What a difference a decade makes: Tesco's boss Terry Leahy 10 years ago

FROM THE ARCHIVE: First published in 2004, this interview with former Tesco CEO Sir Terry Leahy gives a fascinating insight into the corporate life cycle.

by Chris Blackhurst
Last Updated: 18 May 2015

With a £250m hole in its accounts and shareholders baying for boardroom blood, Tesco 2014 has hit a new low. By contrast, 2004 Tesco was right at the top of its game, super-confident, relentlessly customer-focused and apparently unstoppably profitable.

And yet perhaps even then some of the future cracks were showing. As Leahy's immediate successor discovered, taking over when everything seems to be going well is a thankless task.

At least that's one problem that Tesco's beleaguered new boss, David Lewis, doesn't have to worry about...


On a good day, the journey from Central London to Tesco's HQ in Cheshunt, Hertfordshire, should take less than an hour. When I visit Sir Terry Leahy, the retailer's chief executive, it's pouring down and the traffic is crawling along. Over an hour and a half, the unfolding landscape of high-rise offices gives way to suburban estates, of smart, city boutiques replaced by stores selling everyday things. In town, the shops are smaller.

Out of town, they become giants. Near Cheshunt is the biggest one of all, a vast branch of Morrison's right by the roadside.

The driver is bemused. We're bound for the head office of Britain's most successful retailer, one of the top three in the world (along with Wal-Mart of the US and Carrefour of France), and there are no signs and no landmark tower block. Only the woman's automated voice from the car's satellite navigator tells us we're on the right road. 'Take the next left,' she intones robotically, and we're there. No fuss, no fanfare; just a low-key office building in the middle of an industrial estate.

We could be anywhere. And that's the point. Leahy has made this trip from London countless times. While visitors moan at the waste of time and the inconvenience, he revels in it. When we meet, I feel I've been on a drive from hell; he's relaxed and all smiles. The implication is clear: that will teach me to live and work in London. Welcome to the world of ordinary people, to the world of Sir Terry Leahy.

'Cheshunt is more like the UK than St James's Square,' he says, in his direct, matter-of-fact way. Other companies may locate their top brass in London, may go in for luxury premises. Good luck to them, says Leahy - the chances are they won't be as successful as Tesco, or so in touch with their customers.

He's like this, is Leahy. He's nonstop Tesco, Tesco, Tesco - not letting up for even a second. We've met several times and he's always the same.

His room is full of the trophies he has won in the six years that he's been in charge. The latest, MT's Most Admired Company and Most Admired Leader 2003, will join them.

At the MT awards ceremony, his performance is typical Leahy. His speech is serious and straightforward. He's no showman, he doesn't do jokes - not side-splitters anyway. Instead, it's a lighthearted remark here and there, and on with the business of delivering an overview on just how formidable his Tesco has become.

Having conquered Britain, Leahy has set his sights on the rest of the world. Eastern Europe, Asia, emerging markets - he wants them. Tesco is already the fourth-largest company in Thailand and the ninth in Hungary, where it's the number one retailer. Clocks on the wall at reception show the time in the capital cities of all the countries in which Tesco operates.

It's weird, sitting in suburban Hertfordshire looking at the time in Budapest and Bangkok, but if Leahy has his way they will be joined by others. 'We're in Japan and we're researching China.'

His ambition knows no bounds. Tesco has come so far, so relatively quickly, that the world number 1 slot, you feel, is not beyond him. Indeed, that's how he answers the question, where will Tesco be in 10 years? 'I find it more useful to look back 10 years. There are four pillars for growth: strength in the UK; non-food; international; development of services like telecoms, a dot.com, financial services.'

When you meet Leahy, you're not confronted with some huge presence. He doesn't exude raw power like a Jimmy Goldsmith or a Rupert Murdoch. He doesn't wear overtly expensive clothes. His hair is swept back, but more in an attempt to keep his appearance youthful than in City-slicker Gordon Gecko fashion. He's not big, not small, just average. He's trim, though - which, given the number of lunches and dinners that come his way, hints at a disciplined personality. His handshake isn't crushing, you're not subjected to a display of force. His wire spectacles give him a studious air.

In a society that likes its tycoons to be overbearing figures, he's so, well... ordinary. Everything about him is normal. His shirt isn't loud, his hair isn't arranged in outlandish fashion - just slightly long, suggesting he's clinging to his youth. Whereas his high-profile predecessor Lord MacLaurin was the finished article - all urbane smooth, with pin-striped suits and oiled hair - Leahy is altogether different.

Blink and you would miss him. He's a blur in the background on school photos, in Tesco gatherings. Leahy is to business what Jonny Wilkinson is to rugby: the boy next door who practised and practised, and went on to amass the most points ever, who scored when it mattered. Wilkinson gets criticised for being boring, and Leahy gets the same flak.

After the MT awards, I go on to the CBI dinner, where I meet a senior woman who, when I tell her that Leahy won, pulls a face and says that clients of hers ask not to sit next to him because he's so deadly dull.

Hmmm. She's a heavy hitter, but surely none of her clients are as successful as Leahy? Yes, but they talk about golf and rugby and wine and women.

He talks only about Tesco.

True, Leahy isn't a hail-fellow-well-met, good-time guy. But neither is he the machine his public utterances can make him out to be. He's clever and sharp, tells stories against himself and is perfectly good company.

Something else is at work. It's a sort of inverted snobbery. Just as people turn their noses up at Wilkinson, seeing him as an obsessive in a sterile search for perfection, Leahy is seen as too serious, too dedicated for his own good. He is spoken of by some in retailing as aloof and aggressive, an automaton who slips into management consultant speak at the drop of a hat. Yet Leahy runs just about the most successful business in Britain, and Wilkinson secured England the World Cup. You can't have it both ways.

Throw in Leahy's dry Liverpudlian wit and his refusal to allow status and wealth to go to his head - he drives his own car to work, doesn't keep a large support staff complete with private secretary, won't take outside directorships because he believes 'chief executive of Tesco is a full-time job' - and the ingredients are in place for a maligned and misunderstood individual.

It's true, on occasion you want to shake him, to say, please get angry.

When does he lose his temper? He pauses. 'My 11-year-old lost his new kit for the second time at school and it was only just after half-term.' But then he gives a stock Leahy answer: 'I don't lose my temper because it's not the way to motivate people.'

Surely some things annoy him? 'Two things. We've built Tesco around sound values and principles. If I come across something that is just wrong - where we didn't treat people with respect, for example - I'll keep working at that. And performance. If that's bad and there's no good reason, I get cross.'

Questions about his childhood are knocked away. 'You know all that,' he says. As if I do. What I know is that he grew up in a prefab, his dad was a carpenter who also trained greyhounds. He went to the local grammar, St Edward's College, which was big on discipline. One brother ran a corner shop. Terry went up the M62 to UMIST in Manchester, where he was taught by, among others, Professor Roland Smith. Some of Smith has rubbed off on Leahy. The prof, son of a policeman, always stood out among his flamboyant corporate peers for his plain-speaking and non-flash clothes, more undertaker than company troubleshooter.

Of course I want to know more, much more. What was Leahy like as a child?

Was he always so ambitious? What scrapes did he get up to? He won't say.

Is that because he doesn't believe in the cult of the personality? You've guessed it: 'The only personality I believe in is Tesco.'

You can't make this up. It's like meeting a religious leader faithfully reciting a creed. He's had offers down the years from newspapers and magazines keen to feature him and his brother: 'the Tale of Two Brothers - one runs a grocer's, the other runs Tesco', that sort of thing. He won't play ball.

He doesn't do personal stuff.

Try politics. What are his politics? 'My politics are private. Tesco supports the government of the day.' It's maddening. What's wrong with talking about school or expressing a view as to whether you support Tony Blair or not? After all, other corporate bosses open themselves up.

Not Leahy. He refers to his family, but only in passing. He's comfiest talking about one subject only: the success of Tesco. Anything else he regards as superfluous, a distraction for the main event. It's possible to probe further, though. He still has a Scouse accent, he will mention Everton at every opportunity, he's involved in regeneration projects in the city. So where is the chief of Britain's biggest and best retailer happiest: a pub in Liverpool or a villa in Marbella? He smiles: the answer is obvious.

Some Liverpudlians moan about their origins, wearing Born in Merseyside like a leper's mark. Leahy is an exception: being Scouse has genuinely helped. 'Because of my background, I'm at home with the staff and the customers. Scousers are good communicators - they've got lots of Celtic blood in them.'

He's right. Coming from Liverpool hasn't given him airs and graces, and it has equipped him to ignore them in others. He's not swayed by whether someone went to this school or that university. It has made him confident, with a good line in quick put-downs. He is an outstanding communicator in his dealings with those who matter most: staff and customers.

Liverpool is crucial to understanding what makes Leahy tick. He thinks the city is on the way back, that this century will be one of prosperity.

'It's got much better local government, there's a real sense of partnership developing between the people, council and business. And it's got the Capital of Culture prize.

'There are big parallels between Liverpool and Tesco. One of the most important things in the recent history of Tesco is when it decided not to be ashamed of its heritage, when it discovered its Everyman appeal.

Liverpool's the same - it's no longer shy of its past and there's something there for everyone - shopping, culture, sport. It's not a bad thing to look to the example of Liverpool and draw from it.'

Leahy's reluctance to discuss his childhood stems, you suspect, from an unwillingness to be portrayed in the usual terms of boy leaves tough life to come south and make his fortune. That's not how he wants it to be seen. He never sought higher office. 'Do you know something? I've never asked for a job in my life. Everything I've ever done I've been asked to do. I even turned down my first promotion because I wasn't confident I'd do well.' Asked what his goals are, he replies: 'My ambitions are for Tesco.' He won't be seeking a job elsewhere - that's not his way.

Leahy's bosses, from the word go, rated him very highly indeed. It's too easy to knock his control, his attention to detail, his permanent seriousness, but numerous masters down the years have spotted something they like and want, and that sets him apart from the herd.

Leahy's colleagues clearly rate him. He's a combination of the very smart - 'He's always seeing over the hill' was one description - and the very simple. There's no fuss with him, they say, he's the sort of employee who would be a manager's dream: you give him a problem and he'll go off and work until he's solved it. His co-workers respect him for his decision-making, but he doesn't make his moves on a whim. At the top of Tesco, he's gathered round him senior managers who've been with him and the group for years. Everything is analysed, taken apart, discussed and put back together. He's in charge, but he's also collegiate.

What's his leadership style? 'I spend a lot of my time working on how I manage, I'm like Martin Johnson driving at the bottom of a ruck. It's that, I hope, that makes the difference.' Leahy may sometimes speak straight from the retail manager's phrasebook, and you may find yourself wishing you had a dictionary to translate, but, contrary to appearances, he's not big on statistics. 'I'm not a numbers junkie, I'm not one of those who can keep up with the takings on a mobile phone.' Instead, he likes to walk around, to talk and to listen.

He meets with his executive committee every Monday and Wednesday morning for two hours, but what makes Leahy different is the extraordinary degree to which he chats with junior staff and absorbs their views, and the attention he pays to customers.

In Leahy's Tesco, the two - staff and customer - have become blurred.

Tesco, he says, has always prided itself on being an 'egalitarian organisation'.

It's a philosophy he's scrupulously followed. 'There are only six levels between me and a check-out assistant.' Every member of staff has the opportunity to train and rise up the ladder. This year, 10,000 Tesco staff will undergo training to move upwards.

'There's one bonus scheme for managers, all managers, including me. That's 3,000 managers. Our Save As You Earn scheme is open to the whole business and has created 100,000 shareholders in Tesco - more than any other company.' He wants Tesco staff to take 'four things from the job: they find it interesting, they're treated with respect, they have the chance to get on, and they find their boss is helpful and not their biggest problem'.

That spills over into how Tesco sells its brand. 'We're all things to all men, all women. Everybody is welcome in any of our stores. Some businesses are stronger in one section of society and weaker in another; not us.

Being like that chimes with our values for the business. Customers know everybody will be treated the same. They also know that we care about our staff.'

By now, Leahy is positively boiling over. 'There's no officer class at Tesco, we don't have a graduate elite intake, there's no fast-track.' So speaks the chief who followed a girlfriend to London, got a casual job stacking shelves in the local Tesco and never left. There can't be a store he hasn't visited, a job he doesn't know.

The people he started out with back then in 1979 are his friends still today, many of them at senior levels in the business. 'I must have spoken to thousands of staff - I've grown up with many of them,' he says. His whole working life, and much of his social life, is Tesco. It's no use him talking about any other business. Tesco is all he knows. It's what makes him appear unreal and unworldly - a bit like the main character in The Truman Show.

In June, he went to a store in Royston and mucked in as a general assistant.

Come on, this sort of thing - it's all for show, isn't it? 'Not at all, I enjoy it, I find it very satisfying. I'm learning as well. I want a better understanding of how these jobs are done.'

Leahy makes all his senior staff do it. Last year, 1,000 store managers worked in other stores and 1,000 staff from head office did the same.

Top retailers will tell you how they visit stores and not just theirs but those of rivals, but Leahy takes trading places to a different level.

Each week, he swoops on Tesco stores, wandering round, talking to staff and customers. And each week he tours a competitor. Does he ever go into the big Morrison's down the road? 'Every week. I talk to their staff.

Some of them know me and show me round.'

Why can't he just put his feet up on his desk and bask in the glory of the soaring sales chart and the awards that adorn his office? 'I don't go to check on things. I talk to people - I can smell how things are.' It's a party piece of his to tell you to brace yourself for the secret of successful retailing and then to say: 'It's this: never stop listening to customers and giving them what they want. It's that simple.'

On his way up the executive pole, he commissioned a survey of 250,000 Tesco customers, who said they wished Tesco would stop following Sainsbury and carve out its own identity. It was a pivotal point in Tesco's history, the moment when Tesco struck out on its own and left the rest of the industry trailing. It led to the Tesco Clubcard and Tesco Metro, the brand of smaller, high street stores, and to offering just about anything in the stores.

The sea change propelled Leahy to the top job. 'We've worked very hard over the years to organise ourselves from A to Z so we listen to customers.' Whether it's the Clubcard loyalty scheme or focus groups in stores or letters to him, Leahy puts them first. He answers every customer letter he gets personally. 'They really do matter. It's their values we live by.'

It's those values that tell him he's right to fight the farming and corner-shop lobbies, that Tesco customers vote with their feet. Some farmers who can't match the quality he demands and some corner shops that can't compete may go out of business, but so what? 'We're selling 50% more food than we did five years ago; we're the biggest customer of British farming there is and we've created 100,000 jobs in the last five years.'

There can't be a more grounded senior manager in Britain than Leahy.

There's his roots, the working up from the bottom, the ethos of the firm.

Then there's his family: away from work it's his pride and joy. He plays with his children, aged 11 to 15, watches football with them. His wife is a GP. They sound like classic Tesco customer material.

People get him wrong, he says, when they assume he could never walk away from the job. 'I'm not obsessional about it, so it's not as if I can't give it up. My family matters to me a tremendous amount.' But he stresses that he has no plans to quit.

Not even to run the NHS, where his wife works? 'I'm determined to achieve much for Tesco.' He's been in charge for only six years, there's plenty still to do. 'Our market share of UK retailing is 12.5% - that leaves 87.5% to go after,' he says, grinning.

You know that where Leahy's concerned, there's no such thing as an idle boast. Behind the smile, he's deadly serious.

...but four tough issues confront Leahy

1 How long will it be before J Sainsbury finally fights back? And will Wal-Mart move to check Tesco's global ambitions?

2 With an all-powerful, apparently unassailable CEO aged only 47, how does Tesco hang on to its talented senior management?

3 What of the famously difficult relationship with suppliers? What can be done to make these less oppressive and one-sided?

4 And will a reinvigorated Safeway under Sir Ken Morrison - more than 30 years Leahy's senior and with a wealth of retail experience - eat Tesco's lunch?

LEAHY IN A MINUTE

1956 Born 28 February, Liverpool. Educated St Edward's College and UMIST

1979 Joins Tesco as a trainee marketing executive

1984 Becomes marketing director

1992 Joins Tesco group board

1995 Appointed deputy managing director

1997 Made chief executive in succession to Lord MacLaurin

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