My Yahoo!No follower of fashion
Britain's John Lewis Partnership shows the gains and losses of being employee-owned.
Walk into the city-block-size Peter Jones on fashionable Sloane Square in London and it's obvious that this is a department store that runs on contrarian instincts. Most such stores lure shoppers with a bazaar of perfume and makeup. At Peter Jones, however, stacks of Egyptian cotton towels and goose-down duvets are the ground floor come-on. But you really can't call it an old-fashioned store. A chrome-and-wire installation of cream-colored fabrics in the light-filled atrium looks like a contemporary artist's rendition of a sailboat.Peter Jones is the flagship of John Lewis Partnership, which has $6.3 billion in revenue. In the year through January 2002, the firm reported pretax profits of $220 million from the 26 John Lewis department stores and a chain of 138 supermarkets that trade under the Waitrose name. (Peter Jones sells John Lewis merchandise but has its own brand name in a monied neighborhood where residents call it their "local shop.")
The unique feature of this company is that its 57,000 employees own it in a private partnership. In 1864 the entrepreneur John Lewis founded it with a single shop on Oxford Street in London; his son, John Spedan Lewis, took over in 1914, at the dawn of the First World War; not much later came the Russian Revolution. Alarmed by the spread of communism, Spedan Lewis decided that the world needed a better form of capitalism.
He wanted to change things so that labor employed capital, rather than the other way around. In 1929, just months before the stock market crash, Spedan Lewis generously turned his family firm over to the workers through an employee trust, accepting in exchange £1 million in interest-free deferred bonds payable out of profits over 30 years. Seven decades later John Lewis Partnership is Britain's largest private company by revenue and one of its biggest retailers.
"There is an assumption that when a private company reaches a certain size, the only way forward is to go to a stock market flotation," says Sir Stuart Hampson, the chairman of John Lewis Partnership. "We think it's a shame that financial advisers don't put more emphasis on an ‘employee trust' as an alternative strategy. Entrepreneurs would probably find that they could perpetuate their business and ideals in a way that is much more appropriate to a private company, [rather] than going to a stock market flotation and into a different mind-set altogether."
Although Sir Stuart waxes lyrical about the employee trust arrangement, closer inspection reveals that there are minuses as well as pluses to this route.
Upside: great for employees. John Lewis' staff have received year-end profit-sharing bonuses that added from 9% to 13% to salary in the past three years.
Perks include: company subsidies for such after-hours activities as fishing in the Bahamas and attending the Royal Opera in London; taking inexpensive holidays in the Partnership's private country clubs throughout the country; the company also provides hardship loans and grants and up to six months of paid leave after 25 years of service.
Such benefits allow John Lewis to attract and keep Britain's best retail employees. This sets it apart from the competition with unusually good service in a country where depressed and bedraggled cashiers tend to take the shine off the shopping experience.
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