Leadership and Governance at Tesco: Issues and Recommendations

This report examines the leadership challenges faced by Tesco, a multinational grocery and merchandise retailer, focusing on the decline in performance attributed to ineffective leadership and governance issues. It highlights the shift from Sir Terry Leahy's successful leadership to Philip Clarke's less effective approach, which led to a loss of customer trust and market share. The report analyzes the impact of these leadership issues on various aspects of the company, including human resource management and financial performance, referencing the accounting fraud scandal that further damaged Tesco's reputation. A literature review explores different leadership styles and theoretical frameworks, contrasting Leahy's visionary and participative leadership with the subsequent challenges. The report concludes with lessons learned and recommendations for improving leadership and governance at Tesco, emphasizing the importance of restoring trust and fostering employee empowerment. Desklib provides access to this assignment and a wealth of other study resources for students.

Running Head: LEADERSHIP 1
Leadership

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Part 1: Leadership Problem
Leadership issue in Tesco
Introduction
The research title that it emphasizes the business issues that are encountered by Tesco,
UK. The analysis of the company depicts that it’s the UK multinational grocery as well as
general merchandise retailer, whose headquarters are situated in Chestnut, UK. It is noted that
Tesco is the considerable retailer, that is based in the UK, and has successfully attained the
vital position level all around the whole retail industry in the UK (Annual Report, 2010). It
includes more than 500000 employees, which signifies that the company is operating its work
on colossal scale. Tesco plc analysis shows that the company is running on a large scale in
both the domestic and international market (Chapman, 2014). In result of that, Tesco has
essential responsibility level towards a massive range of stakeholders all around the
company. The performance of whole business requires to go positive so that the company can
easily contribute towards the high growth and development level.
Statement of the leadership issue
Analysis of the previous literature depicts the vast range of topics, which can be seen
about Tesco performance. The Tesco business performance is understood to be negatively
impacted in current years, and the principal reason for it are many (Hoogh, Hartog,
Koopman, Berg, van, Weide & Wilderom, 2004).
Analyse the issue
The principal reason behind the declining performance of Tesco plc is lack of trust,
which is hugely ineffective in context of leadership that is practiced by the company. Tesco
under the Sir Terry Leahy leadership has tried to attain the success level and was even

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successfully able to maintain the sound relationship with the customers (Harvard Business
Review, 2013). At the time of his leadership, Tesco has reached the leadership position
within the industry. Nevertheless, the Philip Clarke leadership has damaged the entire image
of Tesco plc, and the company has even lost their share with many other competitors in the
market. The trust of the company among its customers that was built in the last many years
has completely eroded, and the same can be seen through the lost sales as well as reducing
revenue performance of an organization (Muijs, 2010). Nevertheless, the effect of inefficient
leadership can be seen in different vital areas that are operational within the company.
For instance, it is analysed that Tesco has successfully accounted for a considerable
number of leaders that hope massive experience for many years. Tesco employees are highly
empowered to take the decision, which aims towards leading the company towards high
success level. Nevertheless, as per the inefficient Philips Clarke leadership, most of the
experienced leaders were permitted to leave the company in, and the same has impacted the
full conditions of company’s performance (Wilson, 2010). This depicts that the effect of
inefficient leadership is viewed in the context of human resource management that holds
essential resources, made available to Tesco Plc.
It is analysed that not only the leadership issues that have impacted the Tesco plc
performance, instead of that many other factors are also counted as responsible for the
reduction in the complete performance of the business of the organization. For example, there
were many frauds that can be seen at Tesco plc, between the years 2014, where else it was
analysed that there has been the profit overstatement, performed within the financial
statements of the firm to around £250m (Tesco Plc, 2015). In result of the same, there was a
downfall for the company that was witnessed on the company’s share price, along with that
there was a urgent investigation that was launched over companies book accounts (Hoogh,
Hartog, Koopman, Berg, van, Weide & Wilderom, 2004). This specific factor had acted

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correctly in an adverse way over company’s performance, as well as the cost of shares that
were reduced by 10pc (Tesco Plc, 2015). In result of the options for the corporate frauds,
warnings were also issued to the organization, which was issued for an organization, but the
same has affected the entire reputation of Tesco plc negatively (Tesco Plc, 2015).
Part 2: Literature Review
Leadership Issues
The governance and management issues are explored as necessary, as they have
impacted the complete performance of the organization negatively. Philips Clarke leadership
is not highly effective towards fostering the mechanism of efficient governance at Tesco, and
the same has permitted for the problems related to accounting frauds in accounts books of the
company (Judge & Piccolo, 2004). The research also shows that there is an inefficient
management practice in a company that had led to adverse effect on the performance of the
business. This kind of inefficient management can be seen through the decisions taken by the
management of Tesco (Hoogh, Hartog, Koopman, Berg, van, Weide & Wilderom, 2004). It is
also depicted that the company had performed importantly at all the investment level for
developing the infrastructure for their retail stores when the behaviour of the consumer is
showed as entirely changed towards the process of purchase decision making. For example, it
is also depicted that there are still many high preferences set by consumers for the online
shopping and expanding the online platform, like a significant investment on the offline mode
that is highly inefficient from the perspective of complete organization performance (Keller,
2006).
The reputation that is built by the company in the past years is importantly destroyed,
due to the events of the company. The examples related with the corporate frauds, as well as
a reduction in the trust level of customers, along with ineffective leadership practices applied,

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lead to the loss of various efficient leaders and staff, as both have impacted the entire
reputation of Tesco in a negative way over performance and profitability of the company
(Avery, 2004). For example, analysis related to the Tesco plc financial performance shows
that there is a high reduction, which is seen in the context of revenue along with company’s
profitability performance in the last two years (Hofmann & Jones, 2005). Between the
financial years 2013-2014, it is analysed that considerable reduction is seen in both the
profitability and revenue performance of Tesco that relates to the critical issue faced by the
company.
Leadership style
In the recent years, it is analysed that the effect of various leadership styles, as well as
the approach of the company, has highly dominated most of the debates related with
practitioners and academicians. The actual reason is that leadership style adopted might
evoke the subordinate’s performance and is also significant in attaining the organizational
goals. Hoogh, Hartog, Koopman, Berg, van, Weide & Wilderom (2004) offers a
comprehensive, practical suggestion to both the managers and leaders over important topics
like the management of employees, different leadership styles, and best practices followed
among them.
Judge, Bono, Ilies & Gerhardt (2002) address the relationship of leadership
performance. In their analysis, they have expounded over particular paradigms of research
like the visionary and transactional paradigms as well as different ignored potential
paradigms such as classical and organic paradigm (Hoogh, Hartog, Koopman, Berg, van,
Weide & Wilderom, 2004). It is criticized that bass’s transformational leadership theory in
case of exploring, that there is no way related with leadership and instead of that it point
towards the various leadership types, which reflect over social and historical roots. It is

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analysed that performance of the company different as per the kind of leadership paradigm
applied. Judge, Heller & Mount (2002) suggests that the research and context paradigm is
required while researching the impact of leadership on the organization performance.
Many research studies have been conducted and include cross-sectional designs as
well as similar performance measurement method for the issues (Hoogh, Hartog, Koopman,
Berg, van, Weide & Wilderom, 2004). It is noted that the performance management quality is
essential for examining the results of leadership approaches in the performance of the
company. Lim & Ployhart (2004), for instance, had ignored the emphasis on the correlation
between the financial performance and satisfaction of customers. Employing the customer
satisfaction and financial measurements are significant for improving the research validity.
Theoretical framework
Leahy is referred to as the visionary leader behind Tesco success. He is also
considered as the excellent leader that had led the company towards many organizational
changes, with the purpose of making the company customer-centric and for developing the
workforce. There is five power base among the famous leadership models, such as referent
power, reward power, coercive power, legitimate power and expert power (Rowe, Cannella,
Rankin & Gorman, 2005). Terry Leahy success is through three power factors like referent
power, expert power, and legitimate power. It is noted that legitimate power try to stems from
the place of individuals in the company and also initiate the right to ask for compliance
through a subordinate. Leahy had attained the power through ascending Tesco CEO (Rowe,
Cannella, Rankin & Gorman, 2005).
It is noted that expert power includes communication skills, interpersonal skills, as
well as scientific knowledge. This expertise relies on the viewpoint of ownership of different
ability as well as knowledge. The colossal experience of Terry in the organization had helped

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him in making him possess right knowledge related to industry, company operation, and
customers. On the other side, referent power relies on the members of the group attraction
towards identification and leaders respect (Schriesheim, Castro, Zhou & Dechurch, 2006).
The interpersonal skills and charisma of Terry helped him in making his subordinates to
achieve intrinsic satisfaction with their leader.
The theory of bass related to transformational leadership focuses that the leaders
always try to motivate there follow staff through establishing the issues, inspiring them as
well as stimulating the personal development (Hoogh, Hartog, Koopman, Berg, van, Weide
& Wilderom, 2004). It is noted that his followers profoundly influenced Leahy through
motivating them as well as encouraging them. All around the role of leadership, Leahy has
tried to focus towards participative management and empowerment of employees (Lim &
Ployhart, 2004).
Terry applied the leadership style of participative, in which subordinates were highly
active to get involved in the process of decision making. Besides that, he also delegated the
role of leadership towards individuals in the company, while focusing on the significance of
appointing the leaders to manage the different process of organization (Hoogh, Hartog,
Koopman, Berg, van, Weide & Wilderom, 2004). Appropriately, they have hired the
democratic leadership style in their supervisory role in the organization. His style of
leadership had tried to bring change in company’s structure (Lim & Ployhart, 2004). Indeed,
he also ascribed the success epitome that is respective and credible.
Empowerment of employees, as well as participative management, has created effect
over enhancing the morale of employees, encourage the flexibility, strengthen the trust of
employees, increase productivity and elicit the high commitment. The idea related to the
employee participation and empowerment is highly potent towards Tesco Plc (Lim &

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Ployhart, 2004). This kind of practice about connecting employees in the process of decision
making has held many benefits.
Considering the achievements through Terry appointment as the CEO, it is noted that
his style of leadership has tried to bring change in the company towards adopting the organic
system that is featured through sharing the process of decision making, flexible structure of
authority, moderate application of formal regulations and rules, and enormous explained
responsibilities of job (Hoogh, Hartog, Koopman, Berg, van, Weide & Wilderom, 2004).
This kind of arrangement is relevant for remaining innovation and for maintaining the
competitive benefits.
Lim & Ployhart (2004) had analysed that, effective leadership has emerged and it’s
the only effective style of leadership, which is considered as the main reason for the slow
expansion of the organization performance (Lim & Ployhart, 2004). It is noted that
transformational leadership is highly effective towards maintaining the competitive benefits
of Tesco Plc.
Part 3 Lessons learned
Recommendations
The analysis leads to exploring that Tesco has successfully developed its right image
in the entire retail sector in the last many years, but it takes only less time in losing its brand
image, which had taken years to develop (Hoogh, Hartog, Koopman, Berg, van, Weide &
Wilderom, 2004). In result of that, the implications of business in the context of exploring the
issue is that Tesco should work towards taking appropriate steps for planning and they should
also take right measures, that permit the company in rightly examining the issues as sustained
through companies operations (McShane & Von, 2000).

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The critical loophole as explored is mainly in the context of the leadership problems
at Tesco and this requires to be efficiently examined so that the company can quickly regain
the lost share of the market and can efficiently investigate every key loophole around various
critical organizational process faced through it (Raelin, 2003). From the complete analysis,
business implies that management not only requires to get changed, but it’s recommended
that proactive steps should be covered because of targeting the brand image recovery and
finally the performance level of the company (Hoogh, Hartog, Koopman, Berg, van, Weide &
Wilderom, 2004). The position of leadership, which is left previously through the last CEO
require to be achieved again so that the company can quickly create the right effect on the
target customers (Zhu, Chew & Spangler, 2005).
Overall, the complete research is undertaken to prove the high effectiveness from the
perspective of examining the principal aim for which it’s committed (Hoogh, Hartog,
Koopman, Berg, van, Weide & Wilderom, 2004). The study is mainly emphasized towards
exploring the business issues that are seen in context of Tesco and the conduct of complete
research has shown the findings that there are vast range of problems faced by Tesco in
business performance, and it’s recommended that there is a requirement for taking practical
steps in context of enhancing the Tesco plc leadership effectiveness that is needed through it
(Thomas & Adair, 2004). According to analysis, the appropriate suggestion is explored with
an aim to attain the performance and emphasize towards improving its image in the industry
and should make sure about the strategic decision should be taken on time to time basis, so
that the company faces issues are examined efficiently (Taylor, 2006).
Self-Reflection on the integration of faith and leadership theories
From this research, I have analysed the importance of transformational leadership in
Tesco Plc. I have also learned that this leadership style is quite influential in the performance

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of the company. I have learned that leadership is a very pertinent factor in the performance of
the company and also play an essential role in both management and behavioural science. I
can mention that there is no doubt that Tesco had tried to perfect the notion of effective
leadership in successfully achieving the competitive edge by the styles of leadership
portrayed through the favourite heroic. From this study, I have learned about the Leahy Terry
along with its transformational leadership approach. Though this study had tried to portray in
nature, instead of being conclusive, it highly contributes towards the evaluation of the
compatibility of various methods of leadership and leadership styles applied at Tesco Plc.

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References
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performance. Journal of Applied Psychology, 90(3), 509-522
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Lewis
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