Craig Le Grice asks if startups can learn from the John Lewis way of doing business
At a time when our business news is littered with bonus announcements and plagued by eye-wateringly-large payouts to disgraced Directors, people are looking for a new way to work.
Yet it’s a business model from 1929 that could revolutionise the way our companies work and people are paid. For that is the year that John Spedan Lewis laid the foundations for the John Lewis Partnership.
An early commerce pioneer, Lewis created a new structure for the company he inherited from his father. Instead of operating regularly, he set out his vision for all company employees to own a share of the business they ran together.
An “experiment in industrial democracy”, he re-wrote the John Lewis’ operations manual – the ‘constitution’ – to allocate his ownership rights to his staff. Everyone employed by John Lewis was effectively made a shareholder – or ‘Partner’ – and they would share the company’s profits, not external shareholders.
Building a better form of business
This mission of building “a better form of business” survives to this very day.
Each of the 85,000 strong John Lewis team – from chairman Charlie Mayfield all the way down to students stacking shelves in Waitrose on a Saturday – are Partners in the business. They, ultimately, own all of the group’s offline and online businesses, including Waitrose.
On the John Lewis website, instead of ‘sucking up’ to investors and analysts, the ‘corporate information’ page is dedicated to explaining how the partnership works, stating:
Partners share in the benefits and profits of a business that puts them first
Its constitution also outlines its solid (and guaranteed) commitment to maximise the “happiness level” of its staff.
And with an annual turnover in excess of £9.5bn – up from £8bn in 2011 – the group is delivering more than just happiness.
In March 2013, it was announced that the aggregated bonus ‘pot’ for Partners to share would be set at 17% of salary – meaning each and every employee received the equivalent of nine weeks’ pay.
For someone working full time earning a little more than minimum wage, this represented a cash bonus of a few thousand pounds.
For a higher ranking store manager, perhaps on £100k per year, this turns in to serious money. Either way, every single person earned the same percentage as each of their colleagues, 17%.
If a tech giant like Apple had been set up in this way, each of its 50,250 employees would have shared in its $41.66bn annual profit for 2012 – which is a ‘per head’ profit of more than $830k.
Further, if you’ve ever shopped in John Lewis / Waitrose, or read how people talk about the company online, you’ll know that this direct incentivisation is credited with driving the excellent standard of service from its people.
Facebook could learn from John Lewis’ customer approach
At a time when customer service within the technology industry is being critically questioned (try calling someone at Facebook to ask for help!), I wondered why there’s not a single company practicing this ‘mutualism’ model in the list of 1,000 biggest technology companies.
What difference would it make if developers at an established games maker like Electronic Arts owned a piece of the product they were creating?
How much better would a faceless company like Fasthosts be at delivering helpful customer service if everyone in the call centre directly benefited from the profitability of the company?
Would Google be dragged through the media (as it is currently being) for issues of profitability, taxation, privacy and fair competition if it was run like John Lewis?
Tech is already driven by share options
Many of us in the technology sector work to a variant ownership scheme, driven by share options. At best, this model gets very close to ‘mutuality’, whereby early employees of startups are incentivised to deliver 100% and help the company grow.
But at worst, options are too often used to compensate for lower salaries, balance higher risks and promote employee lock-in. There’s very little mutuality about that.
Time for a new model?
I think it’s time for a new operational model in our sector… Creating the first employee owned technology brand that exists for the people within the organisation – founders, creators, shareholders, partners, customers – not just product.
Engagement, empowerment, equality, equitability.
I wonder who’ll be brave enough to be the first.