IN MY OPINION: Sir Stuart Hampson, chairman of the John Lewis Partnership and an Institute of Management companion, believes mutuality enhances competitive performance

IN MY OPINION: Sir Stuart Hampson, chairman of the John Lewis Partnership and an Institute of Management companion, believes mutuality enhances competitive performance - My company has just gone through the process of rewriting its constitution.

by SIR STUART HAMPSON
Last Updated: 31 Aug 2010

My company has just gone through the process of rewriting its constitution.

Of course, not many companies have a constitution, and still fewer would put such a rewrite at the top of their agenda at the risk of diverting management attention from the increasingly severe challenge of making a decent profit. But the John Lewis Partnership has had a Constitution for more than 70 years, and the process of blowing the dust off arcane paragraphs has proved both invigorating and relevant to competitive survival.

The opening two sentences illustrate what I mean. The first is a simple statement under the heading 'Purpose':-

'The Partnership's ultimate purpose is the happiness of all its members, through their worthwhile and satisfying employment in a successful business.'

At first reading, this focus on happy staff might look like a defiant fist-shaking to the orthodox obsession with satisfying shareholders - the eccentricity of an employee-cooperative putting on a brave face when other mutuals are bowing to the inevitability of a Stock Exchange quotation.

But the concept isn't quite so far adrift from conventional thinking, for two reasons.

First, 'members' of the partnership combine the role of shareholder and worker; we have no outside shareholders, and ownership is vested in trust for the benefit of successive generations of employees. So, our 40,000 'partners' enjoy the benefits of shareholders.

The second point is that 'happiness' isn't just about having fun, working in a pleasant environment, or even being well paid for the job (though we try to achieve all three). It's about 'worthwhile and satisfying employment in a successful business.' In other words, happiness depends on commercial success, and job satisfaction will create that success. There is a 'mutual' interest.

The second sentence is also under the heading 'Purpose':-

'Because the Partnership is owned in trust for its members, they share the responsibilities of ownership as well as its rewards - profit, knowledge and power.'

Sharing profit is what conventional shareholder/owners expect to do, and they might also expect to enjoy full knowledge about their business and be able to wield power at least through their ability to appoint directors.

Our constitution doesn't describe this as a right but as a responsibility. Our employee/ owners don't take a share of the profits just through turning up at work. They have a responsibility to share knowledge about what's going on in the business - contributing their experience and perceptions and facing up to some of the unpleasant truths about the competitive scene.

And then they have a responsibility to use their power to do something about it, both through their individual actions and also through elected councils, which we involve in many of our commercial decisions.

So, an unusually structured business has been indulging in some fancy linguistics. You might ask what this means for the 'real world'.

I'm convinced that, even if our employee/owner relationship is unique, the management implications are totally relevant to a company bent on winning approval from Stock Market analysts. My involvement with the RSA's inquiry into Tomorrow's Company convinced me that competitive success means concentrating on the people who will make a difference rather than on the share register. Committed employees ensure that you have satisfied customers, engaged suppliers and a sound reputation in the community - employees are the route to creating shareholder value.

Profit-sharing has now been widely recognised as an incentive to improved efficiency and productivity and is encouraged through tax incentives (though the Treasury's shamelessly blinkered approach is based on tradeable shares and so excludes companies like ours that have pioneered the concept as well as other private companies, start-up businesses and partnerships that should be equally encouraged to share profit).

If you believe you're stuck in a rut, of course, sharing profit with employees means less for the shareholders, but if your aim is to grow your profit you need a properly motivated staff (and that doesn't mean just a highly incentivised board of directors).

But there's the vital link.

Profit-sharing on its own isn't enough. It has to influence behaviour.

The beneficial effect of profit-sharing won't kick in without constant communication - in two directions. Companies need to share knowledge: to update their employees as a matter of course throughout the year on the progress of the business; to trust them with real figures; and to engage them in the challenges it faces. And they also need to share power: to take notice of what their employees are saying and to harness their ideas for improving the business.

If you've worked in a company that practises these ideas, it seems impossible to think of managing in any other way. The idea of 'mutual interest' is self-evidently practical and powerful. If, however, you've seen nothing but 'command and control', all this consultation must look scary - yet not as scary as being overtaken by competitors that are sharing knowledge, power and profit throughout their business and enjoying the acceleration in performance that this brings.

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