John Lewis: Worker Management That Works?

From today’s Independent:

Streets ahead: Does John Lewis offer a revolutionary way forward for big business?

John Lewis is Britain’s best-loved, most employee-friendly retailer. And business is booming. Martin Hickman wonders if there’s a connection..

Thursday, 20 August 2009
The Independent

As he emerged into the sunlight outside John Lewis in London’s Oxford Street this week clutching a plastic carrier bag, Meir Abutbul, a hotelier, had acquired some carpet cleaner and a cameo role in a long-standing industrial experiment.

“I like it,” he said of the department store that has become synonymous for customer service and respectability. “It’s got everything. It’s very clear. When I buy electricals there’s the guarantee and they have people to talk to you.” When told how it operated, however, he looked stunned. “It’s like socialism.”

John Lewis, with its "Never Knowingly Undersold" slogan, is the supplier of sofas, dining tables and widescreen televisions to the nation's sensible shoppers. The Queen buys its haberdashery and household goods. When MPs stuffed second homes at the taxpayers' expense, the Commons Fees Office checked claims for rugs and sideboards against John Lewis prices. Only Marks & Spencer and the BBC can match it in terms of public affection.

Now, however, the John Lewis Partnership (which owns the department store and the upmarket grocery chain Waitrose) is increasingly on the receiving end of public admiration as well. Last year Which? members voted John Lewis best high street retailer; this year they gave the award to Waitrose. A poll of 6,000 people by Verdict Research in 2008 named John Lewis “Britain’s favourite retailer”.

This autumn, John Lewis will take a further step forward with the launch of the first in a planned chain of Home stores that will offer its core range in a smaller format; in effect, a John Lewis convenience store. The store will open in Poole, Dorset, in October; if it is successful, another 50 will open across the country. For retail commentators, the expansion is yet another example of John Lewis doing things right. They attribute its success to its long-term approach and, underlying this, its revolutionary partnership structure – something of which roughly half its customers are aware.

Unlike other big businesses, the John Lewis Partnership is a plc owned not by investors but by its staff. “Partners” are paid more generously than employees at other retailers. On top of that, they receive an annual “partnership bonus”–a share of the profits–that has ranged between 13 and 20 per cent of salary in the past five years. They receive five weeks’ annual holiday, a 25 per cent discount and a final salary pension.

There are other perks, too. They can rent subsidised rooms in two large country estates, or stay at lakeside hotels in Snowdonia and the Lake District, or in a 16th-century castle in Dorset. Five cruising yachts can be rented cheaply. And then there is the 60 pound annual subsidy on exhibitions, theatres, visitor attractions and comedy shows.

What sets the company apart from its rivals, though, is not its perks but the fact that its staff–shop assistants, warehouse workers, delivery drivers–are involved in the running of the business. Staff are represented in workers’ councils from top to bottom of the company. They have the power to sack the boss (though no chairman has been unseated). They can hold management to account and vote to change company policy. They can–and do–write letters of complaint about the business to an internal newsletter, for which they cannot be disciplined.

With a 7bn-a-year pound turn-over, a constitution, its own democratic structures and a public commitment to maximising the happiness of its staff, John Lewis operates almost as a shadow state within corporate Britain. Is it too good to be true? Or, if not, should other companies be following its lead?

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