Organizational Culture Change at Tesco: Leadership and Strategy

Introduction: Tesco's Organizational Culture

Organizational culture — a term that refers to a collection of policies, values, beliefs, and attitudes (Mullins, 2010) — is a critical element of any organization. It is broadly used to denote the general context for everything we think and do within a given organization. This paper discusses the implications of culture change at Tesco plc in order to exemplify the concept of organizational culture and the effects it may have on the company's operations. Ways of managing organizational culture are also presented.

Tesco is famous for its loyalty and dedication to its customers. The staff and workplace policies of Tesco plc are tailored to create the best possible experience for customers. In order to achieve excellence, staff are trained to be polite, helpful, friendly, and generally well-mannered. Tesco employees are instructed to do all they can to ensure that customer inquiries are appropriately answered and resolved. As a practical example, all Tesco stores have an employee on the shop floor whose role is to ensure customer satisfaction — checking on customers' welfare and assisting them with their purchases. Tesco's approach can be described as a "people culture," in which it trains its staff to be genuinely helpful to customers.

Apart from exceptional customer service, Tesco plc has made efforts to create a formal yet professional environment that reflects the quality and affordable nature of the products it stocks. Tesco employees are always dressed professionally, and company policy requires that they be well-groomed at all times. This is in line with the level of professionalism required in the product retail industry. Staff must also be polite and well-spoken at all times, because the company aims to project a professional reputation that is necessary for realizing its primary objective of gaining customer loyalty.

The formal organizational structure of Tesco reinforces its organizational culture. The structure is relatively rigid and hierarchical, operating from the top down, with management at the apex and bottom-tier employees at the other end. A shop-floor attendant, for example, reports directly to departmental managers. This illustrates the formal and highly structured nature of Tesco and is part of what enables the company to deliver the high quality of service seen in its stores.

For some time now, experts in organizational studies, leadership, and management have noted that change is unavoidable in many organizations if performance is to be maintained at its peak. Organizations must adopt certain changes in order to conform effectively to the new demands of their operating environments. Armstrong (2009) pointed out that change is the only constant in any given organization. This inevitability of organizational change is recognized as a permanent feature of organizations — especially those seeking to adapt to new challenges, innovation, and approaches, as noted by Mullins (2010).

Organizational Culture Change at Tesco

In reiteration of the significance of organizational change, it has been indicated that market conditions — such as the dynamic nature of products, services, and the market itself — can bring down a business entity if the business is never prepared for change (Nwagbara, 2011). Change therefore comes about through new strategy formation, the gaining of new insights, and through experimentation and the feedback it generates. At Tesco, there are several factors that can initiate organizational change. This paper focuses on the example of the management change that occurred from 2010 onwards following the announcement of CEO Sir Terry Leahy's resignation, as discussed by Nwagbara (2011).

Organizational change has the capacity to affect all business operations across every department and branch of an organization. Kanter (1992, p. 11) defined change as a shift in the organization's behavior to one degree or another. Organizational change can affect all operations both strategically and structurally. It also involves the dismantling and/or restructuring of organizational structures, culture, hierarchies, and strategies so as to ensure that new and more flexible working patterns are adopted — accommodating the potential problems that arise from resistance to change, as noted by Czerniawska (2005).

Even though change is a critical and inevitable process within any organization, it can elicit considerable resistance from employees with regard to changes in working conditions, managerial arrangements, and the general fear of the unknown. The consequences of the change process are equally inevitable and affect all elements of the organization, including general operations, functions, and the overall well-being of the firm (Senior and Fleming, 2006).

At the time this paper was written, Tesco was facing organizational change arising from the announcement of its CEO's resignation on 8 June 2010. Sir Terry Leahy was the individual responsible for the aspects of transformational leadership that became widely practiced at Tesco from the moment he joined the corporation (Nwagbara, 2011). According to Nwagbara (2011), Leahy's departure marked significant changes in the company's organizational culture, leadership model, level of productivity, entrepreneurial yield, and change management — all resulting from the transfer of leadership from Terry Leahy to new CEO Philip Clarke in March 2011.

The manner in which the transition of power was handled, as well as Philip Clarke's leadership and management styles, would help determine the level of confidence among customers, shareholders, and employees. The way change is managed would, to some extent, determine the future of the company's organizational structure. Companies perform better when they interact effectively with their internal environments — an idea reinforced by Senior and Fleming (2006), who hold that change is very closely synonymous with organizational development.

Mullins (2010, p. 752) lists the following factors as potential triggers of organizational change: uncertain corporate economics; globalization and stiff competition in the global market; government intervention; social legislation; scarcity of natural resources; political forces; rapid development of cutting-edge technology; and the demands of the information age.

Kanter (1999) identified several additional key triggers of organizational change, including information technology, industry consolidation, and globalization. Further factors noted in the literature include the rapid rate of change, the interdependence of economies, the emergence of new nations, the rise of diverse organizational practices, and the need to maximize economies of scale.

Forces That Initiate Organizational Change

There are several distinct types of organizational change, including: planned, evolutionary, incremental, reactionary, strategic, unplanned, operational, and transformational organizational change. From a managerial viewpoint, Mullins (2010) identifies three main elements: people behavior, management process, and organizational context.

The first element — people behavior — is considered particularly deep in nature because it encompasses several behavioral influences, including individual, group, organizational, and environment-based behaviors. The second element, referred to as the psychological approach by Mullins (2010), is concerned with the contractual relationship between people and the organization, as well as relationship management. The third element comprises a cross-cultural approach to management and the management of individuals from different cultural backgrounds.

The lack of proper change management initiatives results in cultural conflict within the organization. It is therefore necessary to avoid organizational conflict, since it more often than not leads to failure — irrespective of the size of the organization or the competencies of its management. Tesco plc should therefore embrace both change management and an elaborate conflict management strategy in order to operate successfully in challenging times. The control of organizational behavior and the adoption of cultural conflict management strategies are key to the success and survival of organizations (Kirton and Greene, 2005).

Conflict is defined by Mullins (2010) as behavior intended to obstruct the achievement of people's goals. Mullins further indicates that conflict arises from the incompatibility of organizational and individual goals, and from opposition to certain behaviors that emerge at the individual, group, and organizational level. Tesco, for instance, has a diverse workforce characterized by people of various ages, races, professions, religions, sexual orientations, lifestyles, positions, geographic origins, and lengths of tenure. This diversity within Tesco's organizational framework can itself be a source of conflict.

Taylor (1994, p. 138) indicated that intergroup conflict with regard to cultural diversity has two main features. The first concerns group boundaries and group differences that are directly and indirectly related to the cultural identities of the groups. The second, described as "opposing interest-based" conflict, encompasses factors such as competing goals, cultural differences, competition for available resources, discrepancies in power, and assimilation versus the preservation of a dominant micro-cultural identity. These observations closely align with those of Mullins (2010) on potential sources of organizational conflict, which include differences in employee perceptions, the nature of employment activities, role specialization, role conflict, environmental change, and generational gaps.

Organizational culture affects everyone — leaders and followers alike — meaning it influences virtually all aspects of an organization. Tesco must therefore actively manage cultural diversity within its ranks. Some of the recognized advantages of cultural diversity include increased creativity, new attitudes and perspectives, improved problem-solving, global understanding, new processes, and the discovery of novel solutions to traditionally difficult problems.

Conclusion

Organizational change is an integral element of every organization. It is therefore necessary for organizations to develop strategies and structures that allow them to handle organizational change effectively. The dynamism of the present corporate environment means that change is both inevitable and a necessary challenge — one that Tesco must be prepared to appreciate and manage with foresight and resilience.