The John Lewis model

Dr Mark Pegg ponders whether the John Lewis model could work for universities.

John Lewis Winged Figure

On the night of 18 September 1940, the John Lewis store in Oxford Street was hit by a large incendiary bomb and totally burned out. With the London Blitz at its height, the staff were nothing if not resilient: they set up trestle tables, traded on the street and reopened one wing within 21 days. Post war, they rebuilt on the same site. The Winged Figure sculpture by Barbara Hepworth symbolises their reinvention, renewal and recovery. This month, John Lewis celebrates 150 years in Oxford Street.

So what is it about this long lived and perennially successful retail organisation that is proving so attractive to universities today? How does a business model that places staff at the heart of everything achieve such great customer focus? How have they built such a durable model in a sector notorious for transience? What is their secret ingredient, their formula for success? How did they overcome adversity and stay true to their values? Can it be applied in the higher education system?

Let’s define what the model is. The John Lewis business model gives each member of full time staff – called the partners – part-ownership, a share of its annual profits, and a say in how it is run. They have a personal and financial investment in the business, heightening their customer service instincts, stimulating productivity and giving them a share in the profits. All 76,500 of John Lewis’s permanent staff are partners and ultimately are the shared owners of 35 JL department stores and 272 Waitrose supermarkets.

If they intended to do it, and had the will and desire to see it through, UK universities would find it radical and difficult in practice, but not impossible in theory to change their constitutions to align with the JL model. The profit motive would be an issue for many staff, but the barriers might not be quite so high for the trading arms of university business, for new partnerships and, of course, for new entrants to higher education provided they could raise the initial capital.

Making the change may not seem quite so challenging if you know that John Lewis did not start out this way. They decided to make the change from a conventional family owned business. John Spedan Lewis, whose father founded the business in 1864, signed away his ownership rights in 1929 to establish a “better form of business” engaging future generations of staff in his “experiment in industrial democracy”, and enshrined in the JL constitution.

Would a university really want to move from a ‘mutual not for profit’ framework to a ‘profit share model’? Could the existing independent, autonomous model where the service to customers (the students) forms only a part of what universities do transform itself into the JL model? Many universities have already committed to change their model to generate surpluses so that they can reinvest, creating distinctive revenue and capital accounts for the sake of their future financial sustainability. This would only be a further logical step along this road.

The JL model shows that it can be long lived, that it can work to scale, it can be flexible and it can respect staff in a way that enables them to deliver quality and customer service. A CASS Business School study shows staff ‘who have a stake in the company they work for are more committed to delivering quality and more flexible in the face of the needs of business.’

If it is such a good model why has it not been replicated by others? Actually, universities would be adopting a widely used model. It is just that they are not so well known. Companies similar to the JL model comprise an annual £35bn turnover in the UK and include Blackwell bookshops, jam maker Wilkin & Sons and polymer manufacturer Scott Bader.

The recent meltdown at the Cooperative Society has led to scepticism that the model may not be so robust. This is perhaps more ‘a lapse from’ rather than ‘a flaw in’ the model. “People say the co-owned model finds it difficult to move with the times but we have,” says JL CEO Andy Street, “just as one example of a mutual is finding life difficult, we are proving those naysayers wrong. We have learned and adapted over the years to new environments. We are able to adapt and surprise people and demonstrate our relevance.”

Is the JL model worth serious consideration for UK universities? It may be the barriers are less real and more about the psychological model of what a university should look like. The social contract with staff is already changing and the JL model with staff as partners could be on the table in a way it would not have been even five years ago. The homogenous constitutional model used so extensively and successfully in the UK in the past, today resides alongside many new business models.

Is there another John Spedan Lewis out there for your university?

Mark Pegg is the chief executive of the Leadership Foundation.