Can an outsider be a successful leader? Boxwood Insights managing director draws parallels between Tesco and Aldi

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Martin: which is best - home grown or outside talent?

Martin: which is best – home grown or outside talent?

Paul Martin, managing director at Boxwood Insights, considers strategies for retailer leadership following the death of Karl Albrecht of Aldi and Philip Clarke’s departure from Tesco

“Over the last week, two very significant stories have hit the retail news headlines. The first was the passing of Karl Albrecht who, together with his brother Theo, founded Aldi in Germany over 50 years ago.

“Karl was responsible for Aldi Sud the larger and more innovative part of the Aldi empire. Aldi Sud operates both the UK and the US operations, which have both been key growth drivers in recent years.

“In the US, Aldi’s turnover is €6bn + with presence in only 50% of US States and in the UK recently a £600m investment programme has been revealed to build on the success of the last 12 months.

“One of the Albrecht brothers’ key management principles was to develop and promote talent from inside the company – this manifests itself in the constitution of the board (known as the “Koordinierungsrat”) all members joined Aldi at an early stage in their careers and grew up in the organisation. One recent attempt to change this approach ended in failure – Frank Lutz who joined Aldi Sud as CFO in 2013 from automotive company MAN left after only eight months.

“The second story was the stepping down of Phil Clarke at Tesco and the announcement of his successor Dave Lewis from Unilever. Clarke clearly has had to face a plethora of difficulties at Tesco since taking over from Terry Leahy in 2011.

“We believe Tesco is facing some fundamental issues that will require drastic actions to fix. Clarke definitely addressed some of the key issues but our belief is that the root cause lies within Tesco’s overall value proposition and the fact that the organisation seems to have lost the ability to clearly articulate what it stands for in the eyes of the customer. Both Leahy and Clarke were Tesco lifers and had grown their career from within the organisation. Appointing on outsider in form of Lewis from Unilever is a bold but risky move.

“Drawing the parallel to Aldi Sud where this tactic failed as described above does not bode well for Dave Lewis.

“Does continuity and a deep understanding of an organisation, especially the complex structures like Aldi and Tesco, make it impossible for an outsider to be successful?”