The Success of Tesco and its Human Resource Management
Identification of the organisation's business strategy, mission and goals
Tesco is, as Brand Finance (2014) notes, the largest retailer in UK, as well as being a highly significant retailer globally. As of 2014, Tesco is operating in 12 countries globally, and there are presently 6,780 Tesco stores. In addition, the company employs approximately 500,000 people worldwide. In addition to its core business in the grocery sector, Tesco has also diversified to offer a range of other products and services, such as personal finance and mobile phones. It has developed its ‘bricks and mortar’ business model to include an increasing emphasis upon modern day technology, through Tesco Direct (Ma, Ding and Hong, 2010) and the customer relationship management programme, Clubcard (Felgate, Fearne and di Falco, 2011).
Tesco’s has, as Schiraldi, Smith and Takahashi (2012) comment, a well-established and consistent business strategy that has enabled the company not only to strengthen the core UK business but also to expand successfully into a range of new markets. Those markets that were not successful, such as the US Fresh & Easy stores, have been off-loaded in order to limit group-wide losses (Tyrell, 2014). Tesco’s business strategies mainly focus, as Wood and McCarthy (2014) further postulate, on the huge UK domestic grocery market, along with financial services, and telecommunications. Evaluating its business strategy, Schiraldi, Smith and Takahashi (2012) assert that one of the main objectives of Tesco’s business strategy is to create sustainable, long-term growth. According to Tesco plc (2014), this will be achieved by world-wide expansion. With this goal in mind, the company initially focused on expanding its business enterprises into Asia and central Europe.
Tesco primarily focuses, according to Metzger (2014), on five key market sectors: 1) its core UK business, 2) the communities in which it operates, 3) non-food products, both within and beyond those offered ‘in store’, 4) retailing services, and 5) international markets. The company has, as this essay discusses, separate strategies for each of these aspects. The major objectives of Tesco’s business strategy include being a successful retailer internationally, facilitating the continued growth of the core UK business, being strong in the non-food market, the further development of various retailing services like telecommunications, Tesco personal finance and Tesco.com, and giving to the communities in which it operates, so as to strengthen brand loyalty (Piercy, Cravens and Lane, 2010).
Tesco’s core UK business is the most important part of the entire business and accounts for 70% of group sales (Tesco, 2014). There are, as already noted, almost 3,400 Tesco stores employing around 310,000 people in the UK; these people are employed in five main, distinctively different, types of store, in order of size format: Tesco Extra, Superstore, Express, Metro, and One Stop. In addition, there are other format stores, such as Homeplus, Dobbies, and internet shopping options. There are presently 247 Extra stores, 482 Superstores, 195 Metro, 1,672 Express, and 722 One Stop stores, which, quite literally, give Tesco a presence in almost every town within the country (Tesco, 2014).
In commenting upon how Tesco has developed its business model in light of lessons learned from the current global recession, it is suggested by Piercy, Cravens and Lane (2010) that the primary realisation has been that people want more value for their money but they do not want to compromise on product quality. This message can be seen to have been acted upon by Tesco in a number of ways. First, Tesco has enhanced promotion of its ‘Value’ range, coupled with less advertising of its premier ‘Finest’ range. Secondly, the rewarding of customer loyalty has led Tesco to create a world-leading customer loyalty programme called ‘Clubcard’. According to Tesco (2014), fulfilling corporate responsibility and creating value within the communities it operates are crucial for achieving growth. Tesco believes, as Blythman (2012) further notes, that each and every strategy that it designs has an impact on the community. Tesco’s strategies regarding corporate responsibility include providing active support to local community, providing good jobs to locals, and taking care of the environment. In addition, the company is aiming to create zero carbon stores in the future (Rosethorn, 2009).
The main objective of Tesco’s non-food strategy is to become as strong in this arena as it is in the food category. Tesco’s Dobbies, Homeplus and Extra stores are the three store formats where non-food products are available, the latter in addition to food. In 2000, Tesco Direct, the company’s online store where more than 125,000 products are available, was launched. The company has 25 distribution centres, out of which six deal with clothing and non-food products (Tesco, 2014). Cumulatively, these distribution centres deliver goods to an estimated 500,000 customers per week in the online sector only (Tesco, 2014); this division of the company has experienced rapid growth, showing the importance of diversification to the continued growth of the company (Ma, Ding and Hong, 2010).
Tesco’s various retail services include Tesco Bank, Tesco.com and Tesco telecommunications. In the UK, Tesco Bank is the most successful supermarket bank (Scuffham, 2014), which once more shows how invaluable diversification has been to the continued success and growth of the group as a whole. Furthermore, developing Tesco.com was a strategy of keeping pace with modern trends in shopping which may result, in the future, in fewer resources being applied to traditional ‘bricks and mortar’ strategies, and more being routed towards on-line consumers.
Identification of the organisation's overall HRM strategy and goals
This section discusses the overall human resource management (HRM) strategy and goals of Tesco. Given the global reach of the chain, it is imperative that managers make a complete and feasible HRM plan and use different strategies to manage employees. This will include changing strategies to account for local customs and variations (Brennan, Moore and Mughan, 2013). The human resource strategy presently utilised at Tesco’s revolves, as Merkel, Jackson and Pick (2010) discuss, around the training and development of employees, communication and consultation, and rewards and benefits linked to achieving targets. This triple-headed approach to HRM has been successful over the years and has helped the firm to retain and recruit well-motivated staff who present a professional appearance to customers and are proud to work for Tesco. The most significant part of the HRM strategy of Tesco is training and development in terms of both time and money (Tesco, 2014). Every year, Tesco employs a large number of staff and a critical component of this, in addition to ‘front line’ shop staff, is the recruitment of high quality graduates from leading universities (Rosethorn, 2009). It is imperative, given the academic background of these recruits, that they are trained in ‘the Tesco way’ and introduced as quickly as possible to the corporate structure and mentality of the firm. This is why the training of graduates through specific recruitment programmes is essential (Merkel, Jackson and Pick, 2010). Tesco does not merely, however, favour graduates. It values all its staff as important resources and promises each of its employees that they will have a chance to develop their skill set and progress through the company (Fernie and Moore, 2013). This implies, in the opinion of the author, that each employee has the same opportunity to acquire essential skills relating to their work and the same opportunity to develop themselves to learn new knowledge. In the UK, skilled specialist employees in traditional occupations, such as fishmongers and bakers, can attain recognised qualifications during their careers at Tesco and, in 2008, 97.4% of shop-floor and 99.9% of Tesco.com employees in the UK were trained to bronze level (competent); 94.2% of shop-floor employees achieved silver level competence (expert or experienced). Such data suggests, as Ma, Ding and Hong (2010) comment, that Tesco realises the importance of investing in its staff and is keen to retain and develop a large number of skilled workers.
In addition to the training programme evaluated above, Tesco has an Options development program. In this program, staff can select and learn skills that they need to grasp so as to progress to the next work level within the firm – this is, therefore, a form of self-guided career professional development. One in 30 employees of Tesco in the UK participate this programme, according to Tesco (2014). Mindful of its success, Tesco expanded this programme into Central Europe and Asia in 2009 (Brannen, Moore and Mughan, 2013). This suggests that different parts of the company can benefit from positive innovations trialled elsewhere.
The second major part of its HRM programme is tied into issues pertaining to communication and consultation. Tesco wants to know the views of employees on problems which affect them and the wider company. This form of ‘bottom-up’ feedback is common in companies with a global presence, as Brannen, Moore and Mughan (2013) note. Managers are now encouraged to use different types of communication to gather feedback that can be used to develop the company further. This includes, according to Fernie and Sparks (2014), staff question times, face-to-face interviews, and use of the in-house internet. In addition, Tesco undertakes an annual staff survey and ‘Viewpoint’, which are anonymous and confidential (Tesco, 2014). Tesco uses these approaches to find the problems in working processes as soon as possible, so that it can address them and ensure that it responds to them in a manner so as to maximise returns. The third part of Tesco’s HRM strategy relates to rewards and benefits (Merkel, Jackson and Pick, 2010). Tesco tries to keep a competitive HRM edge over its major supermarket rivals by offering a basic wage that is as high as possible. This is enhanced by long-term reward plans and share bonuses (Tesco, 2014).
Analysis of the various components of Tesco HRM
Human resource management at Tesco involves various activities, including recruitment talent analysis, provision of a good working environment, programmes aimed at retaining employees who have good performance, and ensuring that all are treated equally (Rosethorn, 2009). These divergent trends within HRM are all important as, without them, employees may not feel valued. Increasing employee self-worth is, as Merkel, Jackson and Pick (2010) note, a valuable tool in the arsenal of the successful HRM practitioner because those who feel valued are likely to outperform less enchanted colleagues. In addition, a highly motivated workforce has been shown, by Fernie and Sparks (2014), to maximise the potential for high profit returns within a firm. It is also worth considering that ensuring equality in the firm is an important legal consideration given the right of all people to work in a safe environment that is free from bullying and respects human rights (Tushman and O’Reilly, 2002).
For good employee relations the company also encourages its workers to work near their homes, which, as Piercy, Cravens and Lane (2010) observe, is a ‘green’ initiative that helps cut down on fuel costs and also reduces the time that individuals spend travelling to work. The company also gives their employees freedom of transfer, thus encouraging employee retention (Metzger, 2014). In addition, the use of shift work maximises the ability of people to work hours that suit their own timetables; thus, for instance, a student may be able to obtain an evening shift that does not interrupt his or her studies, whereas a mother of young primary school-aged children may be able to work during the day whilst the children are at school. This flexibility of working patterns, which is also important for the exchange of ideas and for the promotion of equality of faith (such as the need for Orthodox Jews not to work on Saturdays) are all factors that help Tesco to build a wide multicultural team of workers that are attune to the attitudes of the individual communities that they serve. Indeed, as a result of the UK being a truly multicultural society, HRM can be seen to play a critical role in working towards the creation of a healthy work environment. Tesco also ensures that every employee knows his or her rights in the organisation, which can also be seen as a way of ensuring that employee unions are supportive of the market aspirations of the company (Rosethorn, 2009).
That Tesco also embraces health and safety regulations and training may be seen as a further bonus. In addition, Tesco trains its employees on disaster management, which is not only a positive for staff but also for the shoppers who frequent Tesco (Blythman, 2012). That staff receive such training means that members of the public can shop in safety in the secure knowledge that in the event of a fire outbreak the staff are trained, and responsive. With regard to the use of human resource models, Tesco can be evaluated as using a range of different models to ensure that it meets it core business goals (Fernie and Moore, 2013). This is important to note within the confines of this essay because no two people are identical (in terms of their behaviour and personality traits), thus calling for different HRM approaches to be adopted to ensure that there is, within the workforce, harmony in the company (Merkel, Jackson and Pick, 2010). Tesco has, as Rosethorn (2009) notes, has resolved to use a commitment-based model which does not force employees to meet frameworks. Rather, the achievement of goals is looked at as possible through respect, provided that there is co-ordination and self-control. This model calls for motivation and reinforcement in order to achieve the objectives of Tesco management and, as Tushman and O’Reilly (2002) suggest, employee opinions are taken into consideration and are used even during problem-solving processes. This model puts the employee at the forefront and helps to sustain motivation.
Identification of areas that could be improved
Tesco knows that it, in order to keep competitive in an increasingly cut-throat market, it has to keep sound strategies and build upon them (Wood and McCarthy, 2014). It is critical therefore, in accordance with the view advanced by Tushman and O’Reilly (2002), that human resource management continues to develop, identify, and strengthen the capacities of its staff. Tesco has a lot of employees who have substantial experience, and it follows that there is a key role for them to play in the training of new employees. In addition the company needs to train employees with expertise and ensure that they are kept up-to-date with regards to their key skill sets. The training concepts mentioned within this assignment work together to ensure that the organisation benefits from the increased competence of its staff.
For rewards and wages Tesco is in line with existing laws and regulations and pays salaries according to the minimum wage law (Tesco, 2014). Nevertheless, further benefits could be accrued by making a more explicit linkage between performance and reward, especially with regard to the firm’s overall profits (Metzger, 2014). This would mean that when annual profits increase, there should be an increase in the salaries and rewards enjoyed by employees. Such rewarding of talent will have a positive impact on both workers and the company (Fernie and Sparks, 2014).
The human resource management department plays an important role in any organisation. Tesco has a well-documented, forward-thinking HRM department which is in tune with its overall business aims. Through the recruitment and retention of first rate staff and ensuring that all employees can perform to the best of their ability, Tesco increases the chances that its staff will be a positive asset (Merkel, Jackson and Pick, 2014). In addition, as Tesco increasingly diversifies its business portfolio, there is a need to ensure that all employees in each country in which it operates learn from best practice elsewhere (Brannen, Moore and Mughan, 2013). Indeed, if Tesco is to attain its global objectives, it is imperative that its HRM department continually evaluates its own performance (as well as that of employees), so that the company’s most important asset – its staff – can continually adapt to the changing needs and expectations of the company’s customers to help ensure that it retains its existing position of primacy within the UK supermarket sector (Metzger, 2014).
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