An interview with John Allan, chairman of Tesco and Barratt Developments, as he takes up the role of CBI vice-president
As chairman of both Tesco and Barratt Developments, John Allan has a good vantage point on the British economy at a time of unprecedented change. Add in a career that includes roles in marketing, finance and logistics, the CBI’s new vice-president has a comprehensive understanding of the common strands affecting all businesses today.
Speaking to Business Voice, he comes across as a calm, modest man – but one with plenty of opinions on subjects ranging from the squeeze on consumer spending and the need for more infrastructure investment, to the rise of technology and the importance of good corporate governance.
But the two issues that top his concerns – and on which he hopes he can help make the biggest difference during his time at the CBI – are Brexit and skills. And the first is challenging his optimistic nature.
“Once we know what the outcome of the Brexit negotiations is, I’m sure we’ll all pull together to make the very best of it,” he says. “But I worry that we may not get the sort of Brexit that business needs.”
As a result, he emphasises how important it is that businesses, as employers and part of local communities, continue to inform the debate.
“The CBI has been very good at spelling out the issues which are actually going to impact not just on business, but on the whole economy and on UK citizens. These are not just narrow business interests or theoretical debating points,” he says. “They are important issues that have a practical impact for everyone living in this country.”
Businesses need to help government to “understand that there are issues that perhaps initially they weren’t aware of,” he says. “And if business can go beyond that and start to suggest solutions, then I think that’s playing a helpful, constructive role in the whole debate.”
Skills in crisis
And regardless of the outcome, he argues, the debate has shone the spotlight even more clearly on the issues of skills and how urgently a solution is needed.
“Business needs to seize the opportunity and address that issue,” he says.
“I think there has been more talk than action and now we need to resolutely organise ourselves,” adding that firms need to work hand in hand with government and the education system to provide young people with the tools they need to get into work. “Some businesses are doing it very well already, but we need to mobilise still more businesses to do so.”
There has been more talk than action and now we need to resolutely organise ourselves
He lays that challenge at his own door too, arguing that as the UK’s largest private sector employer Tesco in particular “has huge potential to get out into the local communities and provide opportunities for interaction with business”. He adds: “We are contemplating how best to do that – but I wouldn’t claim that we are tremendously far down that journey.”
And in construction, he is seeing first hand what happens when industries don’t invest in training – making current questions around access to EU migrants and how attractive the UK is for them as a place to work a big issue.
When the ageing workforce retires “numbers will decline still further if we don’t do something about it,” he adds.
But he also points to the tunnelling academy that was set up to fill a gap in skills urgently needed for Crossrail. It’s an example of what is possible, he says – and an example of what could be needed if the UK turns to infrastructure to support a healthy economy post Brexit (as he believes it should).
Making business relevant
By helping young people to get into work, Allan also believes that trust in business will improve. “A solution to the issue of business trust will take a decade or more. But it’s much more about what business does than what business says,” he explains. “And contributing to the skills agenda is much more relevant to people than businesses publishing statistics about how much tax they pay, for example.”
Finding a solution to the “productivity conundrum” is another piece of the puzzle, he adds. “The fact that neither businesses or politicians are well thought of has coincided with the decade in which the ordinary person has not actually made much real progress in terms of wages.”
Again, focusing on skills will help, as will investment in technology, he says. But he thinks retail will be quicker to realise the benefits of technology than construction will be – provided Brexit doesn’t stop investment in its tracks.
Allan sees diversity as an important part of the picture too – even if comments he made last year that were meant to suggest there has never been a better time for women to succeed as board members played badly in the media.
“I believe very strongly that diversity is a good thing – not just in terms of morality, fairness and equal opportunities – but also because diverse boards are more likely to function well and perform well,” he explains. “It matters at board level, at executive team level and further down the organisation. And it’s coming, but it’s coming slowly.”
Diversity matters at board level, at executive team level and further down the organisation
With gender diversity heading in the right direction at Barratt and Tesco, he says the boards are now working very hard on trying to understand the other dimensions of diversity they ought to be focused on, “because it’s not just about gender”.
Allan is also supportive of the renewed emphasis on recognising the needs of all stakeholders – not just shareholders – and giving employees a voice as part of recent reforms to Corporate Governance Code.
“I think after a lot of hullabaloo and noise and heat and light, what has actually emerged are relatively modest but mostly positive changes,” he says.
“Progress on corporate governance in the UK has been very good over the last few decades. But as long as we’ve got human beings running companies and we’ve not become completely robotised, there are always going to be occasions when companies lapse from grace.”
As chairman of Tesco, he’s “in the midst of a very material and significant turnaround”. He joined the board three years ago after the retail giant was rocked by an accounting scandal. And while he believes there’s a lot more work to do, he is careful to place “the lion’s share of the credit” for the progress made to date at the door of the management team.
“You’ve got to be realistic about your role in a turnaround”, he says. As a chairman, he believes his main role is to create “harmonious, constructive boards”, advise and counsel management teams – and not to panic.
“You’ve got to refrain from panic even when there are quite serious issues to be addressed because panicking achieves nothing,” he says.
On his appointment at Tesco, Allan was described as a “shrewd operator” and “a safe pair of hands”; and as chief executive to his chairman at Dixons Retail, Seb James referred to him as a “valuable force for good on the board”, who played an important part in the business’s “great turnaround story”.
So Allan has plenty of experience to draw on when explaining what contributes towards an effective turnaround:
“First of all, you’ve got to start by being incredibly honest about what the problems are and to face up to the nature and scale of the problems. If you can’t be honest about just how big the hole is that you’re trying to fill, you’re never going to fill it.
“Secondly, you’ve got to provide very clear leadership to the organisation. If a business is experiencing a downturn, leadership is paramount in demonstrating to people that you believe there is a way out.”
He also suggests that any painful and difficult decisions should be made quickly – and that communication is vital.
Failure and perseverance
But experience – and in some cases failure – has also taught him to be more modest about the capabilities of good managers.
“When I was 30, I thought good management could solve any management problem. And by the time I got to 50, I realised that that’s not the case. Sometimes the smart thing is to recognise a situation is unmanageable and deal with it very rapidly from there.”
I've probably learned more from some of the business challenges where I've been unsuccessful
He continues: “I’ve probably learned more from some of the business challenges where I’ve been unsuccessful.”
And it’s a love of new challenges and the opportunity to learn that Allan cites as his biggest motivations for what he does – and the reason he gives for taking on the role of vice-president of the CBI.
Returning to where the interview started, he says that while Brexit might not entirely be in the control of people in this country, skills is something he doesn’t want to accept failure on.
“Improving the opportunities for young people to get skills and access work is doable. It won’t all happen in two years, but we can make a fair start on it. Between business, the education system and government we should be able to solve the issues. And there’s really no excuse if we don’t.”
John Allan: a potted CV
Current: chairman of Tesco, Barratt Developments and London First; non-exec director of Worldpay
Previous senior roles include: chairman, Worldpay; chairman, Dixons Retail; chief financial officer, Deutsche Post DHL; chief executive, Exel; chairman Care UK Health & Social Care.
Non-executive director roles: Home Office Supervisory Board, Royal Mail, PHS Group, National Grid, Wolseley, Hamleys, 3i and Connell.
Early career: Lever Brothers, Bristol-Myers Company and Fine Fare.