Peach Report

Waitrose proves the value of putting its own people first

6 November, 2009

Peter Martin


If there’s one business that knows about people, it’s the John Lewis Partnership. Its co-ownership model, which means everyone working in the business has a stake, is world-famous and proof that there is more than one way to be successful in a capitalist market, as Waitrose managing director Mark Price reminded an audience of leading restaurant operators this week.

Price was the star speaker at the Restaurant 2009 conference, with his message of putting the emphasis on our own people first resonating with most, if not all, in the hall.

The John Lewis Partnership was created over 75 years ago by John Spedan Lewis as an ambitious vision of how a business could put the happiness of its employees at the heart of everything it did. Utopian perhaps? But John Lewis has survived, expanded and prospered, not least through the Waitrose brand that joined the partnership in 1937.

In pure commercial terms, the Partnership is now a £7bn turnover enterprise, with Waitrose contributing almost £4bn of that. Profit last year was £407m. Sales so far this year are consistently ahead of both 2008 and 2007.

One of the big development areas this year will be Waitrose’s move into convenience stores – which will also take it further into the food-on-the-move market. It has three prototype stores in Crouch End, Nottingham and Bristol, and another two on Welcome Break motorway service areas. Plans are already afoot to roll-out across all Welcome Break sites.

But as Mark Price said, the ultimate purpose of the business remains the happiness of its partners. And, as he also pointed out, happy teams tend to lead to happy customers. It’s a point that anyone that’s been to a Jim Sullivan workshop will recognise.

Another John Lewis objective is to produce “sufficient” profit for the business to progress. “We’re not about maximizing profit, but producing sustainable profit. We take a long-term view,” said Price.

Last year, £100m was paid out in bonuses, with every partner receiving a share of it, equivalent to 13% of their individual salaries. There are no pay bands in the Partnership, all remuneration is based on merit, he said.

John Lewis still has a final pension scheme, with £280m going to pensions and benefits last year. And, all partners have a say on how those funds are distributed. The partnership is one of the few enterprises with a written constitution.

One of the perks of working for John Lewis is that it funds partners hobbies. It has everything from a surf club to country houses where partners can stay for as little as £10na night.

Training is a big business priority, with £2.5m invested into a new “fresh on service” course last year, as is openness. All partners have access to full information on the performance of the business. “There is full disclosure. As managing director, I am directly accountable to all the partners,” added Price.

John Lewis also takes an active involvement in its local communities, again something determined by its partners. It supported local charities to the tune of £2.2m last year.

The obvious benefit of all this is seen in the one obvious measures of team satisfaction – staff turnover. Shop-floor turnover across the business is 21%, compared to the industry average of closer to 60%.

“Joint ownership also reduces a lot of staff problems, including abstenteeism,” added Price.

Underlying this long-term approach is also its commitment to selling quality products. “We’ll take a hit on margin, but won’t compromise on quality,” said Price. “I won’t sell a value line, because I don’t think it’s good value.”

The relevance of Price’s message was confirmed by the restaurant operators that made up the conference panel that directly followed his presentation. Eren Ali of Las Iguanas, Zeev Godik of Gaucho Grill and Lee Cash of Peach Pub Co all reflected the fact that the focus on people has increased dramatically in the eating-out market over the last year or two.

Godik talked about the launch of the Gaucho Academy, a two-week course that all staff now have to complete before going on the floor,

Eren Ali talked about he has improved the communication with his teams by turning the process on its head, with him listening more rather than distributing information.

While Lee Cash, whose company already as a partnership scheme that allows general managers to invest in, and share the success of, their own businesses, talked about his “autonomy not anarchy” approach to allowing teams decide on their own projects to promote business and get involved in their communities.

The openness of John Lewis also allows anyone to go onto its website (www.johnlewispartnership.co.uk) to see how the partnership works –have a look at the Partnership Spirit video.

For those who want a more detailed, academic review, you should perhaps read the Harvard Business Review article Putting the Service-Profit Chain to Work . Price himself has been spreading the word, having had discussions with the Chinese government, about how the John Lewis model harnessing capitalism and co-operative ownership might work in that burgeoning economy.

On a more mundane note, the contribution of the Waitrose boss to Restaurant 2009 also proved the continuing value of looking outside our own market for ideas and inspiration.

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