Internal Environment of Tesco - Literature review Example

Internal Environment of Tesco Introduction “Now here, you see, it takes all the running you can do to keep you in the same place. If you want to get somewhere else, you must run at least twice as fast as that” (Humby, Hunt & Phillips, pp. 365-378, 2007). The above-mentioned lines are from Alice Through the looking Glass written by Alice Carroll. There is a debate still going that whether or not this revolution or transformation that or world has gone through in the past couple of centuries, in form of globalization, industrial revolution, internet, free trade, information technology and others, has created a positive or negative impact on the lives of the people all around the world. Quite understandably, there is a bright side to the picture and as well as a darker side which go hand in hand, however, when talked about the corporate world, markets and industries, the darker side is more dark to offset the brightness of so called bright side of the picture. The golden days for the business were when they could operate with monopolies and lesser competition. Consumer awareness was virtually zero and thus there bargaining power was extremely low (Senge, pp. 189-196, 1991). However, with this revolution of information technology, the market place has changed into something, which no one could have imagined in his or her wildest dreams, some decades back. Statistics reveal that out of the Fortune 100 companies of 1900, only four of those corporations have been survive and the rest are history. Furthermore, only General Electric (GE) is the only company, which still exists out of the top 12 companies that appeared on the Dow Jones Index in 1900. Quite clearly, the market place is now a brutal and ruthless place, which has no place for companies that fail to adapt, change, innovate, learn, and compete. In fact, the market place today is a bloody red ocean, since all that companies do today, is make their competitors lose, so that they can win. For most companies, the pie is not growing or expanding and the only way to increase your share of the pie is to decrease the share of their competitors. More importantly, the companies that have failed to adopt proactive, calculated, informed approaches and have tried to remain mere spectators, the environmental forces have not forgiven them for the same and they are history. That explains why Nokia, which started it business as lumber company that made equipments needed to cut down the forests diversified, adapted, changed, and innovated to become the biggest seller of mobile phones in the world. Vodafone Airtouch received its success by merging with Mannesman, which produces steel tubes. As one author puts it, “the only thing constant is change” (Landale, pp. 14-17, 1999). The bottom here is that the world is now a global knowledge economy and the only way to survive here is make your organization as a learning organization, continuously innovate and direct all your energies towards advancement and adaptability. Quite understandably, the same is only achievable by creating an internal environment in terms of organizational structure, culture, polices, practices, leadership and others, which can support the organization to survive in the global knowledge economy (Seth, & Randall, pp. 296-298, 2001). This paper is an attempt to look at Tesco is the same regard. The paper will start by providing a brief background of the company and then would devote the rest of ink for highlighting the factors that contribute towards making it an innovative and learning organization. More importantly, the same would be done by discussing relevant theory and examples. Towards the end of the paper would very briefly conclude and sum up all the ideas under the heading of conclusion. Background of the Organization With annual revenues of more than 62 billion pounds in 2010, Tesco is the third largest retailer all over the globe. However, in terms of profits, Tesco’s efficient operational strategies enable to it outclass Carrefour and take the second position just after Wal-Mart. However, important here to note is that Tesco has emerged as the market leader in its own domestic market and generates the biggest share of its revenues from United Kingdom. It was in 1919, in East London, where Jack Cohen gave the world one of the strongest brand names. Over the years, not only Tesco has expanded globally, having operations in to three continents with more than 4800 stores but also it has diversified into several related and unrelated businesses such as financial services, insurance, telecom, internet services, online shopping, electronics and others (Marr, pp. 406-414, 2010). Tesco proudly states its mission statement as “creating value for customer to earn their lifetime loyalty”. Tesco repeatedly enforces to all its stakeholders that “no one tries harder for the customers” and “treat people how we like to be treated”. Moreover, Tesco also associates the slogan to “every little helps” with itself (Holbeche, pp. 179-185, 2005). Important here to note that despite the fact that Tesco is constantly earning healthy Return on Investment (ROI), yet it has all the reasons to fear that same is not going to be the case in the company years. The retail industry is increasingly becoming a competitive industry. Never in the history, have people had more options in choosing retailers than they have today. Moreover, retailing is not only about offering the most attractive price today; however, it has gone on to include elements like technology, shopping experience, maintaining long term relationships and others. Therefore, creation of value, innovation, and learning has become an important part of the business (Little, Quintas, & Ray, pp. 245-247, 2002). Findings Leaders, Leadership, and Vision Without any doubts, the commitment from the top management is a necessary ingredient for successful innovation and creating a learning organization. Quite understandably, learning and innovation are not as bright and beautiful of exercises that they appear in theory since they involve unlearning, unlearning, changing, disruption, risk, and cost. Moreover, the basic element of human nature is that people try to stay in their comfort zones and avoid any potential disturbance or changes to their status quo (Seth, & Randall, pp. 296-298, 2001). Therefore, creating an internal environment of innovation and out of box thinking requires considerable amount of energy and inspiration to overcome this inertia and the best source of the same comes from the leadership who can champion the cause. The same is true because the leadership of the organization is the one that decides that where they are heading to and how they are doing the same. Moreover, according to the most basic definition, leadership is nothing but all about “influencing” others (Hatch & Cunliffe, 392-393, 2006). If one cannot influence others to achieve and embrace the goals, one wants to embrace them, then one is not a good leader. The organizational strategy, plans, objectives, goals, targets, operational tactics, and moves are nothing but a practical representation of the vision that the leaders have in mind. Steve Jobs wanted his organization to be top most in terms of product design and today Apple spends tons of dollars in creating, exploring, discovering, and introducing new innovative, bold and beautiful product designs. Tesco represents a similar case (Armstrong, pp. 548-552, 2007). As mentioned earlier, Tesco was founded by Jack Cohen in 1919. His initial business idea was to “pile it high and sell it cheap”. Quite understandably, the boom of mass production and reaping benefits from economies of scale was still there in the 1930s and 1940s and the same influenced Jack Cohen. However, more importantly, the slogan, motto or vision, which made Tesco to advance in this competitive environment was “You cannot do business sitting on your ass” which later became known as “YCDBSOYA” (Holbeche, pp. 179-185, 2005). Despite the fact that this may appear as funny and catchy at the first glance but it had a serious message of adaptability, openness to change, transformation, learning, and moving forward for all the employees. However, it is under the leadership of its current CEO Terry Leahy under which Tesco has really become equipped to face the challenges from the outside. Leahy strongly believes that the biggest asset, resource or strength of the company can not stem from its balance sheets, income statements, manufacturing plants, computer systems, outlets, dealers, distributors, suppliers or others, but only and only from its people and its employees (Little, Quintas, & Ray, pp. 245-247, 2002). Leahy has believed right from the day one that they by keeping his people happy Tesco can achieve a sustainable competitive advantage. Quite understandably, when workforce is satisfied then they are more likely to defend its organization from all external threats. Leahy has outlined four important points to increase the employee satisfaction at Tesco. Firstly, by providing people jobs that are interesting to do (Haberberg & Rieple, pp. 106-109, 2008). Tesco’s human resource departments spend a lot of their energy and efforts to craft and design jobs, which can create excitement and interest for people that are supposed to perform that job. Secondly, employees have all the right to get on with their lives. Work life balance is one of the biggest concerns of employees today. As the pressure to increase profits and revenues and increasing on the employers, they are in turn transferring these pressures on their employees to put in higher work hours. Despite the fact that they are being heavily paid for these extra work hours, yet the same is creating dissatisfaction amongst employees (Williamson, Cooke & Jenkins, pp. 56-57, 2004). They are finding it difficult to find that line which can separate their work lives from their private lives. At Tesco, under the leadership of Leahy, managers appear to be taking great care of the same to restrict the control of employers only and only to acceptable and mutually agreed work hours of employees. Thirdly, it is about treating employees with the due respect. Quite understandably, even if any employee is at the bottom level of Maslow hierarchy of needs, psychology reveals that factors like respect, admiration, appreciation, value, and recognition can have significant impact on the performance of employees. Moreover, these factors have a long-term influence on employee motivation and relationships (DuBrin, pp. 96-98, 2008). Lastly, bosses should offer some help to the employees and not become their biggest problem. Tesco is trying to move further away from the traditional concept of bosses, where they are perceived as alien creature having the job to create misery for its subordinates. Instead, bosses should attempt to act as coaches, mentors, and supervisors and empower their employees to take certain decisions and then let them take the responsibility, blame, credit, or appreciation for the same (Armstrong, pp. 548-552, 2007). It is also important to look at the sources from which leaders derive their power since it has quite an impact over the discussed theme. According to the leadership theories, leaders can have five different sources of power. Firstly, the power can be “legitimate power”. Whenever, a manager is appointed, he gets the power to influence the behavior of its sub ordinates from his job description and position in the organizational hierarchy. Secondly, leaders may exercise “reward power” (Marr, pp. 406-414, 2010). As the name suggests, it is based on their ability of the leader to provide desired rewards or outcomes to their members. Thirdly, leaders may have “Coercive power”, which exist from the leader’s authority to punish or penalize his sub ordinates. However, only when the leader is respected and valued for his expertise, skills, knowledge, abilities, or experience he is able to derive “expert power” over his followers. However, a leader may also hold power over his sub ordinates or followers because his followers admire him based on the friendship, relations and his traits. This is known as “referent power” (Peck, Chartered Institute of Marketing, Christopher & Payne, pp. 91-99, 1999). Important here to note is that under the vision of Leahy, Tesco wants his managers to have Referent and expert power. In fact, Leahy himself derives him power from these couple of sources. It was in 1979 when Leahy joined Tesco right after University of Manchester Institute of Science and Technology (UMIST). Various sources reveal that from the day one, Leahy worked very hard to make his away to the top. In 1992, he had achieved the position of the marketing executive of the company and only when he was 40, in 1997, he was appointed as the Chief Executive Officer (CEO) of the company by the board of directors. His wide experience and philosophy of keeping the employees happy has allowed him to gain both expert and referent power (Hawryszkiewycz, pp. 401-403, 2010). Quite understandably, all other power sources may be good in short term, panic and emergency, however, for long-term situations and for creating an internal environment, which is proactive to the changes in the external environment; managers have to have referent and expert power. Only when people have faith in the skills of their leaders and have good relations with them, they embrace their vision and align their behaviors as required (Williamson, Cooke & Jenkins, pp. 56-57, 2004). Quite clearly, these approaches are contributing positively towards helping Tesco survive and advance in the global knowledge economy. Organizational Structure and Culture Without any doubts, the most important component, which characterizes the overall internal environment of the company, is the organizational structure and organizational structure. Quite understandably, if an organization is expected to be a learning organization and the one with restless and continuous innovation then its organizational structure and culture has to be supportive of it. Research reveals that organizations operating in certain industries, stable, emerging or growing and declining share similar kind of structures which means that structures have to responsive to the organizational conditions (Daft, pp. 98-103, 2007). Organizations that strive to be innovative and become learning organizations would go for flexible and organic structure so that communication could be boosted, people could be joined to coexist, decisions could be taken quickly, and employee moral, confidence, and satisfaction could be boosted. However, industries that are stable, rigid, and less innovative would go stiff, well-defined, and hierarchal structures so such happenings can be controlled and monitored closely (Holbeche, pp. 179-185, 2005). Extensive Communication Repeatedly, experts, critics, and authors have indentified communication as a pre requisite of innovative organizations and learning organizations. Quite understandably, 360-degree communication, which is communication not only amongst the peers or colleagues and subordinates but also with your bosses, helps in boosting employee creativity and employee moral, which in turn results in innovative ideas. Innovations of 21st century have not taken place in closed rooms or in isolated departments but it fosters it environment, which supports communication, ideas, discussions, feedbacks and suggestions, from colleagues, bosses, suppliers, customers and other stakeholders (Hakansson & Waluszewski, pp. 265-269, 2007). Evidence from learning organizations and organizations that embrace corporate entrepreneurship do everything possible to ensure healthy communication amongst all employees in terms of feedback, sharing of ideas, reviewing, generating new ideas, and others. As one author puts it that organizations that do not encourage communication are the ones presenting a picture of the “soulless world of corporate cubicles in which people show up, do the minimum, assume no responsibility, avoid the landmines, and collect a paycheck” (Dychtwald, pp. 246-257, 2006). As mentioned earlier that Tesco is comparatively a flat organization therefore, in the absence of too many formal organizational hierarchies, layers of management and closed rooms, at Tesco information flows from all directions. Moreover, at many retail chains of Tesco, mangers have came up with a rule that bounds any employee to inform their fellow employee about any new idea that they think is a big one (Hawryszkiewycz, pp. 401-403, 2010). Not only through this technique, employees have understood that what is expected out of them but in this way, communication is boosting amongst fellow employees. Quite understandably, this boost in communication leads towards improved, refined, well crafted, and mutually agreed and embraced ideas. Tesco also claims that through its extensive communication strategies amongst it employees rarely, any employee at Tesco would express unfamiliarity when any other employee of Tesco, regardless of their departments, teams or roles. Even the employee at a very low level would offer some knowledge about the top-level mangers (Williamson, Cooke & Jenkins, pp. 56-57, 2004). Tesco has also gone on to build bridges amongst its employees from different countries and regions. Mostly for its white-collar workers, Tesco has come up with various programs that allow plans like regular company sponsored visits or through video conferencing and other, which help cross-region communication to boost ideas and enhance the learning of their organizations. Tesco believes this that the same equips their employees to broaden their horizons and look at things from many perspectives. According to some recent evidence regarding boosting communication amongst employees, Tesco has recently softened its rules regarding labor unions. The code of conduct at Tesco of UK reveals that employees have the freedom to join any union and go on strikes. Moreover, Tesco has also altered the authorities of managers and now managers no longer have the power to force any employee from going on strikes (Harrison, pp. 123-128, 2005). Teamwork “It takes five years to build a new car in this country. Heck, we won the World War II in four years” (Armstrong, pp. 548-552, 2007). Ross Perot was the one to make this comment in 1980 and he did the same looking at the slow and rigid car manufacturing processes in the US. However, it is important to know that it was during the same era the Japanese car manufacturing companies were able to innovate and decrease this time from half a decade to months. One of the most crucial reasons for this key for this tremendous efficiency was the group working techniques. This explains why today more and more organizations are now introducing project based and team focused organizational structures. The idea is to allow autonomous and self-managed teams, having members from various functions or departments, work on project and innovative endeavors (Jackson & Carter, pp. 46-49, 2000). Evidence suggests that Tesco has taken some serious steps towards ensuring group work in their organization. There is a strong belief in management that the sum of group contribution would always be greater than the contributions of individuals working separately. In almost all outlets of Tesco, even the blue-collar workers are divided in groups and allowed to work together. Their effectiveness at the same is measured and rewarded through the performance management system (Leat, pp. 302-304, 2007). Creative Climate Even a quick glance at history of most of the corporate and entrepreneurial innovations would reveal that most of the great inventions, innovations, discoveries, and advancements were a result of lucky accidental discoveries. However, lucky accidents or luck was not the prime factor in these inventions. However, it was preparedness and vigilance of these people who led to the same (Dobson, Starkey & Richards, pp. 256-258, 2004). If Newton was not knowledgeable, vigilant and owner of a philosophical and inquiring mind, he would never had discovered gravity, In fact, these similar apples, mangoes, bananas, oranges and even stones had fallen on may others, but it is not about luck but about the preparedness and presence of the climate which supports inquiry and discovery. As Louis Pasteur says, “chance favors prepared minds”. In light of this evidence, lately, many organizations have focusing their energies on creating such climates, cultures, and conditions where such “accidents” can take place (Goudge & Market Research Society, pp. 89-95, 2006). For the past couple of decades, Tesco has really been working hard on incorporating the element of learning and innovativeness at every level of the organization. Most important of them is the performance appraisal system at Tesco. Performance appraisals at Tesco specifically now mention and give great weightage to elements like contribution to Tesco’s values and mission (Davenport, Leibold & Voelpel, pp. 374-375, 2006). Tesco believes that it has to draw a distinction between itself and other companies. At other companies, impressing your bosses, winning the internal political games, seniority will help the employees to get the rewards they want but the same is not rue for Tesco. At Tesco, efforts are being made to make performance appraisal system so objective and unbiased that employees can feel more motivated to contribute towards the goals of the company (Little, Quintas, & Ray, pp. 245-247, 2002). At many chains and offices of Tesco, employees are allowed to devote around 10 percent of their time, experimenting with approaches, techniques, methods, and ways in which they perform their jobs. The goal is to encourage employees to come up with new and efficient methods to perform their tasks. If the employee thinks that he or she has figured out one method, then he or she should share it with employees. Only if the employee is able to impress most of his colleagues, then they work on it as team and inform their manager (Palmer, pp. 358-359, 2002). The same would provide them a healthy reward in terms of benefits and pay increases. According to the official reports at some stores of Tesco at US, many employee teams in research and development departments are finding new and innovative processes to improve the value chain. Employees have been asked to work on their ideas in terms of projects in teams. However, to our surprise, there are clear instructions from the management to celebrate all the project failures in the same way in which project success are celebrated, with champagne, beer and throwing a little party. The idea is to remove the fear of failure from the hearts and minds of the employees. In fact, at times, the only thing that is standing being a person and his creativity is the fear of failure. Successful entrepreneurs and innovators are the ones who have been able to overcome this fear or they were able to get rid of it completely. Moreover, the recent results prove that this approach is working for the company. Tesco decided to adopt the slogan of “fresh and easy” for its Californian outlets so that it can align its values with the Californian culture. It was due to the experimentation and findings of these groups that Tesco decided to offer mainly organic foods, fresh fruits, vegetables, and other natural foods at their outlets to take advantage of the current gap in the offerings of other competitors (Humby, Hunt & Phillips, pp. 365-378, 2007). In pursuit of creating this creative climate, Tesco has also taken many actions towards ensuring flexi hours at many outlets and offices. Moreover, Tesco has revisited its employee rules and regulations and have decreased them to considerable extents under the belief that employee empowerment would lead to better results (Channer & Hope, pp. 229-234, 2001). Conclusion Towards the end of this paper, it is understandable to conclude that Tesco’s current practices have the capability to enable it survive in the global knowledge economy. For most part of the discussion, we can sum up that Tesco’s focus is turning from systems, technologies, designs, layouts, outlets, physical locations to people, employees, employee satisfaction, employee motivation, and most importantly, employee empowerment. Without any doubts, the key to make your organization a learning organization is to empower your employees. Many organizations that are willing to innovate make a fundamental mistake of leaving the job of innovation and creativity on their managers rather than taking to the lowest level employees. It is the blue-collar worker or the first line manager who is best aware of the needs and demands of the customers. Only a floor boy at Tesco can tell that what is the problem with the shelves and their designs and what is the customer feedback since he is the one to receive the first hand information on the same. Therefore, the idea is to empower these employees and allow them to learn in order to compete in the global knowledge economy. It cannot be said that Tesco has done a great job but for sure, Tesco is moving in the right direction (Leibold, Probst & Gibbert, pp. 72-78, 2005). References Armstrong, Michael. 2007. A handbook of employee reward management and practice. Kogan Page Publishers. Channer, Philip, & Hope, Tina. 2001. Emotional impact: passionate leaders and corporate transformation. Palgrave Macmillan. Daft, Richard L. 2007. Organization theory and design. Cengage Learning. Davenport, Thomas H., Leibold, Marius, & Voelpel, Sven. 2006. Strategic management in the innovation economy: strategy approaches and tools for dynamic innovation capabilities. Wiley-VCH. Dobson, Paul, Starkey, Ken., & Richards, John. 2004. Strategic management: issues and cases. Wiley-Blackwell. DuBrin, Andrew J. 2008. Essentials of Management. Cengage Learning. 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