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Portrait of a Great Success: The John Lewis Partnership
Faith, Commitment and Caring Capitalism: The Foundations of John Lewis Partnership
The John Lewis model and what others could learn from it
All 84,700 of John Lewis's staff are partners and they ultimately own the retailer's 35 department stores and 272 Waitrose supermarkets, generating annual sales of more than £8bn
"A successful economy is one where private interests ultimately serve the broader public interest. What companies like John Lewis demonstrate is that this does not have to come at the expense of commercial success."
However, before I proceed further, here is a bonus payment which I approve of, where everyone is a winner:
John Lewis staff celebrate bonus of nine weeks' pay. Retailer says staff will all receive bonus worth 17% of salary
On 7 March 2013, the John Lewis retail chain handed its 84,700 staff an annual bonus worth 17% of their salary – the equivalent of nine weeks' pay – as the employee-owned company continues to outperform its rivals.
Staff at John Lewis's Oxford Street store whooped and clapped as the better-than-expected bonus – which is handed to all employees, from cashiers to chairman Charlie Mayfield – was revealed on Thursday against a gloomy backdrop for some other retailers. The bonus for an employee on average salary would be £4,000. Here you have it: bonuses for all and not only for a few selected ones.
And now returning to the main subject of our discussion: John Lewis’ Partnership as an example of responsible, profitable, efficient capitalism.
Recently all the talk in the UK has been on “Responsible Capitalism- Is it Possible?” I am sure the same debate is taking place in many other countries, given the disastrous consequences of the neo-liberal inspired capitalism.
In Britain, it is said that the leader of the opposition, Ed Miliband may have claimed this territory first, in his Labour Party conference speech distinguishing “producer” from “predatory” businesses. But the Conservatives and Liberal Democrats are now developing their own strategies for claiming this cause.
At an event hosted by the City of London Corporation and the Centre Forum thinktank on Monday 16 January 2012, British Deputy Prime Minister, Nick Clegg remarks that allowing employees to have a stake in their firms will usher in a new era of 'responsible capitalism'. "We need more individuals to have a real stake in their firms. More of a John Lewis economy, if you like.
"And what many people don't realise about employee ownership is that it is a hugely under-used tool in unlocking growth. I don't value employee ownership because I believe it is somehow 'nicer', a more pleasant alternative to the rest of the corporate world. Those are lazy stereotypes. Firms that have engaged employees, who own a chunk of their company, are just as dynamic, just as savvy, as their competitors. In fact, they often perform better. Lower absenteeism. Less staff turnover. Lower production costs. In general, higher productivity and higher wages. They weathered the economic downturn better than other companies.", noted Clegg.
The ownership of businesses is a crucial element of this debate. Who owns the business: the private equity fund managers; the shareholders, the workers, and so on?
It is said that, employee ownership can make a significant contribution in this respect. But it has largely figured in public-policy debate as a possible model for public-service delivery, not for private enterprise. However, when it comes to private enterprise, then, John Lewis Partnership is mostly mentioned as a truly successful example, a topic to which I will return to shortly.
For now, let us see what the benefits of the employee ownership might be for all concerned.
According to a recent report by William Davies and published by the Employee Ownership Association, the ownership model is particularly well suited to medium-sized enterprises, which often struggle with business succession when their founders retire. Many of these businesses face a choice between family ownership (which typically fails within two to three generations), private equity ownership or being gobbled up by a competitor.
Furthermore, Davies has noted that, , there are two types of business value that will be crucial to the renewal of the British economy in the future. And both are integral to how employee-owned firms operate.
The first is greater emphasis on patience. The complaint that shareholder-owned firms are excessively short-termist has been around for many years. But the urgency of addressing this has grown as a result of the financial crisis. There is a sense that many businesses have become primarily geared around maximising the earnings of a small group of elites who run, advise and finance them. A relentless focus on short-term share-price fluctuations means financial strategy often predominates over long-term value creation.
How can firms resist this temptation to focus on immediate monetary returns, at the expense of longer-term productive purpose? Davies notes that, employee-ownership solves this problem, because the owners are engaged in the day-to-day workings of the business, at all levels from top to bottom. Employee-owners are rewarded with dividends, but they can see the benefit of investing for the long term and delayed gratification.
Committed for the long term, employee-owners will see the benefit of investment in research and development, to an extent that external shareholders and private equity funds typically don’t. Staff turnover is also lower. The entire orientation of the business culture is towards long-term horizons.
The second value which needs to be at the heart of responsible capitalism is well-being. Stress is now the single biggest cause of absence from work, having recently overtaken repetitive strain injury. The Government’s own research shows health-related absence from work now costs the UK economy a staggering £100bn a year, of which a third is related to unhappiness and stress.
As noted by a recent study, whilst comparing various indicators of well-being in employee-owned firms with existing data from businesses elsewhere; it found that well- being was higher in the employee-owned sector, by various measures, such as intention to change jobs and sick leave taken.
This, according to Davies, chimes with everything else that is known about employee engagement and what makes work enjoyable. What makes for a good job is being recognised, being consulted and operating in a culture of fairness and openness. Giving people real voice and ownership is a crucial bargaining tool, if employers want to get the best out of people.
In all, whilst John Lewis staff earn the same as shopworkers at rival chains – but the year-end bonus is a significant top-up. Its directors, on the other hand, are paid substantially less than their boardroom counterparts at businesses such as Tesco, Marks & Spencer and Sainsbury's. Staff also receive employee perks – worth £70m this year – ranging from holiday homes to sailing clubs, theatre outings, theme park admissions, and even a choir, all subsidised. It also one of the dwindling number of companies to operate a final salary pension scheme which is funded entirely by the company.
The ownership model means it is in the interests of John Lewis and Waitrose staff to work hard as they are the direct beneficiaries.
Companies such as Next are far more profitable than John Lewis but according to a recent report the employee-owned businesses had a higher rate of sales growth and job creation during the recession than companies in conventional ownership. Over the course of the boom-and-bust period between 2005 and 2009, they generally created new jobs more quickly and were at least as profitable as their counterparts.
The findings — based on a survey of more than 60 senior executives of both types of company, and financial data from more than 250 firms — back up other studies that show that employee owned businesses typically outperform those companies in which employees do not have an ownership stake or the right to participate in decision-making. "The advantage comes from taking a stakeholder rather than a shareholder view of management," as noted by the report. "Employees who have a stake in the company they work for are more committed to delivering quality and more flexible in the face of the needs of business."
Responsible capitalism will not be achieved through employee-ownership alone. But there are ample opportunities for growth in this area, which the Government, business lobby and business schools ought to recognise and act on. If we want to move beyond the era of short-term earnings maximisation the Government needs to champion alternatives, if necessary through legislative and tax changes.
It is time that political and business leaders spoke up for a vision of business as something other than just a money-making vehicle. This vision, in my view should become the cornerstone of the teaching in any business school, interested in sustainability, responsibility and well-being.
Faith, Commitment and Caring Capitalism: The Foundations of John Lewis Partnership
As I have noted elsewhere*, in the past the charitable works of successful businesses like Sainsbury, Cadbury, Marks and Spencer and John Lewis (to name a few British examples), showed how conducting business with commitment to ones faith, convictions and spirit could power lasting social change. Businessmen who had lived in the shadow of the previous century’s upheavals realised that only peace and social cohesion within a shared culture could provide the harmonious stability in which both the businesses and the workers and their families could flourish. They understood that they were part of the community and environment in which they lived and worked, benefiting from both and responsible to both. Without the benefit of MBAs, they understood about the common good.
They all shared an impulse to give back to society part of their wealth. Some sought to improve their employees’ working lives; others were patrons of the arts and sciences. Philanthropy among self-made billionaires has been common enough, from Andrew Carnegie to Bill Gates, but curiously it rarely takes the form of benefiting the company’s own workers. It was the second generation John Lewis who gave his entire inheritance to his employees, to ensure the continuity of the vision of fair shares and happiness at work for all.
What a contrast to our neo-liberal progeny, one might say.
Economic life was formerly regarded as a branch of the moral life of the whole community; today it is a moral-free zone. In shaking ourselves free from many forms of tyranny, we have achieved just one kind of emancipation, and in the process we have delivered ourselves into the hands of a philosophy which has destroyed the basis for any common social purpose. Economic activity needs moral regulation. The main problems in the world today are not economic or technological; what is really wrong with modern society is that it is morally sick.
R.H. Tawney has described ‘acquisitive’ societies: the whole preoccupation of our modern way of life is the acquisition of wealth. Rights are divorced from duties; the unrestricted pursuit of self-interest is the ruling ethos. A society of this kind, which has taken off the moral brakes, consists of individuals who see no ends other than their own, no laws other than their own desires and no limits beyond those they set themselves. It sets the individual at the centre of the universe and dissolves moral principles into choices of expediency. We can appreciate the significance of this attitude when we look at the morally impoverished behaviour of many chief executives in big companies around the world.
In our materialistic environment there is much emphasis on wealth creation, but no room for the creator, and no proper relationship between creator and creation. We should not forget that our most important economic resources owe nothing to human labour and ordering, nothing to economic factors in general. The land, the air, the sea, the sun, and vital natural resources such as oil, gas and coal, are all God’s gifts: they should be for the benefit of all God’s creation.
John Spedan Lewis, envishoned and empowered by his faith, Christianity and Quackerism, saw and felt all these shortcomings and setout to transform capitalism, from bad to good; uncaring to caring; unsustainable to ever lasting.
Below, I have provided you with a bird’s-eye summary and an overview of the John Lewis Partnership.
With an ambitious vision of co-ownership, and of how a business could put the happiness of its employees at the heart of everything it did, and profit by it, John Spedan Lewis left a radical mark on commercial history. The John Spedan Lewis way is as alive today as it was 80 years ago. The Partnership has over 76,500 Partners who own 35 John Lewis shops (29 department stores and six John Lewis at home shops), 272 Waitrose supermarkets, an online and catalogue business - johnlewis.com, a production unit and a farm, and share in the benefits and profits of a business that puts them first.
This is how it began:
The early years
Born in September 1885, John Spedan Lewis was the eldest of two sons whose father had opened the John Lewis department store in Oxford Street. By the age of 21, not only had he acquired a quarter share holding in the department store, he was well on his way to becoming Director of Peter Jones, the other shop in his father's control.
The beginnings of a radical idea
It was during this time that Spedan Lewis became aware that he, his brother and his father between them were enjoying earnings equivalent to those of the entire workforce in both shops. But it wasn't until a riding accident forced him to convalesce that he was able to spend time developing his ideas for the future of the business, ideas that would radically change its foundation.
With the happiness of his employees firmly at the centre of his mind, he began to instigate new systems and practices as soon as he returned to work. Intent on bettering the working conditions and spirit of the company, he offered shortened working days, the setting up of a staff committee, a third week's holiday paid holiday was an innovation for the retail trade at this time and eventually, a house magazine, the Gazette, which is still published today.
Trying it out at Peter Jones
By 1914, a conflict with his father, who was alarmed by some of these bold practices, meant Spedan withdrew any active involvement with the Oxford Street shop in exchange for total control of Peter Jones. And although it had been unhealthy financially, Spedan's bravery paid off as within five years it converted an annual deficit of £8,000 to a profit of £20,000.
Founding the John Lewis Partnership
In 1920, the first profit-sharing scheme was introduced along with a representative staff council. A reconciliation with his father after his mothers death meant the cooperation between the two stores resumed, then his father's eventual death in 1928 gave Spedan sole ownership. He created the first Constitution and the following year the John Lewis Partnership Limited and signed the First Trust Settlement. This gave him practical control of the business, but allowed the profits to be distributed among the employees. Twenty-one years later, he signed the irrevocable Second Trust Settlement, and the Partnership became the property of the people employed within it.
The principles
The John Lewis Partnership's seven principles (see below) define how the business is run. They are as relevant today as they were when they were set out by the founder, John Spedan Lewis.
Purpose
The Partnership's ultimate purpose is the happiness of all its members, through their worthwhile and satisfying employment in a successful business. Because the Partnership is owned in trust for its members, they share the responsibilities of ownership as well as its rewards profit, knowledge and power.
Power
Power in the Partnership is shared between three governing authorities: the Partnership Council, the Partnership Board and the Chairman.
Profit
The Partnership aims to make sufficient profit from its trading operations to sustain its commercial vitality, to finance its continued development and to distribute a share of those profits each year to its members, and to enable it to undertake other activities consistent with its ultimate purpose.
Members
The Partnership aims to employ people of ability and integrity who are committed to working together and to supporting its Principles. Relationships are based on mutual respect and courtesy, with as much equality between its members as differences of responsibility permit. The Partnership aims to recognise their individual contributions and reward them fairly.
Customers
The Partnership aims to deal honestly with its customers and secure their loyalty and trust by providing outstanding choice, value and service.
Business relationships
The Partnership aims to conduct all its business relationships with integrity and courtesy and to honour scrupulously every business agreement.
The Community
The Partnership aims to obey the spirit as well as the letter of the law and to contribute to the wellbeing of the communities where it operates.
John Lewis: Portaite of a Great Success
John Lewis began in 1864 with the opening of the first shop in London's Oxford Street. 'Never Knowingly Undersold', a unique promise to their customers that the price of any item they sell will always be as low as the lowest price in the neighbourhood, has been John Lewis slogan for over 75 years. Through the efforts of its Partners serving customers with their suppliers' high quality goods, the partnership has succeeded in building the largest department store retailer in the UK, with 35 John Lewis shops (29 department stores and six John Lewis at home) and a growing online business - johnlewis.com.
The Partners work hard to offer customers everything they need under one roof: the best fashions, furnishings and household goods of all kinds at competitive prices with excellent service and free delivery.
Supported by a network of suppliers around the world, John Lewis department stores were voted 'Britain's favourite retailer” in the Verdict consumer satisfaction index published in March 2011.
John Lewis's multi-channel operation and its 'at home' format contributed to the John Lewis Partnership winning 'Retailer of the Year' at the Oracle Retail Week Awards 2011.
For further reading see:
John Lewis Partnership - Our founder
and The John Lewis Partnership
http://www.johnlewispartnership.co.uk/en.html
William Davies, “John Lewis and a new vision for capitalism”
Zoe Wood, “The John Lewis Model and what others could learn from it”
http://www.guardian.co.uk/business/2012/jan/16/john-lewis-model-lessons?newsfeed=true
“Nick Clegg unveils plans for “John Lewis economy”
http://www.guardian.co.uk/politics/2012/jan/16/nick-clegg-unveils-plans-john-lewis-economy
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“Students don't come to university for the support staff but to be taught by leading academics." So said Nick Petford, vice-chancellor of the University of Northampton back in 2011 after his university announced staff redundancy plans. He argued there was an "imbalance" in the amount of money spent on support staff compared to that on teaching and learning at the university, and called for it to be "corrected".
Whether you agree or disagree with Petford on the right balance of academic to non-academic staff, when it comes to the provision of student welfare support in particular, recent cuts in services have prompted a much wider debate on student mental health and wellbeing in the UK.
I believe, given the results of many academic research, papers and studies, one can question the wisdom of statements such as the one by Petford. Let me explain further.
Survey of school leaders finds universal concern over pastoral support offered at higher education institutions
Photo:The Independent
“Universities are failing in their duty of care to undergraduates by ignoring the binge drinking culture and failing to help young people settle into student life, according to head teachers.
A survey of school leaders at both private and state schools revealed almost universal concern over the level of pastoral support on offer at higher education institutions.
The findings come amid evidence of growing mental health problems and a sharp increase in the number of suicides among those in full-time education.
Last year the Office for National Statistics has reported a 36 per cent rise in the number of male students in full time education taking their own lives between 2007 and 2011 with a doubling in the number of female students committing suicide over the same period.
Pete Mercer, NUS vice-president (welfare) said: “Universities should do all they can to provide comprehensive pastoral and welfare support for their students. Services could be delivered by the institution themselves or by supporting the students union or local services.”
And now let me share with you what I had written on this topic a few years back. I wonder if anybody was listening!
In January 2011, I wrote a short article: “Why Happiness Should be Taught at Our Universities? when I noted:
…“I believe that our education in universities is fundamentally ill-balanced. Of course exams matter greatly - they are the passport to an individual's future work and career. A university which fails to let every student achieve the best grades and results of which their students are capable of is failing to do its job properly. But education is far more than this. It is far more than grades and percentages here and there.
As a university lecturer with many years of experience, I have seen far too many tortured and unhappy students who have achieved very high grades. If they can achieve these grades while leading balanced lives, taking part in a wide variety of activities which will develop different facets of their character, and if they blossom as happy and contented human beings, then all is well and good. But as any teacher will know, this isn't always the case with high achievers. Neither is it with high achievers in life. These driven people see their lives flash by in fast living and fast cars, and most fail to realise they are missing the point of life. Is it more important to be highly “successful”, or to be a respected colleague and a valued friend, and a loving parent whose children grow up in a secure environment in which they know they are valued and treasured? I have had to learn the hard way myself, the answers are obvious. Hence the need to teach happiness while at schools and universities.
Universities should seriously consider developing courses and modules which are about emotional learning and emotional intelligence, which by definition are far more reflective activity than traditional classes. Students should learn about how to form healthy and sustaining relationships. They should gain understanding about the goals they should want to set in life, which should be realistic and appropriate for their own talents and interests. The negative emotions which are an inevitable part of life should be explored: students should be able to learn more about what it is that causes them pain and unhappiness, how they might be able to avoid or minimise these emotions and how to deal with them when they do occur. So the essence is that students learn more about themselves, which will be information that they will be able to use for the rest of their lives.”…
Here you have it. Hope one day, and I sincerely hope, very soon, this subject will receive its due attention.
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‘for the enjoyment and benefit of the People.’
Photo: bing.com
Steve Szeghi PhD (ECON), Professor of Economics, Wilmington College, Wilmington, Ohio, USA
“In a day and age when new forms of enclosure and privatization continuously stalk the globe, endangering indigenous wildlife and indigenous populations; Yellowstone remains a wonderful example of the power of common ownership and common purpose working for the common good of not merely humanity but of all the species of the family of nature of which we are a part.”
Yellowstone was established as a National Park in 1872 by Act of Congress. It was explicitly created to protect a beautiful natural landscape, the many species of animals who reside there, and ‘for the enjoyment and benefit of the People.’ The Northwest Gate of Yellowstone is inscribed with the motto ‘for the enjoyment and benefit of the People.’ Through the many decades of its existence as a National Park, millions and millions of people have enjoyed the Yellowstone experience. People are reminded upon entry that they are visitors even as Yellowstone is home to many animals. Care for the Park, the value of stewardship, of marveling at the beauty about while minimizing impacts is today implanted in the mind of visitors.
Yellowstone is a truly transformative and empowering experience. I know because it was for me, just as it was for my children, as for millions of other visitors. I was only ten years old the first time I saw the herds of Buffalo, the Moose, the Elk, and the Grizzly Bears of Yellowstone National Park. I remember walking the steep trail to the brink of the lower falls. I remember my Dad telling me, “This Park belongs to you, to me, to all Americans, we all own it together.” He went on to say, “In many other countries rich people would build their summer homes in such a beautiful place and the rich would fence out the common people, but in the United States beautiful places like these should and often did belong to all of the people.” My eyes opened wide marveling at the beauty all around me, relishing the idea that I owned what I saw, that rich people could not fence me out, could not deny me the experience of such a place. My sense of pleasure was in no way diminished by the fact that all other Americans also owned such a place together with me. Quite the contrary the sense of common ownership, of common purpose, of common stewardship of the land and nature welled up within me as a deep source of pride and intense satisfaction.
Photo: thewowstyle.com
Roughly twenty years later I took my children to Yellowstone, many times, but the first visit was perhaps the most memorable and delightful. I watched as their eyes opened with wonder. I saw the delight on their faces as they saw the herds of buffalo, the moose, the elk, and then one day the grizzlies. One of my daughters is now a Professor of Environmental Literature. And one of my daughters works for the National Park Service as an Archaeologist.
The concept of a National Park of celebrating common ownership over vast tracts of land was a counter to the enclosure movement and privatization which had been gaining ground for quite some time, at the time Yellowstone was established in 1872. Public and Common Ownership grounded in rules and regulations which protect the land and the animals, provide at the same time and in the same place, the best of human enjoyment and conservation of the environment and ecology. Shortly after its establishment as a National Park, a couple of herds of Buffalo found refuge in the high mountain pastures, surrounded by the many majestic peaks, geysers, and forests of Yellowstone. The Buffalo were routinely and systematically killed throughout the American West in order to deny to American Indians both a source of food and their way of life. Today all genetically pure buffalo are descendants of the herds that found refuge in Yellowstone. Grizzly bears survived in Yellowstone and in Glacier National Park even as they went into extinction elsewhere in the lower 48 states.
Of course many mistakes were made during Yellowstone’s existence which endangered both wildlife and the many geothermal features of the park. In certain respects people loved both the animals and park features too much. Consequently rules were put into effect to force people to keep a respectful distance, to be able to appreciate and enjoy without doing harm. As an example laws were established making feeding the bears and other wildlife illegal within the park. People are now encouraged to keep a respectful distance from the animals just as it is now illegal to swim in or to otherwise damage geothermal pools and springs.
There are no doubt, many mistakes still made, many which stem from overuse. But as ecological understanding and love for the earth and other species grows, new rules and regulations will take shape. It is precisely the Yellowstone experience which gives people such an appreciation of nature, that it engenders a deeper and deeper desire on the part of those who visit, as well as those who may never visit but nonetheless learn of Yellowstone, to safeguard the environmental treasures not merely of the crown jewels of American public lands, but of all the elements of nature throughout the world. The Yellowstone experience makes us all more profoundly environmentally conscious. The power of Yellowstone spurred the establishment of many other such National Parks not just in the United States but throughout the world. It has also spurred and inspired even stronger environmental protections such as Wilderness designations as well as the effort, will, and energy required to protect nature, the environment, biological diversity, and ecological systems, generally throughout the globe.
Yellowstone is a powerful reminder and example of the need we have as human beings to do things together, to share the bounty and beauty of nature together, and together to both appreciate the beauty and the wonder of the natural world, and to therefore bind ourselves to rules and regulations which safeguard such beauty and splendor. In a day and age when new forms of enclosure and privatization continuously stalk the globe, endangering indigenous wildlife and indigenous populations; Yellowstone remains a wonderful example of the power of common ownership and common purpose working for the common good of not merely humanity but of all the species of the family of nature of which we are a part.
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