Crises are always stressful and best avoided but recent events at the UK’s favourite supermarket point very strongly to a full blown crisis. The combination of faltering sales, over reporting of profits and the media interest in its culture and treatment of suppliers are all good indicators that this a real threat to the wellbeing of the business.
The big question is, can they limit the damage, protect the brand and develop a new strategy in the time available? This is not just a question for Dave Lewis but for the top management team around him. How much experience do they have of managing in a crisis; after years of solid performance and steady operation it is likely they have very little and what they have will largely relate to media and breaking news events such as the horse meat scandal. Managing a business crisis is very different; communication remains important but strategy and operational delivery are key.
Could the solution to this crisis lie as much in the hands of the HR leadership team as the CEO? Why? Well lets first examine the background to the crisis and explore the actions that Tesco should be considering.
Its current strategy (pre entry of the new CEO Dave Lewis) was under pressure after years of growth, the changing market conditions with regards competition having led to a significant challenge to the business and a slide in market share.
Turnover, footfall, margins and profits are all examined in minute detail in what is a highly competitive market place and it would be reasonable to assume that the Tesco interim results now due out on the 23 October could be revealing.
The presence of a whistleblower, the interest of the regulator and a backdrop of falling sales are all part of the complex picture that makes a crisis and, if the Board fail to gain control, could lead to significant damage to the brand and the business.
But will it? The introduction of a new CEO creates an opportunity for him and for Tesco. The strategy has to change, the business needs new blood and a new direction and ultimately a well-managed crisis could give him the time and the resources to make the transformation that is needed.
Putting this in context Tesco still retains the number one slot and whilst the media is full of reports of growth for Aldi and Lidl these remain small in comparison by size in the UK market. They will also come under increasing pressure as market share starts to outgrow their capacity. Not only in terms of retail space but back office functions, staffing, logistics etc.
One of the penalties of operating in competitive environments is that it is difficult to justify over engineering the systems and this will be a growth limiter, which has the potential of damaging the business if badly managed. An interesting conundrum given that the problems faced by Tesco’s will knock them back and the space exists for a competitor to make a significant move.
So what should Tesco be doing?
A start would be to ensure that the operational delivery, customer focus and day to day operation is not pulled in to the crisis. This needs leadership, resourcing and plenty of work engaging with the staff, a fantastic opportunity for a team to take control.
Then create a top management team who are trained and focused on strategic analysis and delivery in crisis situations, look at the forward scenarios and horizon scan the risks, generate alternative futures and test the sensitivities of the analysis. Use external support and facilitators, don’t rule out anything and really push the boundaries. Keeping ahead of the current issues and gradually feed the solutions in to the business.
Finally ensure you have the best communicators focused on the most important stakeholders working with the lawyers and the accountants to sort the mess that could escalate through regulatory and financial liabilities.
Plan for the future and do not underestimate how long it will take to recover from a crisis but do use the crisis to transform the business.
When it comes to how this can be done, step forward HR.
To achieve this will mean aligning the best skills within the business and at all levels of the business; capability is the key and the person in Tesco who can deliver this is the Group Personnel Director as a core member of the crisis team. There are no fast and simple solutions but there are solutions which people who are trained and capable in crises and business as usual can deliver.
One of the long term impacts of crises is the loss of good people, often the first to leave and the hardest to recruit and in a competitive market the next couple of years could be tough for Tesco but get it right now and they will be well on the way to damage limitation and turnaround.
Access capable people, train and train and exercise in business crises, provide experienced crisis facilitators and communicate with the employees, get them engaged and keep on communicating. All of which can be delivered through the HR team.
The Corpress advice in cases like this is don’t fight the causes of the crisis, live with them and solve them. What is certain is that the next six months will be an interesting time for this sector.