July 11, 2008

England, Tescoland?

Lucy Neville-Rolfe, Tesco HR & Legal Affairs Director (photo: Davis Plas)
Lucy Neville-Rolfe: "95 per cent of consumers love Tesco"
When Corporate & Legal Affairs Director Lucy Neville-Rolfe agreed to an interview, her suggestion to meet at Tesco's legal offices in London's Fleet Street gave pause for thought.

Were we about to receive a subpœna from the retail giant's principal legal eagle?

This nervous introspection was not without a certain irony. After all, Lebensmittel Zeitung had come to ask, whether the UK's leading grocer felt under attack by the media?

Over the last few years, the retail giant (2008/09 group sales: £59.4bn) has been accused of a growing multitude of sins. But recently there has been a veritable orgy of public Tesco-bashing.

Is the former star pupil of Cool Britannia being savaged by a vociferous minority only, or is there some deeper malaise within the company? 

The Tesco-isation of Britain?
Local council planning committees and MPs, who don't want their constituency to become yet another "Tesco Town", feel strong-armed on sites. Even no. 2 player Asda/Walmart has attacked the size of Tesco's land-bank and called on the UK government for a "level playing field". Are we heading for a "Tescopoly"?
Suppliers and farmers complain of being bullied on terms & conditions. In the media, Channel Four, The Guardian, and Private Eye etc. have insinuated that Tesco avoids paying UK tax via holding companies domiciled in international tax havens.

Add to this whole streets in the UK with "Don't Shop at Tesco"-signs on their windows and doors, or consumer interest groups who have issues with Tesco's Clubcard data bank.

This makes for a pretty high-octane cocktail of problems, which some would call a PR nightmare. So how does Lucy Neville-Rolfe cope with this as the person at Tesco ultimately responsible for corporate affairs?

"Serving the customer"

Ms Neville-Rolfe, t
hey say that nothing succeeds like success, but Tesco and other major retailers are increasingly experiencing a backlash against their size. In a business world where economies of scale are imperative, how can Tesco continue to grow without being perceived as something threatening?
Few people feel like that about Tesco. A lot of people, i.e., 95 per cent of consumers love Tesco. You have a small minority who sometimes have been affected by our growth for whatever reason and they feel differently. It almost has something to do with the clash between the classes.

There has been a big switch in the UK over the last 15 years, epitomised by Tony Blair’s New Labour success. We have seen the death of deference, and we have become a much more classless society.

A company which serves the whole spectrum of society, a "broad church", has accompanied a big change in society. Our lodestar is serving the customer, and that is how we have been successful.

We have been trying to go for growth while always asking "Is this something the customer wants?" If it isn’t, which could be linked to PR, then we try to change so that we fit in with the customer. And that keeps your 95 per cent figure up.

Obviously, we have tried to diversify our growth. So, although you think of us as being grocers, we have brought an enormous amount of value and range and innovation to new markets e.g. dotcom, banking, telecoms and general merchandise.

These are big growth areas for us, where we have brought the margins down and been on the side of the consumer. Now, clearly, that process may lead to some attrition from people who are affected by that growth, but I think that it has been good for consumers.

In fact, there has been a regulatory study over the last two years in the UK. The main finding was that supermarkets were good for consumers. The investigating commission felt that from an economic and competition perspective the market has been served well.

Our entry into the small shop sector has been very helpful in that this has led to improvements right across that sector. So, from a PR point of view, you have to focus on the positives. You can’t just allow a monopoly of conversation on bad news. Scale can be good.

If we consider some of the green work we have done, e.g., in trying to reduce CO² emissions, this is a really good example of where a big grocery chain such as Tesco can bring big international benefits to society.

Tesco has been accused of all manner of sins in the media. Even if Tesco is totally innocent on all charges, surely the amount of criticism points to the fact that you have a major PR problem on your hands?
What you are really saying is: "You are almost certainly right, but the issues are out there!"

The answer is that, if you are a big company, you will have these stories. So, what we try to do from an external perspective is to engage with stakeholders, the media and try to get across the good things we are doing as a company.

You have to bring to people’s attention the things which are going to interest people, where they feel that you are doing something for the broader good.

An example would be regeneration schemes where we have bought land in urban areas, which were badly in need of regeneration, and put in a large superstore which also allowed other shops to open up alongside it.

Then we offered jobs to the long-term unemployed, a guarantee, if they can pass through certain training. We have around 20 such schemes across the UK. They are very well regarded because people perceive that we have gone the extra mile.

We have engaged in the debate on responsible drinking, which may surprise some people. Rather than make alcohol as cheap as possible, we have realised that binge drinking is a social problem. The biggest thing that I personally have worked on has been climate change.

For the last three years, we have been working on a very demanding programme with targets for our world-wide business to get CO² way below the levels the government are talking about. Long-term we are considering how to radically reduce the emission of carbons in our business.

We have decided that we have to change the business through our operations and the supply chain, but, more importantly still, to change consumers themselves.

We are trying to work on things like the labelling of the carbon footprint of a product’s life cycle. We are trialling this with detergent, potatoes, orange juice and light bulbs with carbon labelling done with the Carbon Trust, an independent body.

I feel that the more you can engage with society on these sorts of issues, the more you can have conversations with stakeholders who may feel that they want to live in a village and have only small shops.

Regarding the farmers, if you meet farmers who actually supply Tesco, I don’t think you will find the level of annoyance mooted in general.

What you tend to find is that farmers are very gossipy and very involved in engagement with the government and the media. You hear a story and it reverberates around the industry. I am sure that this must also happen in Germany.

We have around 5,000 suppliers, over half of whom have been with us for more than five years. We try to work with them on a win-win basis. We apply good modern management techniques.

We have something called “Viewpoint” for our staff. Every year we ask our staff how they feel about different aspects of the business and whether we adhere to our values. We do that with our suppliers as well, and it is anonymous.

So suppliers can tell us, you do this well, you do that less well. An ombudsman has been suggested as part of the follow-up to the inquiry I have just mentioned, which is still under discussion. The idea of the ombudsman is that the suppliers can come along and bring their complaints.

Whether it is right to have a separate ombudsman, I am not sure. You do need to have somewhere one can go, if you have a complaint, but we already have our own ombudsman within the company, our compliance officer to whom suppliers can appeal.

We have a code of practice which regulates relations between suppliers and retailers. We try to have transparency and we train that code into all our people.

Consumers are, however, often very contradictory in what they wish for. How do you deal with this in PR terms?
You have to feed the contradictions. One day a customer wants to be organic, and the next he or she wants to buy lots of value products. So the right thing is to try and do both. Recognise also that the groups overlap, but always be very much on the money with the consumer.

One of the things we try to do is to follow consumer research, almost every day of the week, and see how consumers change. Since the Northern Rock crisis consumers have become more interested in value and lower prices, and it has affected people right across the board.

Affluent people are slightly less affected, but even they are changing their habits, so they may eat out less and therefore eat more “Finest” food. Obviously at the bottom end we have seen a big increase in sales of “Value” products.

So, if you are somebody who normally buys organic, you will still go on buying organic, but you will be looking for the cheaper organic vegetables and not the expensive ones. People’s personality doesn’t change and the contradictions don’t change. Nearly everyone’s habits are contradictory.

On the Trust tracker, Tesco is highly trusted, but also distrusted. It is quite interesting that people have that contradiction inherently.

Raw materials and food prices are rocketing leaving retailers to carry the can. How can you get out of the firing line?
We have a good heritage because over the last eight or nine years, around £5,000 has been saved for the average family as a result of cuts in prices by Tesco.

People know that supermarkets are a force for good. We have put a lot of efficiencies through the business, and rather than increasing the margins we’ve given that back to customers in better prices and ranges.

The fact that we have just had a public inquiry helps because people now know that the retailers have not been making excess profits. We try to be on their side. We know that people are less well-off so we ask, whether we can help with their telecoms, financial services or "Value" lines.

We talk to the government about trying to improve productivity. The productivity work we do -- whether this is speed at the checkout, energy saving in stores, or encouraging people to use the Tesco bus etc -- is an opportunity to show customers that we are doing the right things for them.

We also work with the UK supply base because it is clearly important that our agricultural base feels that they can produce more where there is a need for that. And some of our farmers are doing very well, particularly on the cereal side. The livestock farmers are having more trouble.

The oil price has gone up over 100 per cent in the last year, which is affecting our business. It means that it is hard for us to hit our operational targets. It is affecting everyone across the economy. It is a big change.

We also sell petrol. That is not great because we have always offered great value on petrol and the margin is very small in petrol retailing. Indeed, when we had that recent difficulty with the tanker drivers we had an enormous rush on our petrol pumps!

In Germany, shrink has reached such worrying levels that, with or without union and works council permission, some local retailers have employed detective agencies to film employees at the till etc. This has recently caused a public furore. Does Tesco use these methods, and how does it treat the problem?
It is not an issue which we have had here at all at Tesco. We don’t spy on people at checkouts. We never film staff, and we are very careful about customer data. After all, we are the custodian of the customer’s privacy.

Obviously, we have CCTV around the stores for security reasons. Our shrink is low for the industry. Perhaps this is due to our culture. Obviously we work hard and ensure that we do not leave cash around. We have an excellent security director who came from the Metropolitan Police Service.

When we go to new countries, our security expertise is always admired by our fellow retailers. To store any type of personal, sensitive data would contravene, among other things, EU directives.

Retail shop staff is often regarded as "surly". Employees are relatively low-paid for a hard and often monotonous job and have a relatively low level of education and social status. How can you get such people to smile and be friendly to customers?
There are many ways to motivate people. People are our most important asset. We want our people to be proud of what they do and of working for Tesco. It is partly about leadership, but also about benefits. Clearly, within the market we try to pay a reasonable salary.

In the UK there are a range of benefits, including a defined benefit pension scheme, which is a fantastic asset. People own shares, you can buy shares under staff schemes, and there is a staff discount. The way of life, being treated with respect, the Tesco values also make a big difference.

Anybody in Tesco can get on, if they want to. We try to encourage people to have a career, when it suits their family planning.

We have done specific training on staff helpfulness, i.e., share a smile, show you care as part of our routines. We have targets, not only regarding what customers think about us, what money we are making, what the sales are, but whether the staff is helpful in our stores.

In the Czech Republic, we have found that the store workers do not naturally smile as much as in the UK. We therefore tell our Czech staff that this can really help customers and get them engaged. This is a key part of modern retailing. Our staff members are our ambassadors. Customers will be happy, if the staff is happy.

We have put a lot of effort into these issues. For example, if a customer asks, where the chocolate biscuits are, you take them there all the way. Some find it eccentric, but it shows that you care about them and will not leave them to wander about.

We also send all our Directors and top management back to store for a week each year. We call it “Twist”, i.e., “Tesco Week in Store Together.”

We spend the time on the till, stacking the shelves, in stock control, finding out what the latest problems are, how our head-office plans are doing. We try to put the stores first. We have a system of control so that, when we have new initiatives, the person responsible has to book the space.

You can’t bring a new initiative into store e.g. in clothing, unless you’ve booked a slot with the operational people. We never have change when it is half-term, over Christmas or the summer holidays. That means that the stores are ready for a significant change and can manage it.

It means you get a much bigger degree of implementation. Because we put the stores first and spend time in the stores, we know that, if we try and make them do too many things, it creates chaos. We all go to stores all the time.

Our CEO, Sir Terry Leahy, spends two days a week visiting stores, talking to the staff. We are retailers. We also go to other people’s stores. It’s an attitude.

We do not go into the stores to control, because running the stores isn’t our job. We want to learn so that the strategy takes account of the impact of change and the people and where there are weaknesses.

It is about acting fast, when you see things happening. That is why we know that the discounters are doing very well. We’ve known that for a year. The Competition Authorities didn’t seem to be aware of their growing strength in their inquiry!

Regarding food packaging details, Tesco has tested the "traffic-lights system", but prefers the GDA-based system. The UK government and the EU, however, seem to want to implement the traffic-lights system. To what extent do you believe that you will be able to lobby the legislative in favour of GDA (Guideline Daily Allowance)?
In the short run, obviously, if you show the traffic light labels, people say that they are simple and clear. However, if you follow traffic lights through and look at the pattern of behaviour change, it isn’t so helpful because you end up with red for all dairy products, while chips are green.

There are some funny effects. The GDA we have put on all our own brand products have actually been leading to some very significant change. When we put GDAs on our sandwiches, people went for lower fat options. It is a pragmatic solution.

All of the UK retailers, however they do it, have put more information on the front of the pack, and it has led to better diet choices, which must be good.

I think that the same will happen in the EU. Even if certain people in Britain may be keen on traffic lights, it is quite a small group of people.

Actually, if you think of the EU, which is where these things will eventually be decided, any directive has to be discussed and agreed right across the board, i.e., throughout Europe, and I am not sure traffic lights will be accepted.

More broadly we are doing many things to bring about a healthier lifestyle. I think it is more important to have labelling than trying to have a religious argument about the particular type.

We are encouraging the consumption of more fruit & veg. We are putting more into our ready meals and children meals. Where we open stores in poorer areas, diets improve because people get cheap fruit & veg. We sell five types of fruit & veg every week at half-price.

We have a target for 2m people to get active with Tesco in the run-up to the Olympics. We organise "Race for Life", which is women running five kilometres and which I join every year. We are doing football for children and coaching with the football association, which is very popular, along with a number of walks, bicycle rides etc.

We try and use the scale of our business to interest people in moving about more because health is about both calories in and calories out. Also, at the work place we are trialling a completely new menu in some of our staff restaurants, which is much healthier, and that has been really successful.

And on our leadership courses, the first half day is devoted to how you look after yourself, being nice to your wife or husband, eating properly, having a proper balance, understanding about sugar surges, going for ten-minute walks, getting people to walk around the store etc.

This makes people have a better work-life balance, which is a good investment for the business and has a wider family and social impact.

As with the environment, you can do a few disparate things that are useful, but, if you have a coherent policy, you can make a big difference.

You are one of the few women in international retailing who has reached the top. Why is this such a rare an occurrence?

It won't be a rare occurrence in the future as women come through the system. Lifestyles have totally changed. Women classically are a large part of the national work force. Retailing obviously reflects society. In time, our culture should help women to get on and make it to the top.

I worked my way up in Tesco after eleven years. Of course, you have to do more in my position. You have to be a mentor, a sponsor of women in business.
It wouldn't have been like that in the past. Certainly, when I set out, I spent 20 years working for the UK government in Whitehall. I remember that my other job options were the Bank of England and Unilever. I partly went to Whitehall because I felt that I would be able to combine a career and a family, which I duly did. But I would hope that that would now be possible in retailing. It won't be the same everywhere.

Isn't it schizophrenic that there are so few women decision-makers in retailing when the majority of shoppers are female?

True, although more men are shopping now. There is a difference between most men and women. Most women like shopping a lot more than men do!

Wisdom has it that any woman at the top has to be twice as good as her male counterparts. Does your experience confirm this?

Probably there is an element of truth in that historically. Obviously, if you have organisations with a lot of men, there is a tendency for people to like their own mirror. So, if you are a woman, you don't necessarily fit the mirror. Particularly, if you are just one, you are more high profile, if you make mistakes.

This is one of the reasons I think it is very important to have two or three women on a Board or at a specific level. That can help quite a lot both to change the culture and for people to feel less of a sore thumb. However, I don't think one should overstate this.

One of my role models is Margaret Thatcher who went to the same Oxford College as I did. She may have had some male characteristics in her upbringing, but she was very female as well. She managed to make it against all the odds and became Prime Minister. I feel it was a good day for women. Of course, the same applies to Angela Merkel. In fact, we could do with more women in politics.

What tips would you give to a female graduate wanting to make it to the top in retailing?
Think about learning to manage and what good management is about. It is about supporting your people and having confidence and a vision even if you are quite far down the pile. It is necessary to have a little bit of charisma. These are the key leadership issues. Be very focussed.

One of the things where women are very good at is multi-tasking because we all have so much to do. You want to make sure, however, that this does not get in the way of you demonstrating focus when you get on.

On a lighter note: Don't put your children off till your mid-30s, which everyone seems to do! I had my first children in my 20s, which wasn't planned, but it was one of the best things that ever happened to me because I managed to box and cox with the children. I now have four children who are in their early 20s, and I had them spread out over a number of years. I have benefited hugely by learning from them.

Often I find colleagues waiting into their 30s to have a baby. In social terms, especially with people living so much longer, that is not great.

Women are generally considered to have more emotional intelligence than men. These qualities are rare, but surely not unimportant in top management. Do you believe that women are better managers?

Obviously not every woman. But, if you take the average, when you read books about the brain etc., it is perfectly clear that the intelligence is a bit different. And emotional intelligence is very important, which is one of the reasons why Tesco is gradually getting more senior women, because the company puts a lot of emphasis on emotional intelligence. It is very important in managing or motivating people.

How do you react to sexist behaviour in business, and how would you advise other women managers to deal with it?

Probably because I started at management level in retailing and had an established position, I have been alright. The sexist behaviour I have experienced in my work life was further back in my career.

On one occasion, I didn't get the job I thought I merited because there were already two women in a certain position and the powers that be thought they ought not to have a third one.

Today it is different. At the time, it was nothing to do with me; it was just that they thought there were too many women around. This reflects a combination of changing attitudes and also equality laws, which have made people behave more objectively in these areas.

Obviously, you get the typical football jokes and things. What does one do? To be honest, I laugh. One can laugh, one can be different and still join in. Actually, I happen to be very keen on cricket because I have four boys and my family are all terribly keen on sport and cricket in particular.

I think that, if behaviour is hurting someone, you need to take it on. So, where there is an issue with people being bullied or not being treated with respect, you either take it on yourself for them or you actually try and give people confidence. I take people aside and say: "I've been there before. It would be a good thing, if you went about this in a certain way."
Advice can be a great thing. I remember a senior woman during my time in government who was highly talented, but actually a complete menace because she was very eccentric. I always felt that she had never been given proper feedback. If you manage people well, you give them both the good and the bad feedback.

However, if people are not like you, you will find it more difficult to get appropriate feedback. Women working for women are quite good at giving both positive and critical feedback, i.e., telling people where they need to improve.

In German retailing finding a woman board member would be like searching for a needle in a haystack...

Really? Are they not taking the strategic view that they are missing out and beginning to make female appointments?

Related articles in German: Interviews by Mike Dawson in Lebensmittel Zeitung, no. 32, 11.07.2008

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