Terry Leahy: The Need for Value In Business

Terry Leahy
The Man: The former CEO of Tesco turned a local supermarket chain to global retail giant. Pursued concepts like small-scale convenience stores, loyalty cards (as a way to understand customers better) and adjacencies (selling insurance and car loans inside the supermarket) much before they became popular on the high street. He tells us why a business with a good purpose is a good business.

The Oeuvre: Britain’s foremost proponent of business as already being a force for good; and the need to recognise the nobility of wealth creation.
 
X-Factor: Hunger for growth, appetite for risk, willingness to experiment—and a knack for being low-key.    

The Message: The best way business leaders can change society is by creating and running successful businesses; in the investments they make, in the services they provide, in the risks that they take, the jobs they create, in the leadership that they create in the firm and in the community.

The Hypothesis
You’ve got to place more emphasis on values in business. The business needs to have at its heart a noble purpose; something that is good for society, good for business, good for people who work in the business.

So What?
There are costs to modern retailing. But the benefits far outweigh the costs in terms of safe food, good quality nutritious food, food that’s affordable for ordinary families, opportunities for farmers and for manufacturers because they have supply chains they can easily access the markets through. You can only have one set of values. You cannot be Janus-faced. The values that you adopt have to be demonstrated to all of your constituents.

It’s not so difficult to be good, most people are good. In my experience, most people intend good. I think what you have to do is express clearly what the business is for, to ensure that it’s a good purpose and then your actions have to align with those words, not just for a day—but for all time. If you do that, then people will come to see that that’s what you and the business are about and you’ll attract like-minded people and you’ll encourage the right sort of behaviour.

That’s one of the things we got right at Tesco; that the business started with values. There were two simple values; ‘No-one tries harder for customers,’ and the other was ‘treat people as you would like to be treated yourself.’ They spoke to two fundamental things that motivate people. One is service towards others, towards customers; the other is to treat people you work with, with common good manners and respect. They’re very powerful foundations for a business, because everybody wants to work in a business like that—they’re universal values that work all over the world. And you can come to work each day and feel that you’re doing something worthwhile if you’re serving customers, and if you’re encouraging the people around you with good manners and respect.

Our ethical behaviour at Tesco came from the core purpose and from the values and by leading and by behaviour. People could see that the business was trying to make improvements in ordinary peoples’ lives that were worthwhile and that we were trying to go about it in a fair way. We have a community plan which is one-fifth of our company strategy and is as important as our financial targets. The objective of this plan is to create benefit for the communities we operate in to earn their lifetime loyalty. The plan covers major issues like climate change and diet and health.

You’ve got to place more emphasis on values in business. The business needs to have at its heart a noble purpose; something that is good for society, good for business, and good for people who work in the business. The noble purpose that Tesco chose was to create benefit for customers in order to earn their lifetime loyalty. So it wasn’t about profits or market share, it was about serving customers to make small but important improvements in the quality of their life; better stores, better service, products that they could afford, these sorts of things. And that is important for people working in the business because they need to know—when they come to work—that what they’re working for is worthwhile.

Trust and confidence are the most important ingredients in a business and a leader has to be somebody who trusts people and is trusted by people. You can only do that by the way you behave. You have to behave with integrity in that your words and actions are aligned. People will judge you by your behaviour.

It’s important that you know that it’s the impact you have on other people rather than what you do yourself—that’s the most important thing as a leader. How you cause them to feel, what you cause them to contribute. And in an organisation you want thousands of leaders, not just one leader; you want them to have the confidence and the belief in the business that encourages them to step forward and take responsibility and be a leader. You can be a leader from all parts of the organisation.

The best way business leaders can change society is by creating and running successful businesses; in the investments they make, in the services they provide, in the risks that they take, the jobs they create, in the leadership that they create in the firm and in the community. This is a very positive force, and not just short term, but long term. Think about the development of the business and its environment in the long term and make investments that really foster a successful society and economy in the long term as well as a successful firm.

Business leaders can directly inspire young people by their behaviour. They have to demonstrate a respect for institutions, a respect for the law, a respect for the community they work in, demonstrate that they give more than they take in any situation—and it is possible to do that.

You can have highly successful businesses that create huge amounts of benefit which can be shared into the community—to the shareholder, to the employee, to the customer.

We always spoke to local people and we found that the majority of people welcomed a new store. It brings jobs and investment, it helps local wages and it helps suppliers.

We always try to use local suppliers as far as possible. It’s always a difficult balance to be struck, to make sure that every part of society benefits. There are costs to modern retailing and investments in modern retail infrastructure, but the benefits far outweigh the costs in terms of safe food, good quality nutritious food, food that’s affordable for ordinary families, opportunities for farmers and for manufacturers because they have supply chains they can easily access the markets through.

We used the same construct to be fair to suppliers. You can only have one set of values. You cannot be Janus-faced. The values that you adopt have to be demonstrated to all of your constituents.

If you put your customer first you will respond to social change because you’re developing products and services that customers need in their busy lives. So if more women are at work they need convenience food.

If people have cars they need to be able to park them at stores. If people are worried about their weight they need to have nutritious, healthy foods. These are all innovations that help society and they’re responses to peoples’ express needs.

 We do hope India opens up—we believe that modern retail can be very beneficial for India, for all parts of India, for farming, for manufacturing, for consumers and the communities as well as the individuals. But obviously we work within the regulations as they stand. We are very privileged to be in India working with Tata group and our relationship is developing very well.

Business is a good thing. It’s an exchange, its part of human nature, its part of human progress, the exchange of ideas, of products and services. So business is good for society.

Values matter, businesses will reflect the values of the society, and so you have to have respect for institutions, respect for people, you need ground rules, and people need to obey those ground rules. But then you need competition and businesses should be free to compete for consumers.
You want the consumers served by businesses in competition, and a lot of benefit can be created for the society. You want owners of businesses who think long-term, not just for today’s profit, but into the future generations.

I’m very attached to Tesco. I spent my life there. You might leave Tesco but Tesco never leaves you. I’ve every confidence in the team. They’ll take the business forward.

The larger purpose and meaning behind my enterprises now? I like business and I like young people with ideas. I like to work with them so the purpose is to help young businesses grow. Business is a good thing provided the business is for a good purpose.

(As told to Rani Singh)