desired
goals without hindering its profitability. The business strategy of Tesco is analysed in this
report to understand the role of employees in the workplace and how they contribute to
the overall success of the company. The key HR and people challenges faced by Tesco
include high employee turnover, fulfilling seasonal demand of employees, long shift hours
and maintenance of diversity in the workplace. Key changes which Tesco should implement
to adopt SHRM policies are identified in this report such as adopting strategic planning
process, Mintzberg’s 5P’s for strategy and HR Value Proposition. These changes will make
the HR of Tesco more strategic which will enable it to sustain its growth in the market.
7. Recommendations
Following recommendations are given for executive team of Tesco to address the key HR
challenges along with evaluation of challenges which they might face while adopting these
recommendations.
 The executive team of Tesco should change its HR practices to adopt effective SHRM
principles to make sure that they link the strategic goals of the company along with
its HR capabilities to ensure that they are appropriate to meet the desired goals.
While adopting these policies, they will face challenges because they will have to
make changes in their current HR framework which can be time-consuming.
 The company should prioritised the interest of employees by providing them
facilities such as flexible working hours, growth opportunities, rewards and
incentives for their hard work to encourage them to perform better and retain them
in the organisation. This will assist them in addressing the issue of the high attrition
rate of employees and job dissatisfaction; however, they will face the challenge of
increased operating costs while following this recommendation. However, it will
increase its profitability in the long run.

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