Sir Terry Leahy’s gorilla

Can CEO Philip Clarke return Tesco to its former glory?

By Michelle Perry | Published 12:23, 25 June 14

I vividly remember attending a conference roughly 10 years ago where Sir Terry Leahy, then CEO of Tesco, was the keynote speaker. When it came to the Q&A session one attendee asked Sir Terry if Tesco’s, or rather Sir Terry, would ever consider entering the US market.

If I recall rightly (and I have the notes somewhere) Sir Terry responded – as CEOs are prone to do – with a question that went something along the lines of: “Would you get into a telephone box with a gorilla?” The accepted response being: Not if you’re got any nous, you wouldn’t.

And yet just a few years later the UK’s largest supermarket entered the US grocery market in 2007 with a new chain of grocery stores called Fresh & Easy.

We all know what happened next so I won’t labour the point. But I do want to ponder the idea that for all the hammering that Tesco’s current CEO Philip Clark is coming in for, could Tesco’s slide be traced back to that moment when Sir Terry got into the hone box with the gorilla – aka the US?

I was reminded of Sir Terry’s comments because of the news this week that another Tesco executive in a growing line of executives has just parted ways with the supermarket just days ahead of what could turn out to be a very lively annual meeting for the supermarket giant.

UK general merchandise director Neela Mukherjee became the latest quarry of the “leadership restructuring” that the FTSE 100 company undertook two weeks ago, a Tesco spokesman tells me. Mukherjee had worked for Tesco for 12 years both in the UK and overseas.

Tesco’s – which is still the UK’s leading supermarket despite falling market share – is also searching for a new finance chief. I reported back in March that Tesco CFO Laurie McIlwee – who has managed the finances since January 2009 – could leave within months.

Just weeks later Tesco confirmed McIlwee would indeed be leaving the supermarket after 14 years with the grocer.

McIlwee’s departure is believed to be because of mounting tensions between Clarke and the finance chief over the supermarket’s falling sales.

It is vital for any business – at whatever stage of growth – that the relationship between the CEO and CFO is solid, complementary and mutually respectful. If that marriage breaks down at the top then there is little option but for one party to leave. And as is typically the case – it is usually the finance chief who walks.

McIlwee is due to leave in October ensuring a “smooth handover period” for the new finance chief, who is yet to be named. Or perhaps even found. The search is underway for a replacement, both internally and externally.

Given Clarke’s delicate position among those executives who have been with the company for decades and the CEO’s recent management purge, it’s likely he’ll opt for an outsider to replace McIlwee, and won’t be stepping into any tight spaces with primates any time soon – at least not until he regains some of the ground Tesco’s has lost in recent years.

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