Democratic Company Profile: The John Lewis Partnership

The John Lewis Partnership is a large retailer based in the United Kingdom which generates revenues close to $9.9 billion from its 27 John Lewis department stores and 199 Waitrose supermarkets.
 
What separates John Lewis from its competitors (and from most other companies) is the fact that the stated purpose of the company, which is owned by its 69,000 employees, is to ensure “the happiness of all our members, through their worthwhile, satisfying employment in a successful business.”

The John Lewis Partnership calls itself “a unique and vibrant democracy.  We share knowledge and information about the business between Partners, giving everyone the opportunity to contribute to decision-making as well as to challenge and question.  We recognize every Partner’s right to be listened to and heard regardless of their point of view.”

In addition, every employee at John Lewis receives an annual bonus equivalent to 9%-18% of their salary, depending on the company’s profitability, with everyone receiving the same percentage.  These democratic company policies of sharing information, decision-making powers, and rewards among all employees have had a significant impact on shielding John Lewis from the impact of the current recession.

In 2008, when most retailers were hit hard by the economic crisis, the John Lewis Partnership made a $403 million profit on revenues that were 3.6% higher than in 2007, and every employee received a bonus of 13% of their salary, equivalent to about seven weeks’ worth of pay.

Here’s what the chairman of the John Lewis Partnership had to say about the secret to their success:

We’re a partnership, which means our business is owned and run by the people who work in it. It makes John Lewis a different kind of place to work for our 68,000 staff – known as Partners – and a different place to shop for over eight million customers.

Our success…over the years has everything to do with our Partners owning the business. Retailers often suffer from high levels of staff turnover. Our turnover is around half of the industry average.

Because people stay with us for longer, they know our products and our customers better. When success depends on getting a lot of things right, having experienced and motivated Partners is the difference between success and failure.

Our ownership structure also means we are stewards of the business for Partners working today and for future generations. We invest our capital carefully and demand a good return, but we make investment decisions for the long-term interests of our partners, rather than trying to satisfy outside shareholders.”

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The End of Management?

Gary Hamel, best-selling author of The Future of Management and one of the leading proponents of decentralized, innovative, and democratic management practices, recently wrote an excellent article about the following three forces which he feels “will mostly destroy management as we know it”

  • New web-based collaboration technologies
  • Dramatic changes that have made the competitive business environment more challenging
  • New expectations that “Generation Facebook” will bring as they enter the workplace

Hamel believes that we are on the verge of a management revolution that will transform society as much as the industrial revolution and that will put an end to the command-and-control hierarchical structure that has characterized the 20th century workplace. 

It will become common practice for companies to share information freely amongst all employees, and decision-making responsibilities will migrate towards the team members closest to the customers.

This shift of power and influence from top executives to the customer-facing employees carries both opportunities as well as risks for companies.  The people closest to customers obviously receive a more accurate picture of customers’ problems and are potentially better equipped to develop and deliver solutions to meet customers’ needs. 

The main challenges that executive managers will encounter will be to ensure that all employees have the ability, the freedom, and the motivation to do their jobs properly.  The best way to engage employees is to democratize management practices by making information accessible to all team members, decentralizing the decision-making abilities, and sharing financial incentives with the entire workforce in a more equitable manner.


Gore’s Democratic Culture Drives Innovation

The CEO of W.L. Gore & Associates recently gave a lecture at MIT titled “Nurturing a Vibrant Culture to Drive Innovation.”

Gore is a highly successful and innovative company that has developed a unique democratic environment.  Gore’s culture, which despises bureaucracy and hierarchy, has been credited as one of the key enablers of its explosive growth and market leadership over the past several decades as well as its expansion into entirely new product areas. 

At Gore, there are no job titles, bosses, or chains of command.  Instead, everyone is an “associate,” and team leaders are chosen by their coworkers.  New associates, who are interviewed and hired by groups of their peers, are assigned a “sponsor” to introduce them to Gore’s team-based culture.  New associates are then encouraged to join groups whose projects are best suited to their skills and interests.

Innovation and experimentation are encouraged, and mistakes are not punished.  It is therefore not surprising that Gore, which was started out as a small chemicals company in 1958, has been able to invent numerous industry-leading technologies that have dominated their markets, such as GORE-TEX fabric and Elixir guitar strings.  The 8,000 associates working at Gore’s 45 locations around the world currently generate over $2 billion per year.

Gore has been named to FORTUNE’s list of “100 Best Companies to Work For” in each of the past 12 years.