The Hierarchical Structure of Tesco PLCTesco has a flat hierarchical structure with just six levels between checkout staff and chief executive.
This efficient structure may be partly due to the Griffiths report on the inefficiency of the NHS. Sir Roy Griffiths, Sainsbury's managing director, was an adviser on NHS management for Margaret Thatcher. His reports was the main inspiration for moving the NHS from the reign of consensus minded administers to managers focused on results.
The biggest problem with the NHS was determining who was responsible for the mistakes being made. As Griffiths said: "If Florence Nightingale were carrying her lamp through the corridors of the NHS today, she would almost certainly be searching for the people in charge."
Griffiths also inspired the recruitment of managers from the ranks of doctors and nurses. Under New Labour management initiatives like clinical budgets , cost improvements, and treatment evaluations became the norm. Responsibility and accountability was discharged to as low a level in the NHS as possible.
Sir Terry Leahy, Tesco's chief executive, helped steer Tesco from being the UK's number three retailer to number one. With 350,000 employees in 13 countries and 20 million customers he was faced with similar structural problem to the NHS. With a wife who is a well-connected doctor, Leahy was in a perfect position to apply lessons from Griffiths report that greatly helped Tesco.
From Sir Ian Kennedy, chairman of the Healthcare Commission, he learned many things. These included the importance of:
- A small central office
- Listening to customers
- Customer diversity (what people eat in London as against Glasgow);
- The use of technology
- Random checking (mystery shoppers)
He had many advantages over the NHS executive: no ministers telling him what to do and no conflicting professional groups. With these advantages he forged ahead with creating a flat hierarchical structure with only six levels between checkout and chief executive.
Tesco lost trade in the early 1990s and Leahy surveyed 250,000 customers, who told him Tesco was too like Sainsbury's. This led to the introduction of cheap basics, and the Tesco clubcard. These and other innovations led to Tesco coming out on top.