· 6 min read · Features

John Lewis: is it working?


John Lewiss form of worker co-ownership has been described as a blueprint for a more humane way of doing business. Meg Carter reports

With its network of 25 branches, John Lewis Partnership is the UKs largest department store group. It is also Britains biggest and longest-surviving example of worker co-ownership and is viewed by many as offering a blueprint for a more humane way of doing business.

It is formal, bureaucratic and at times unwieldy, its director of personnel, Dudley Cloake, readily admits. But its a structure that works very well. The partnership enjoys levels of staff tenure and loyalty and partners enjoy levels of job security that are significantly above the retail sectors average, he claims.

The first shop was opened by the groups eponymous founder in 1864. But it was John Lewiss son, John Spedan Lewis, whose philosophy shaped the fledgling business. Lewis Jnr believed the real advantages of ownership should go to those who gave their time and labour to the business rather than those who supplied the capital. He introduced the policy that all staff should be partners.

Spedan Lewis identified knowledge as one of the core benefits of partnership. In other words, a partner is entitled to know what is happening in the organisation and should know how well the business, their work unit, department and section were faring. But the most tangible advantage to partners is the annual distribution of profit.

Today, John Lewis is a business whose assets are held by a trust rather than shareholders. The structure is built around a carefully planned system of checks and balances and set out in a document called the constitution. It lays down that the partnership be prudent with any surpluses it earns. Management is required to ensure the business has resources to meet all contingencies and finance future growth.

Throughout, the constitution is imbued with a sense of moral responsibility. Partners were and are still expected to behave fairly and honestly. Spedan Lewis believed in the value of happiness, kindness and harmony and these remain the values of the partnership today.

A partnership-wide system of democracy is built into the way the business is run both by the governing authorities structure and, at a local level, where all operational units shops, warehouses and factories have their own branch councils. These are elected by all who work in them and they deal at a local level with all issues dealt with at a company level by central council.

There is also a committee for communication, an elected body to ensure that all who are not managers have a direct channel of communication to management and, ultimately, the chairman. An independent chair is employed by this committee to tour the country holding regular meetings with local partners independent of management.

Meanwhile, all operational units have regular communications half hours involving all partners. Partners can also access an organisation-wide intranet and air their views via John Lewiss self-declared free press; there are two partners newspapers, the Chronicle and the Gazette.

John Lewiss distinctive culture is therefore ingrained throughout the organisation thanks to the constitution, a distinctive corporate structure and a sense of tradition. And it is this culture, along with the emphasis on the individual, that is a key weapon in the hunt to secure the best staff.

A belief in co-ownership and its associated values rather than bonuses or share options attracts top talent, according to Cloake. Because the business is a trust there is no ownership of capital. This is good because there is no short-term need to maintain share price, he explains. But it also means the partnership is unable to offer long-term senior management incentives like other organisations.

Particular challenges, however, are posed by the organisations commitment to democracy. Cloake is quick to stress that its approach to HR is anything but centralised. Major policy changes are regularly implemented not through top-down management decision-making but by an organisation-wide consultation process.

A case in point has been John Lewiss recent review of opening hours. In line with its constitution, management decided that each store should assess its own needs and make proposals for any changes required according to local circumstances. Each store embarked on a consultation process with partners a clear illustration of working democracy in action, says Jane Beine, recently promoted to assistant general manager of Londons Oxford Street store.

It was my role as HR in-branch to co-ordinate the consultation process, Beine explains. It was fully discussed by partners and then taken to branch council for approval.

Consultation lasted nine months. By then, focus groups had been set up, many people had been given an opportunity for input and compromises had been made. It really was an example of HR management being out there of partners themselves deciding what would best work for them, she adds. The proposals to extend trading hours were approved at every branch.

John Lewiss democratic style of people management involves two-way communication, involvement and lots of listening. Its a system which makes management downwardly accountable to a degree unheard of in most organisations, Cloake claims. I have to report once a year to central council and answer questions Im not briefed on in advance about what I have done the preceding year.

A key test, of course, is how effectively democratic decision-making can be applied to problem areas such as poor performance or whether to close less economic parts of the business. And yes, Cloake admits, this can be tough. Were pretty hard-headed commercially but want to be fair, he insists. We wont not deal firmly with poor performance because we are co-owned. Its how we deal with poor performance that reflects our co-ownership.

Dialogue and consultation are enshrined, he adds. While we cant consult on all business decisions we have to consider the relative job security that partners enjoy by which I mean that we will do our best to retain people if we can possibly do so.

A key factor contributing to the relative satisfaction of John Lewis staff is the benefits they enjoy. Although pay rates are the industry norm, partners enjoy subsidised social and leisure facilities such as social clubs, hotels... even a fleet of yachts.

Its something weve got that just cant be copied a clear advantage, Cloake believes. Most businesses wouldnt dream of putting that sort of resource into such facilities from scratch. Yet weve been building this up over the past 20 or 30 years. It is undoubtedly a fact that makes partners think twice about leaving.

The groups social commitment also helps attract the best talent at management level. Almost the first thing a senior candidate recognises is the partnership structure and its ethical approach to business. This ensures the right sort of people are attracted to the business which reinforces the culture and ensures the whole co-ownership approach is self-perpetuating, Beine claims.

A challenge to the constitution

A fundamental challenge both to the partnership structure and its suggestion that co-ownership equals a more contented, better motivated workforce was the recent call from a minority of partners for de-mutualisation. The debate, in 1999, was effectively scuppered by the realisation that de-mutualisation would require a complete re-drafting of the highly prized constitution.

The desire for de-mutualisation shouldnt really surprise, Cloake observes. This is a low-paid industry and reports of the tens of thousands of pounds partners could each stand to gain were undoubtedly tempting. The call for de-mutualisation, however, reminded management of the need to stay focused on partners priorities and changing needs, he readily admits. Which is why HR policies are constantly under review.

Work-life balance is extremely important and its an area where we undoubtedly have an advantage. But I am also extremely interested in the potential for greater flexibility and flexible benefits not in the sense of cafeteria-type arrangements, which would hardly be feasible for such a large and diverse business but in terms of greater choice, such as with our car policy, or in relation to time taken off work, Cloake says.

Other areas currently under review include retirement age, flexible working and opportunities for part-time managers. A lot of changes, Cloake adds, are driven from the shop floor.

The challenge is always to balance flexibility against the needs of the retail environment, he explains. And the challenge for John Lewis Partnerships HR management in the broader retail market is to stay one step ahead. Our style of management is one that any progressive business would want to adopt. It is more deeply ingrained here, because of the co-ownership structure, but the principles could be applied anywhere.

In his new book, The Elephant and the Flea, business guru Charles Handy agrees ... up to a point. The up side of John Lewiss approach is a considerable amount of loyalty, and most people stay most of their working lives there, which indicates John Lewis employees are not just resentful human capital, he concedes. But it is a pretty big organisation now, which poses its own challenges. With 40,000-plus staff does each really believe themselves to be a true partner?

Good organisations try to build a community of common interest, Handy adds. Democratic decision-making, however, is not an approach that lends itself to a fast-moving or market-responsive business. There is also the possibility that you end up averse to risk. Large groups tend to be risk-averse anyway. I would prefer to see larger organisations become something like a federation of smaller units with a lot of independence but also some security built into the structure to support that, he suggests.

Andrew Seth, ex-chairman of Lever Brothers and co-author of The Grocers, adds: The democratic approach is a big feature that sets John Lewis apart, but only one.

Being a private company is another significant difference which means they can really deliver long-term policies without having to go cap in hand to a voracious and volatile stock market every quarter. A third difference is that it is an organisation that has put people development learning and trainingright at its heart. Emulating all of that would be quite a challenge.

There are key features of John Lewiss philosophy that undoubtedly work. The true test, however, will be whether it can harness people power to achieve its goal of keeping its HR strategies fresh, innovative and one step ahead at a time when many other organisations are eager to develop a more democratic approach.

Further reading

The Elephant and the Flea by Charles Handy, Hutchinson

The Grocers by Andrew Seth and Geoffrey Randall, Kogan Page