How can Tesco rescue its brand reputation and restore customer loyalty?
After inflating accounts by over £260 million, and wiping more than £2.5 billion off its market value, Tesco has severely damaged its brand, eroded consumer trust and shareholder confidence. To add to its woes, the Serious Fraud Office has now launched an investigation into the company’s over stated profits.
Since news of the accounting scandal was broke, Tesco’s Chairman Sir Richard Broadbent has stepped down, eight of its senior executive team have been suspended and new CEO Dave Lewis appointed with his work clearly cut out to transform the company.
A change at the top is something you would expect from any large corporate in this situation. However, changing the leadership team won’t necessarily help them identify the root causes of the problems. Tesco appears to be no closer to revealing why the accounting scandal happened and might well be papering over some deep cracks.
A company in such a situation needs to uncover where its problems really lie, identify the root causes and then create a strategy to solve the issues in order to win back customer loyalty and regain market share.
‘The way we do things around here’
One of the biggest problems may lie with Tesco’s culture. Culture is not a light and fluffy concept existing only in the minds of the HR department; it is a living and breathing entity and it affects how individuals behave, act and work.
Organisational culture not only drives how people behave, but their attitude towards risk taking. In Tesco’s case, it appears that risk taking and ‘creative accounting’ at the top has impacted everyone from the management team and frontline staff, to the customers, suppliers and shareholders - eroding its reputation, share price and company value.
However, a crisis like this doesn’t happen overnight. It builds over a prolonged period in which certain behaviours are overlooked and unchecked by people responsible. When the ‘wrong’ behaviours are driven through an organisation and transparency, openness and honesty aren’t prized highly enough, then it will only be a matter of time before the outside world starts to notice.
The task for a company like Tesco now is not only to invest in new staff, but to define and build a different and better culture, where the right values and behaviours are embraced by everyone from senior management team to the online delivery staff – and customers and shareholders start to notice.
Who am I?
Another issue might be that Tesco seems to have lost its identity in recent years. In attempting to be everything to everyone it has perhaps diluted its customer proposition. Competition is also rife in retail. Aldi & Lidl, two of the UK’s fastest growing food retail chains have chipped away at Tesco’s customer base; whilst other retail chains like Waitrose are creating exclusive retail shopping experiences for customers.
Like all retailers, consumer loyalty and trust are key, but this trust can be eroded quickly with the realisation that a company has individuals in charge who make bad decisions or don’t behave with integrity. People naturally assume that if this kind of behaviour happens at the top of the company, it will also be unchecked elsewhere.
For companies like Tesco, being able to identify and document how people behave at work as well as their likely behaviours, current knowledge, understanding and confidence when making decisions is a critical part of ensuring the right workplace culture.
All brands are an output of the culture within. In this case, the conduct that has been deemed ‘acceptable’ for some time now has diminished the brand and consumers’ perceptions. In such a situation, individuals within the firm must take responsibility for their actions and these long-lasting behaviours they have embedded throughout the organisation.
Human behaviour and people risk
Understanding the human behaviour behind decision making, measuring how individuals perform and understand their roles is a crucial challenge in mitigating people risk in any company. Human behaviour plays a significant role on the impact of brand reputation, consumer loyalty and ultimately share price.
How people behave at work is a result of the organisational culture, and sometimes individuals deviate from the expected norms that are put in place by the organisation. At other times there are behaviours that are deemed acceptable at first, yet after analysis, are in fact incorrect because the processes driving the behaviour need reviewing, along with why this was embedded in the first place.
Would Tesco have benefited by understanding how individuals are likely to behave in a variety of situations? With this kind of knowledge and by being able to identify gaps in the knowledge and skills of their teams, it would have been easier for the company to pre-empt certain issues before they escalated into a crisis and in doing so, reduce exposure to reputational risk.
What should Tesco do next?
Any company in a crisis needs to go back to basics and re-evaluate its strategy and customer proposition. Questions to ask are, “who are my customers?”, “what sort of employees do we want to employ?”, “what sort of organisational culture do we want?” and “are we listening to our staff about how we could change?”
The next step would be to create interventions to embed a new company vision. With a vision in place, senior management need to lead by example, communicating clearly that “this is how we do things around here” and these messages and interventions must be reaffirmed continually so everyone understands them.
Every employee must be clear about what the company expects from them – how they should work, how they should treat customers and the kinds of behaviours that are acceptable and those which are not. Companies need to measure this to understand what employees are thinking and how they are behaving at work.
By measuring people’s level of understanding of their jobs, their likely behaviour in different work scenarios and how confident they are in making decisions, it will soon by clear who has adopted the right behaviours and if there are still gaps.
With this knowledge, companies can offer more targeted interventions to close the skills gaps, help people change and understand what is accepted and what behaviours are acceptable. It’s about encouragement, saying to others what the right thing to do is and then taking measures to engage the right behaviour.
New processes and procedures are not enough to drive change, what is how well employees understand the processes and if they follow them.
To really drive cultural change, companies need tools that will measure and assess employee behaviour and risk. Without this, it will remain exposed to risk.
Tips to drive cultural change:
- Starting with a culture survey in order to get a ‘baseline’ of the current cultural norms and understand how people truly behave and understand their roles.
- Review existing training and comms to see if, how and where they match cultural aspirations.
- Audit training and comms to understand why despite continual training, review, and refreshers of a new culture seeming to be in line, ‘it’s’ not sticking.
With these steps in place, companies can then embed a continual process of reminder and review, which incrementally embeds the desired values and behaviours. The use of measures and metrics will also identify where individuals require intervention. This will provide the senior management team and the executives with insight into every individual and enable them to understand what their people, know and understand and how they are likely to behave so that they can pre-empt problems arising.
A company’s culture won’t change overnight, but needs to start somewhere and in Tesco’s case, there is no time to wait.
Mary Clarke is CEO of Cognsico, a company that specialises in the behavioural outputs of employee assessments that identify, pre-empt and mitigate people risk.