Andy Street, the managing director of British retailer John Lewis, addresses new partners in the new Westfield Stratford City branch. All 76 500 of John Lewis’s permanent staff are partners and they ultimately own the retailer’s 35 department stores and 272 Waitrose supermarkets, which generate annual sales of more than £8-billion.
The John Lewis Partnership is one of the few British companies in which bumper bonuses do not provoke a public outcry. All staff — from chairperson Charlie Mayfield to shelf stackers — receive the same percentage payout, which rises or falls in line with its financial fortunes. Last year its staff, or “partners” as they are known, received 17%, the equivalent of about nine weeks’ pay.
John Lewis’s employee-owned partnership model operates differently from private equity-backed businesses and stockmarket-listed companies. Instead of profit flowing to the shareholders, it flows to the staff in the form of the annual bonus.
According to the Employee Ownership Association, there are more than 100 British companies with significant employee ownership, a section of the economy that is worth more than £25-billion annually.
John Lewis’s ownership structure was established by pioneering businessman John Spedan Lewis, whose father founded the business in 1864. He signed away his ownership rights in 1929 to allow future generations of employees to take forward his “experiment in industrial democracy”.
As the company puts it: “Partners share in the benefits and profits of a business that puts them first.” John Lewis’s constitution also lists a formal mission to maximise the “happiness” of its staff. The power structure involves a staff council — for ideas and complaints to filter up to the board — and a weekly magazine in which staff can air their views about policies and management, anonymously, if they choose.
Tony Greenham, the head of finance and business at the New Economics Foundation, said it was important that employees had “a greater say in how their businesses are run, not just a bigger share of the profits”.
“The idea that workers have nothing useful to contribute to management belongs to the 19th century, not the 21st,” he said.
Greenham said both privately held and employee-owned businesses could contribute to an economy that does a better job of creating social and environmental value over the long run. “A successful economy is one in which 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.”
John Lewis staff earn the same as workers 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 £70million this year — ranging from holiday homes to sailing clubs, theatre outings, theme park admissions and even a choir, all subsidised. It is also one of the dwindling number of companies to operate a finalsalary pension scheme that is funded entirely by the company.
The ownership model means it is in the interests of John Lewis and Waitrose staff to work hard, because they are the direct beneficiaries. According to a report by academics at the Cass business school, based on a survey of more than 60 senior executives and financial data from more than 250 firms, “the advantage comes from taking a stakeholder rather than a shareholder view of management”.
“Employees who have a stake in the company are more committed to delivering quality and more flexible in the face of the needs of business.” —