John Lewis is in deep trouble. Two loss-making anachronistic businesses, no ability to tap the capital markets, and no real investment story to tell. Everyone knows we don’t need overhead-heavy jack-of-all-trades department stores in the age of ‘the everything shop’ and super-accessible uber-specialists.
I mean, we’ve managed to survive without BHS, C&A, Dickens & Jones, Debenhams et al, so I’m sure we can survive without John Lewis. And, much as we love it, do we really need a posh overhead-heavy supermarket in the age of Lidl, farm shops, Tesco Finest, Ocado, premium convenience, M&S Food and Amazon Fresh?
So Sharon White and her board deserve support and sympathy as they face these epic, existential challenges, on two fronts at once. In exchange, we can expect courage and realism from them. If John Lewis is to navigate its way out of this bind, it must face some home truths on every level – governance, strategy and finance.
Starting with governance, employee ownership is a magnificent idea and a wonderful vision. But, like democracy, it can be quite hard work. It sounds like entitled whingers have worn everyone down with their negative control, while the value creators and the grafters have become increasingly disempowered and exhausted by wading through the treacle of internal change.
The malaise at John Lewis must be cultural – what else could explain their smart leaders’ failure to keep ahead of the long-foreseen meta-trends that are now eating them alive? Where’s the snap? This is a failure of governance, and the buck stops with the employee-owners because the problem is, literally, theirs. So a governance overhaul is overdue and will inevitably now be forced.
Financially, Sharon White and her board are not stupid. So they will know there is no such thing as a benign institutional investor. Especially not when the investor is investing that much money into a position of such weakness. It is impossible to see how any institutional investor could invest £2bn into the current weak situation of John Lewis Partnership without requiring downside control.
This is not something that any board of John Lewis Partnership could, in good faith and given their obligations under the JLP Constitution, countenance. It would be a betrayal, a capitulation and a breach of duty.
So it can only be that Sharon White and her board are using it as a bucket of cold water to throw over their employee-owners. What it really suggests is their bubble of entitlement must be so divorced from reality that the only way for the board to burst it is to introduce a raging investor bull into the employee-owners’ china shop. To soften them up for their real plan, which they will bring to the table when their employee-owners have seen for themselves the misalignments that any institutional investment capital will be obliged to impose on to their mission, obligations and John Spedan Lewis’ Constitution.
So, the big question therefore is… what is the plan?
Some have suggested an alternative could be to look at some sort of more democratic share ownership proposition – a retail IPO to allow John Lewis customers to buy shares. Kind of like extreme crowdfunding, with customers joining employees as owners of this great endeavour to model an alternative to financialised capitalist ownership. Which is magic thinking.
I mean, who wants shares in a couple of ungovernable anachronistic loss-making businesses with huge legacy issues? I’m not sure the board would set out to demonstrate the gullibility of the crowd or to sell a dud to people’s grannies. They know that the problem isn’t just about access to capital, they’re not la-la-land idealists.
So they must be up to something else. The highest commitment of the board will be to the company mission, expressed through its constitution and governing documents. According to John Lewis’s constitution, it exists to “create a successful business and a fairer, more sustainable future for Partners, customers, suppliers and communities”.
They can do this. But it requires them to accept the harshest of realities. They cannot get out of two deep holes with no money and a governance horror show simultaneously. But if they can get some realism into the governance, they could get out of one hole and generate sufficient funding to do so by selling their other business.
So if Sharon White and the John Lewis board want to deliver on their duties under the trust deed, it is obvious what they should do. They should choose one of their businesses to keep, and sell the other. But which one?
To make this decision, they will look at it through the lens of the original mission and the answer becomes obvious. Unlike when John Spedan Lewis established the vision and wrote the constitution, the world now faces a nasty bunch of existential consumption-driven health, ecological and climate crises. When one looks at its two businesses through the lens of its mission and this context, the decision is obvious.
Sell the department store business and retain Waitrose. Retain it to transform it into a model for the future of food while bringing its customers with it – and attracting new ones, maybe through acquisitions like Planet Organic.
To lead us away from being ‘Ravenous’, embrace living systems and transition to a food system that can regenerate and restore, rather than kill us all. To do what none of the other supermarkets can or will do. That’s a mission worth fighting for.
Dying department stores that sell more (and more) stuff were great for a while in the last century. But the board of John Lewis aren’t stupid, and they are serious about their mission. Which means that there’s only one thing they can be up to. Something profound, and capable of inspiring us all. It is my pleasure to reveal Sharon White’s brilliant three-point plan for the future:
- Introduce an institutional investor to scare the bejesus out of our employee-owners, burst their bubble of entitlement and force them to get realistic about taking some big mission-aligned strategic decisions.
- Use this energy to update our governance to reboot employee ownership for the 21st century, renew our culture and incentives, and rediscover our mission.
- Sell our defunct undifferentiated old John Lewis department stores business and invest the proceeds into making Waitrose the greatest future-fit food retailer in the world… along with a bung for the department store employees who we’re selling, to encourage them to go along with it.
Sharon White, and the board of John Lewis – I salute you. What a magnificent secret plan. I look forward to seeing it realised.
James Perry is co-chairman at Cook but writes in his personal capacity
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