For Tesco investors, the news that Sir Terry Leahy has decided to step down as chief executive in March 2011 after 14 years at the helm of the UK's largest retailer must feel like the world is coming to an early end. It had been expected that Sir Terry would step down in 2013, and in an already nervous market, the surprise announcement was enough to send the shares 3 per cent lower.
But while it would by myopic to suggest that Sir Terry won't be missed, he leaves a strong legacy in - according to his famously impeccable judgement - a safe pair of hands.
Under his leadership, Tesco has cemented its position as the undisputed leader in UK food retail and spread its tentacles into most areas of household spending. The loyalty scheme Clubcard - a Leahy concept developed during a 10 year stint in marketing - has been key to this ability to embed itself in the psyche of UK shoppers and beat off competition. And the strength of the UK business has underpinned his strategy to drive into new markets, particularly in the Far East.
So, with data and Asia very much the engines of future growth, Tesco veteran Phil Clarke's appointment as Sir Terry's successor makes much sense. His role as head of international means he's already responsible for nearly two-thirds of group floorspace, having masterminded transformational acquisitions and joint ventures in China and Korea. As head of IT, he's well-versed in the sophisticated systems that provide the heartbeat to such a gigantic organisation.
And like much of what Tesco does, the succession has been smoothly managed. There have been no gaping holes left in the continuity of management, no leaked news of in-fighting to secure the top job, and no troublesome corporate governance issues lurking in the sidelines. One need look no further than ITV or Marks & Spencer to see the damage that a mismanaged succession can inflict on a business. Tesco's succinct announcement leaves no uncertainties as to how the business will continue to be run - in all probability, as well as it has been under Leahy.
