For nearly 150 years, John Lewis has had a shop on London's Oxford Street. Customer 'footfall' is steady. The department store group's carefully nurtured and increasingly well-marketed reputation for dependable quality and value for money, from picnic ware in the basement up to personalised stationery on the fifth floor, remains intact even as other UK retailers are failing.

But while the group's commercial success and enduring hold on middle-class Middle Britain are clear, the retailer also has a growing - and some- what unlikely - role as a political talisman. Like unhappy couples seeking to make the home they cannot afford to leave more liveable, UK politicians are drawn to the John Lewis Partnership - owned by its staff and managed on democratic principles - as a model for economic and organizational reform.

From the US, where California has just enshrined in law new forms of socially aware 'flexible purpose' and 'benefit' corporations, to Spain, where the UN year of the co-operative has refocused attention on the Mondragon network of worker- led businesses, the leaders of crisis-hit economies are on a global shopping expedition. They are hunting for successful businesses run out- side listed-company lines to help reinvent, rebalance and revive capitalism.

Nowhere does this urge to refurbish the economy seem more urgent than in the UK, where the influence of the shareholder-owned joint stock company is stronger and the dominance of financial capitalism greater than almost anywhere else. Speaking this week, Nick Clegg, deputy prime minister, told an audience at the Mansion House, in the heart of the City of London: We don't believe our problem is too much capitalism. We think it's that too few people have capital. We need more individuals to have a real stake in their firms. More of a John Lewis economy, if you like.'

But does it make sense for Britain to fetch a new economic model off the shelf, in the same way a consumer would drop into a department store to replace a faulty coffee-maker, a threadbare rug or a worn-out jacket? Even if it does, is John Lewis the right choice?

 John Spedan Lewis, son of the retailer's original founder, put his idealism into lasting action, pioneering a model of co-ownership that was, and remains, radical. In two chunks, in 1929 and 1950, he transferred his shares in the business to a trust. The company has an executive chairman and is governed under a set of principles and a constitution, with policy influenced by an elected council that represents the staff or 'partners'. Spedan Lewis ensured that all staff would benefit from an annual share of profits, and that pay would be regulated according to a ratio. The highest paid staff member cannot earn more than 75 times the average wage of the shop- floor salesperson. Staff are encouraged to air their concerns in the weekly Gazette, and senior managers are expected to respond. Generous pensions and holiday amenities are available for partners.

'Spedan's "big idea" was a simple one employees work better if they feel they have a stake in their company', says Peter Cox, who wrote a history of the group after retiring from Waitrose in 2003. 'In the John Lewis case, they know that no nameless shareholders are taking a cut before they get their bonus. Unless a business distributes its profits to its employees, that subliminal motivational benefit is not replicable. But the knowledge that they can appoint their own representatives, that they can complain and be listened to, is still a major advantage.’
It helps, of course, that John Lewis and Waitrose continue to demonstrate commercial success.

But even advocates of the John Lewis model point out that the form is no guarantee of success. A periodic accusation is that the management system tends towards bureaucracy, while employee-ownership impedes expansion and hinders productivity improvements. Charlie Mayfield, a suave former McKinsey consultant who is the group’s executive chairman, says managers have to demonstrate their accountability to staff – the council can dismiss him if he fails in his duties–because the trust structure means employees cannot sell their shares. Low staff turnover improves the return on investment in training and encourages better service.

The elements of the formula – participative management style, employee ownership and profit sharing–work best when applied together. David Erdal, author of Beyond the Corporation: Humanity Working , about employee-owned companies, says productivity can be increased by applying any of those approaches, but ‘if you do all three, you have a knockout’.

Politicians’ good intentions could still founder on the reefs of tax codes and the UK’s engrained corporate culture. A change in the tax code to make it easier for entrepreneurs to transfer shares to staff would run up against the Treasury, traditionally a staunch backer of the shareholder-owned publicly listed company model, according to critics of the existing system. As one politician puts it: ‘The Treasury’s full of very clever, neoclassical economists who think the PLC was divinely created and handed down on tablets of stone to Moses.’ 

The fact that the financial sector is geared towards serving the stock markets and listed companies is a further obstacle to change, Prof Michie says. ‘If you want to sell your family firm, and go to your bank or financial adviser for advice, they will tell you that you can sell it in a trade sale, or float it on a stock market. End of story’, he says. ‘They won’t tell you that you can sell it to an employee trust. If you ask whether you can sell it to an employee trust, they will probably say “no”.’ 

Questions

1. According to the author, there is growing support among UK politicians for partnerships such as that of John Lewis. What are the reasons for these politicians advocating the concept of a ‘partnership’ company?

2. What are the arguments against this form of partnership?

3. Schein (2004) defined culture as ‘a set of basic assumptions – shared solutions to universal problems of external adaptation (how to survive) and internal integration (how to stay together) – which have evolved over time and are handed down from one generation to the next. Using this definition, try and detect the assumptions in the article with regard to (a) external adaptation (how to survive), and (b) internal integration (how to stay together).