Sunday, September 14, 2008

Guest Contributor: Tesco's Approach to Strategy Communication. By: Robert S. Kaplan

The Tesco steering wheel, a tool the company uses to drive performance, communicate and help employees drive into the future.

From the Fresh & Easy Buzz Editor's Desk: Robert S. Kaplan, the Baker Foundation professor of business at Harvard Business School and chairman of the Palladium Group consulting firm, is, along with David P. Norton (his partner and the founder of the Palladium Group), the creator and intellectual force behind the Balanced Scorecard, which is a strategic methodology and organizational and operational structure used by corporations throughout the world.

Kaplan and Norton has authored five books together, along with numerous articles, on the Balanced Scorecard. Their latest book about the Balanced Scorecard method is titled: The Execution Premium: Linking Strategy to Operations for Competitive Advantage. You can read a detailed biography of Robert S. Kaplan here.

Kaplan and Norton recently completed the 2008 version of their firm's annual European Balanced Scorecard Summit in London The awalys well attended conference is a much sought after ticket by corporate strategists, chief executives and others.

Tesco PLC, which owns and operates Fresh & Easy Neighborhood Market USA, was represented at the 2008 European Balanced Scorecard summit by its CEO, Sir Terry Leahy. Mr. Leahy made a presentation at the summit. Robert S. Kaplan writes about the Tesco CEO's presentation in the September 2, 2008 issue of the Harvard Business Review.

Mr. Kaplan's piece about what Tesco CEO Leahy discussed at the recently-ended summit provides interesting insight into Tesco PLC's current organizational, operational and communications structure.

Reproduced below is the article:

Tesco's Approach to Strategy Communication
by Robert S. Kaplan
September 2, 2008

I recently returned from London where we held our 2008 annual European Balanced Scorecard Summit. Each of our summits features the induction of companies into the Balanced Scorecard Hall of Fame. We had several firsts at the London conference as we inducted the first two companies from Russia, the first Irish company, the first Middle East company, and the first enterprise from France, its Ministry of Defense.We also noticed a distinct increase in delegates coming from companies in emerging markets, such as Tanzania, Namibia, Cyprus, Iran, Saudi Arabia, and Egypt. It's clear these countries are diversifying beyond their traditional simple manufacturing and agricultural companies into higher-value industries. As these companies march northward on the value chain, their need for more sophisticated management techniques will only increase.

In addition to the induction ceremony, we heard from leaders of world class companies, including Infosys, Old Mutual, BP, Nippon Boehringer, Solvay Pharmaceuticals, and HSBC--all presenting on how they approach strategy and execution, specifically using our Balanced Scorecard (BSC) method.

Sir Terry Leahy, CEO of Tesco, gave one of my--and the audience's-- favorite sessions. He described the challenges of delivering a distinctive and consistent buying experience to consumers in every store when you have more than 400,000 employees in multiple countries. It's a classic concern: How can you keep local store managers and employees engaged in satisfying consumers in their shopping experiences? Extended out a little: How can you keep distributed frontline employees--regardless of industry--engaged with and acting on the company's central strategy?

Leahy explained his approach: "Tesco doesn't want one leader. We want thousands of leaders who take initiative to execute the strategy."

To make this goal a reality, in the early 1990s, Tesco went through a process to clarify its mission, values, and strategy. Based on our first Harvard Business Review BSC article, Tesco communicated its new strategy to its employees via a "steering wheel," a simple symbol and metaphor for a tool intended to drive performance and help employees navigate into the future.

The Tesco steering wheel has four 90 degree arcs, representing the four BSC areas of focus: financial, customer, operations, and employee performance. Every store gets a monthly steering wheel update, a summary of its metrics within each of the four arcs, so that all employees in Tesco's multiple regions and formats get feedback on their performance. Tesco supplements its steering wheel report with "shopping lists" that capture key elements of the strategy in simple forms that employees can follow in their everyday activities. The steering wheel has helped the company stay focused on its strategy even as it experienced rapid growth over the past two decades.

Recently, Tesco added a fifth dimension, community, to the steering wheel report to encourage employees to be excellent citizens in the communities where they work and live. While praising the simplicity of the steering wheel display and its power to communicate to employees, Sir Terry emphasized that it is not easy, requiring extensive consumer research, data collection, and analytics to make sure that the objectives and metrics remain relevant as consumer preferences evolve and competition heats up. But in part because the steering wheel ensures all employees are aware of and can act on the strategy, Tesco has become an engine of social mobility, allowing employees from whatever background or education to advance in the company. Last year, Tesco filled 3,500 management positions, 27 directors, 200 store managers, and 8,000 department heads by promoting from within the organization.


>You can learn more about the Balanced Scorecard and how it links strategy, operations and communications here.

>Bruce Tempkin, who writes a blog called Customer Experience Matters, read Mr. Kaplan's Sptember 2, 2008 Harvard Business Review (HBR) piece about Tesco CEO Terry Leahy's presentation at the European Balanced Scorecard Summit. Mr. Tempkin has a September 11 post discussing it in his blog. We suggest reading it. It's a short post. Click here to read it.

>For more on the Balanced Scorecard click here.

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