Key Human Resource Issues at Tesco

Has The ‘King’ Of The Supermarkets Lost Its Crown?

By the end of February on 2015, Tesco has projected a loss of 6.4 billion pounds (BBC News, 2015). The report targets to identify and critically analyse the key issues of human resource management (HRM) at Tesco. Tesco has the largest chain in the United Kingdom supermarket sector. The loss suffered by Tesco is the biggest loss ever for the UK’s supermarket in the corporate history (BBC News, 2015). Due to several causes, Tesco has faced such disappointed result in their financial performance. The issues may be varied and those may be in customer satisfaction or in employee performance or in strategies used by the company. The reasons for such loss are assessed using the proper human resource models and theories.

The business report is thus going to discussed the areas where Tesco lacks with the help of current supermarket leading performer’s benchmarking performance, Tesco’s strategic HRM models have been evaluated over here. The business report concludes how the retailer, Tesco can be recommended based on the real cases of the global supermarket.

It can be seen as per the financial report of Tesco since 2010 that, the retailer has faced a lot of problems from the supermarket has faced a great footfall in their property portfolio (Truss, et al., 2012). Without sales, no company can earn revenues and thus have a profit at the end of their financial period. These profits then help the company in growth and expansion. The company has experienced a huge loss in the current year in comparison to the earlier year’s performance. It can be seen in the following structure of the financial year report of Tesco.

HRM is the one of the main resources of Tesco since it helps to accomplish organizational objectives and also offers innovative ideas those may be effective in the business process. The retailer actually trades in the highly competitive market, where consumers have several numbers of options to choose from. Human resource is the key factor of an organisation for making profits and business growth. If manpower has boosted energy to give a strong performance, then only an organisation like Tesco can make their business fruitful (Gulati & Soni, 2015).   

Figure 1: Financial Report of Tesco Since 2010

Source 1: (BBC News, 2015)

The relationship between employee and employer, working culture, labour rules, economic and competition, working environment are few factors that are key issues of SHRM or strategic human resource management within Tesco. These factors are not managed by Tesco properly and as a consequence, the retailer has faced such a big downfall in their business recently. Since, the retailer does not use the latest technology, the consumers are less interested in their products which results in a decrease in sales. The competitors took an advantage of the downfalls of the organization and provided the consumers what Tesco was lacking. As an outcome customer base of Tesco has decreased (Samantara & Sharma, 2014). Today, the retail market is dominated by the e-commerce retailers mostly. People are more comfortable with the electronic grocery system and they like to buy their commodities over the internet. But, Tesco has not implemented such a big and developed network for its consumers (Xie & Allen, 2013).

McKinsey’s 7S Model

Another issue is that with the dynamically changing consumers’ needs, market trends have also changed. Business operations and employees’ training and development programs must be aligned with the changing trends (Brown & Grundy, 2012). But, Tesco is not able to cope up with the changing market challenges and thus it has to face such loss. (Entrekin & Scott-Ladd, 2013).

Another problem in the case of Tesco’s downfall is that the HR managers do not get enough importance in the decision-making process by the top management department of Tesco. Hence, not all good ideas come up while making major decisions. Creativity is not seen. This also de-motivates the HR managers as it gives them a feeling of ignorance. The confidence of the managers goes down and they are unable to give their 100%. The work they do doesn’t give them happiness anymore. Moreover any important feedbacks of the working staffs are ignored as HR managers do not get much importance to the top managerial personnel (Chandra, 2013).

McKinsey’s 7S model is used to analyse the position in which an organisation is situated for achieving its objectives. McKinsey has suggested the 7-S framework that aspires seven internal factors for making a successful business, in an alignment of those factors. Seven ‘S’ indicates to:

• Skills
• Structure
• System
• Staff
• Shared value
• Style

It is an effective model to improve Tesco’s performance (Singh, 2013). The model helps to assess likely future changes of Tesco. With the help of this model, all the departments may align to work accordingly. This model helps to recognize the ways using which an organization like Tesco can implement an appropriate strategy.

Figure 2: McKinsey’s 7S model

Source 2: (Choi, et al., 2012)

Hard elements in this model are structure, strategy and systems. These are easier to identify and these factors can be influenced directly by company’s management. These are Tesco’s reporting lines, information technology systems and formal procedures. The Strategy here tells us about the methods the company uses in order to achieve its goals and objectives. The Structure tells us about the management of the company. It tells us about top to down management and how it works. System shows us how a company finishes it works and how it achieves it goals. In this process, the company has to identify the important works and get over it first. System shows us how smartly the company has operated and taken care of its business. Strategic human resource management has a lot of strategic issues and thus, Tesco’s performance degrades its scale of performance. Tesco’s remuneration structure for men and women is different. This has created a bad effect in their employee management system (Baroto, et al., 2014). Most of the people nowadays opt for a better option like buying over the internet rather buying from the physical market. Tesco has a lack insufficient IT infrastructure so that they can dominate in the e-retail market. However, Tesco leads in the UK supermarket.

Soft elements are more intangible and influenced by cultural factors within Tesco’s business operation. These are difficult to elaborate. These are skills, style, staff and shared values. Shared values can be termed as working together of the team members of Tesco to achieve the overall goals and objectives of the organization. From employers to individual employees all are devoted to accomplishing the unique target of Tesco (Galbraith, 2012). This can be called as shared value. But, the fact is there has a lack in smooth communication and relationship among the employers and employees of Tesco. Skill is although an intangible thing but is very important factor to be focused upon. Skill describes what a company can actually do. It shows the capabilities of the organization to do any particular job. Lately the company has not been co-ordinating well with its staff and not giving them appropriate knowledge and information for them to carry their jobs effectively and efficiently. Since, without having proper knowledge about the business operations and service, employees cannot communicate and dealt with the consumers in a proper manner (Cummings & Angwin, 2015).

Hard Elements in McKinsey’s 7S Model

Style denotes to the ways of business operations by which Tesco deals with its consumers. Ever organization has its own style of working and achieving its goals. Tesco has its own style. Tesco basically focuses on 4 different parts or areas which can be termed as financial, customers, operations and employee performance. Style may differ in the employees’ working performance. The sector is more dependent upon the satisfaction of consumers’ fluctuated needs and demands. But, Tesco is unable to cope up with this type of change management policies (Kemp, et al., 2012).

Performance management program is liable for setting organizational goals so that those can be accomplished in order to get the desired outcome in the business sector. Performance management has a huge impact upon alignment of team’s goals with individual’s interests and finance, people, organizational change and growth (Sharma, 2014). Tesco has a deficiency in this particular matter since the UK’s biggest retailer is unable to attract more customers by satisfying their current demands. The organization is unable to evaluate or find out the demands and changes in the running market due to which it is losing its customers. Performance management does not only deal with aforesaid facts but also with standard skill and necessary equipment so that an organization can lead their business operations in the industry (Bourne & Bourne, 2012). The standards that have been set by the organization seeing their previous achievements are really high and currently the organization cannot match up to the level due to which the customer base is disappointed. The customers expect a lot of the top supermarket which they are not getting.

Figure 3: HRM element and performance management

Source 3: (Bourne & Bourne, 2012)

Tesco cannot implement an appropriate system to manage the performance of employees and hence Tesco has faced such a big loss recently. If individual personnel in Tesco do not gets sufficient satisfaction regarding their payment structure or other benefits they may not give their best in achieving company’s goal accordingly. The retail market is getting changed from the physical market to the electronic market and most of the people opt for that marketing field (Keller, et al., 2011). Tesco needs to think about this changing market trends and hence, they can incorporate new technology in their sales and marketing policy to increase their business. The increase in the business field can also lead to new customer base. Leading the business via internet will give all the people in the world access to the products of the organization. The company has hence easily expand its business and reach new heights.

The theory is limited or restricted in the case when the requirements are not clear to an organisation, then how the performance can be managed is not also clear to that particular organisation (Bourne & Bourne, 2012). Thus, Tesco first needs to recognise its prerequisites so that the retailer can manage all its present issues.

Walmart recently leads the supermarket retail chain all over the world. The supermarket has made a profit of 10 billion dollars more from the fiscal year of 2014 to 2015 (Hwang & Park, 2015). Walmart has started dealing with manufacturers since 1980 and the retailer have given managing inventory job in warehouses to the suppliers. Inventory management of Walmart funnels information from POS or point-of-sale data (Rothaermel, 2012). The world’s largest and biggest retailer uses the centralized database for real-time sales and warehouse inventory. Even the information are shared by the company to its suppliers so that shipping can be smoother and convenient. The retailer does not fully depend upon technology it uses different ways to operate its business systems effectively. Walmart has an expansive network of more than 160 distribution points covering over 130 miles stores the retailer supplies (Wood, 2015).

Soft Elements in McKinsey’s 7S Model

The retailer has developed all the required equipment by its own so that it may not have to face any kind of difficulties farther. Such as, Walmart has instituted cross-docking in the warehouses. It has developed a process that transfers inventory from departing or arriving trucks directly. But, the entire process is done by the retailer with the help of an effective technical applications automatically (Smith & Popkin, 2015). As a consequence, the world’s leading supermarket has lessened its inventory costs, transportation costs and products are reached so quickly. Walmart uses its own truck and has engaged own drivers by providing them standard driving competencies.

Tesco should follow this benchmarking operation to adopt proper strategies so that the UK’s leading retailer can regain its losses by attracting more customers to its business. If Tesco can implement enough and convenient systems with proper structure within its business sector then, only customers will take interest upon the retailer’s trading and they will persuade to make purchasing. Benchmarking is necessary to be followed by Tesco.

Tesco, king of the supermarkets has lost its crown recently by experiencing a large amount of loss in the business. Tesco should follow a benchmark performance within its business operation, system, organizational structure, performance management and strategic human resource management. Otherwise, the king cannot gain its lost position in the competitive retail market in the United Kingdom. Tesco should focus upon its business policy in the field of sales and marketing operations. So that more people make their purchases from the stores of Tesco than the other supermarkets. In this regard, Tesco should focus upon its technical applications and e-retailing since people prefer this option more particularly at this time. Tesco should provide sufficient training and development programs those are aligned with the present market needs and changing trends of the retail market. Otherwise, customers cannot be satisfied as without proper dealings of employees with the customers, a business cannot experience a growth.

7. Conclusion:

Due to several causes, Tesco has faced a big loss ever in the corporate history of UK supermarket on 2015. The reasons are related with the strategic human resource management mostly. The relationship between employee and employer, working culture, labour rules, economic, market competition, working environment factors are not managed by Tesco properly and as a consequence, the retailer has faced such a big downfall in their business recently. HR managers do not get enough importance in the decision-making process by the top management department of Tesco. Hence, the outcomes are weak strategies in the business operation. Tesco should focus upon the world’s leading retailer Walmart in order to get back its market position for leading UK retail market. Tesco has to develop more specifically its strategic facts so that it cannot compete easily by any other retailer. The most important thing the retailer has to build are automatized applications.

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