The hardest decision in leadership

Sir Terry Leahy was a legendary figure in British business during his time as chief executive of Tesco. Sir Terry worked his way up the Tesco ranks to become chief executive in 1997, retiring in 2011. During the 2000s, when Tesco was in its pomp, Sir Terry was voted Britain’s business leader of the year (2003), most admired businessperson (2005) and most influential non-elected person in the UK (2007).

The story of Tesco was one of unfettered financial success; many even became concerned that the business was too big and too powerful, especially after Tesco posted £2bn of annual profits in 2005. So when he retired Sir Terry Leahy did so as a titan of the UK retail sector.

Yet in 2013 Tesco saw profits after tax slump from £2.8bn to just £120m because of the fall in UK sales, the £1bn writedown to exit the US, and the £804m writedown on UK land. More recently, Christmas sales figures showed a further like for like decline in the UK, and activist shareholders are even seeking to force the Board to hive off Tesco’s massive land holdings and take advantage of the current boom in UK Property values.

The problems stored up in Tesco only came to light after Sir Terry’s departure, leaving his able successor, Phil Clarke, with a long list of issues to sort out in order to restore Tesco’s fortunes. This process which may take at least 2-3 years, according to ex-Tesco chairman Lord Maclaurin, who got out of his seat at the company’s AGM last year to criticise previous management. One commentator coined the phrase: “doing a Leahy” to describe the timing of Sir Terry’s departure.

Another high profile personality, Sir Alex Ferguson, has done a similar thing at Manchester United. His successor at Old Trafford, David Moyes, has inherited a squad shy of perhaps three or four world class players, and a team patently coming down after years of football domination, in the UK and in Europe.

Arsenal and Manchester City fans will be delighted to see Sir Alex in the Director’s Box, as opposed to pitch side, notwithstanding an army of football pundits who have sought to analyse the reasons behind the demise in Manchester United’s supremacy.

Should Sir Terry and Sir Alex be held to account for leaving Phil Clarke and David Moyes respectively to clear up the problems they inherited, or should we instead simply salute their achievements and acknowledge the worlds of business and football have to move on?

Perhaps it is easy for leaders – seduced by adulation and not a little hubris – to believe they are invincible; Mrs Thatcher famously said that she would go ‘on and on’ following her victory in the 1987 General Election, only to be seen off the premises of Number 10 in 1990 by members of her Cabinet.

My sense is that the corollary of a great leader is to know when they need to exit stage left and hand over to their successor, not, perhaps when the business or team is on the cusp of meltdown, but when it is still firmly in the sunlit uplands of growth and success.