When process becomes more important than any one person

FOR better of worse, some businesses become identified with their bosses. Look at Steve Jobs at Apple, whose share-price dropped when rumours about his health circulated last year. Or BP when it was run by Lord Browne, a man whose attitude towards the business he ran is often compared to that of Louis XIV’s towards the French nation (“l’etat, c’est moi”). His successor Tony Hayward is currently discovering just how profoundly one person can become identified with a company’s woes. Tidjane Thiam has learned something similar at the Pru, following its troubled attempt to move into Asia. Sir Martin Sorrell at WPP and Sir Philip Green of Arcadia are synonymous with their firms. And while they may not have quite the same star-power, the fates of the CEOs of the best-known British retailers, such as Sir Stuart Rose at M&S, are closely tied to the fortunes of the companies they run.

So it is inevitable that when Terry Leahy, who has spent 14 years as CEO of Tesco and who guided the firm so well that its sales now top £1bn a week, announced he was leaving that some would worry that his successor can’t possibly replicate his triumphs. But looking more closely at the way his abdication has been managed reveals a profound truth about modern business: that people matter a whole lot less than process.

“The days of the celebrity CEO are over,” says David Taylor, a boardroom level coach and the author of The Naked Leader. He points out that there was a very small blip in Tesco’s share price when Leahy announced his departure, but that it quickly recovered the lost ground. Investors know that the business will not be damaged by the change of personnel. “Tesco is bigger than the CEO,” Taylor shrugs. “People move on, people die. Nobody should get het up about what’s happening.”

Far more important than the personnel is the way that Tesco has handled the whole thing. Process, and not people, is what is driving it. The announcement that the new man, Philip Clarke, will not take over for several months “demonstrates that they understand successor-planning,” Taylor says. And there are unlikely to be any surprising bumps when Clarke does take the reins. These days, many big organisations make people prove that they can do a job before they are given it. The new man is unlikely to spring too many surprises when he takes charge, which will reassure shareholders and employees alike.

By appointing someone from within, Tesco has shown that it sees the value of having people in high places who understand the business’s culture, something which is applauded by John Timpson, a CEO of 33 years standing and the author of Upside Down Management. “It gives confidence to people because they can expect continuity,” he says.

Somebody who is steeped in the Tesco way is less likely to start shaking things up for the sake of it, to eagerly try to stamp his own personality on the business. Outsiders always have the “temptation to bring their own people in, and make the business more like the ones they are used to”. In other words, as CEO Clarke will do things as they have been done in the past. That is far more important than bringing in somebody with star power. The process has not been sacrificed to ego.

Also, the fact that Clarke will not take over for several months also means that any changes are likely to be considered ones. Before you take over, the best thing is to spend “a lot of time listening” to people in the business about what they want to see happen, says John Timpson. Again, Tesco is reassuring its shareholders, and employees, that the company that there will be no knee-jerk changes, and that it will continue to follow the recipe that has brought it success in the past.

The cult of the CEO grew up because it is human nature to concentrate on people – a management structure is far harder to talk about, and doesn’t appear in the gossip pages of newspapers with a model on its arm. But successful firms are increasingly faceless. How many Goldman Sachs bankers can you name? If you ask people in the City what makes a successful business they tell you two things. One, hire talented people, and two, make sure that you let them do their jobs. On the basic level, that means making sure that the printers don’t run out of paper, and there are no IT glitches that prevent people working. But it also means that you also have to give them the right training, make sure that they are managed properly, and that things like successor management are addressed.

Whatever level you work at, stability, continuity and organisation are what will bring you success, not big personalities. That is the lesson that Tesco’s exemplary handling of Terry Leahy’s departure teaches us. The king is dead. And that’s a good thing too.