The partners and the principles When John Spedan Lewis first set up a retail outlet based on egalitarian principles, he could not have foreseen the intensively competitive world in which we now live. So how do Waitrose principles hold up today? Sue Barnard examines ideals in practice If you think retail management is tough, you would be wise to avoid the temptation of working for a company with a constitution based on democratic principles. Not only will you face the trials and tribulations of commercialism, but you'll have to stand up and be counted by each and every employee. For this is retailing the John Spedan Lewis way. John Spedan Lewis, the son of department store founder John Lewis, had great foresight. He wanted what some might see as a utopian business. In the early 1900s he had a share in the family firm, but became increasingly concerned as the years passed that the highest proportion of the profits were being shared by the family. The real advantages of ownership, he believed, should go to those who gave their time and labour to the business rather than to those who had supplied the capital. Spedan Lewis had a personal vision of fairness. In 1914 he had the opportunity to put some of his developing principles into practice when his father agreed to give him control of the Peter Jones store in London's Sloane Square. Spedan Lewis promised his staff that, when the shop became profitable, they would share in those profits. This was to become the first step in his long-term plan to turn his employees into partners' ­ a term well entrenched in the John Lewis business today. He fulfilled his promise within five years, when every member of staff received the equivalent of five weeks' extra pay. After 10 years, he created a trust to take over the assets of the company, while running it as a Partnership. By 1950 he had relinquished his controlling interest in the much-expanded business, which by that time included the Waitrose chain and the Selfridge Provincial Stores Group. Spedan Lewis's principal aim was that those who worked within the company should be happy and he wanted future generations of employees to be able to take forward his experiment in industrial democracy. But he fully anticipated the dangers and, to address these, he left clear guidelines for his successors. He developed the Constitution, a framework that defined the Partnership's principles and the way it should operate. That Constitution ­ although amended over the years ­ continues to form the basis of trading today. Central to it are three governing authorities that direct the Partnership's affairs according to the consent of the partners and the needs of the business. These are the Central Council, the Central Board and the chairman. There are 40,000 partners, 140 of whom form the Central Council. The councillors have the right to question and make recommendations to the Central Board or the chairman on any subject they wish. The Council also debates policy on any Partnership expenditure, such as discounts, pensions and sick pay, and makes recommendations on how profit is spent, reflecting partners' opinions. The Council also has the power to dismiss the chairman if that person no longer fulfills the responsibilities laid down in the Constitution. The Central Board comprises 12 directors, including the chairman, who have ultimate responsibility for issues of policy and for allocating the financial and other resources of the business. Five of these directors are nominated by the Central Council. Each year the Central Board determines the amount of profit that should be reserved for the maintenance and development of the Partnership's business and the rate at which the Partnership bonus may be paid. In being answerable to the partners, the chairman, Sir Stuart Hampson, must ensure that the Partnership retains its democratic vitality. He is also ultimately responsible for the company's commercial performance. On taking office, the chairman makes an undertaking that he will uphold the principles of the Constitution. He must also agree actively to seek to share power with his fellow directors ­ the 40,000 partners ­ and must delegate as much responsibility and encourage as much initiative as possible. He must accept as fully as possible the recommendations of the Central Council and, before rejecting any, he must consult the Central Board. Further, he must maintain open communication with partners at all levels. So how does this translate into the workings of a modern grocery multiple? The food division applies the constitution according to its own structure. Whereas in the department stores local accountability is through Branch Councils, in Waitrose there is a "Divisional Council" that enables representatives from transport, warehousing, head office and each individual shop to meet and discuss their own business and to hold to account their md, David Felwick, and his fellow directors on the Waitrose Managing Committee. The demand for openness and good communication presents a challenge for the managers, according to the principal registrar for Waitrose, Gretha Dignan. "The fact that managers have to answer to the partners and account for their decisions makes them think carefully about their actions," she says. "If something is wrong, partners are quick to point it out. There is no room for a cover up. It is a mutual problem and we all share in the solution. "Working well within a democratic constitution can be a huge strength for the managers. They have to be strong minded and make decisions that are not just for short-term gain, while carrying the majority of the partners with them." Although the principles seem utopian, Dignan readily admits that the ethos does not suit everybody: "The constitution demands high calibre managers who are good communicators and who are comfortable with a participative style. If managers became too wrapped up in their own needs they would not survive. "Managers need to show initiative and even be revolutionary at times, but they must not lose sight of the need to take partners with them." Spedan Lewis's principles of fair and enjoyable trading through the sharing of profit, knowledge and power has brought with it many benefits. The partners have a say in their trading hours, for example ­ Waitrose Council agreed to Sunday trading as soon as it became legal and each year agrees Christmas trading hours. Dignan says: "Waitrose partners are very commercially aware and alert to what the competition is doing. They positively welcomed innovations such as home delivery, Waitrose@Work and Waitrose Direct." With this fair and democratic trading comes many perks. There is the profit sharing scheme, of course, which partners call their bonus. Dignan says: "Even those who might not take advantage of the full Partnership benefits all share that special sense of ownership when the bonus announcement is made." That reality of ownership is also reflected in other ways. Dignan says it is not unusual to see a notice around the offices saying "Turn off this light; you are burning my bonus". But there are drawbacks. In order to share knowledge, the company publishes a lot of information that exposes it to competitor scrutiny. "Last year, we were criticised by some of the press for being old fashioned, I suspect by people who had never set foot inside a Waitrose Food & Home or seen John Lewis trade at Bluewater," Dignan says. "But our strong principles are just as important today as they have ever been. Just look at e-commerce and the current concerns about honesty and reliability. "The John Lewis Partnership is a name people recognise and trust," she adds. "Spedan Lewis could never have foreseen how his democratic blueprint for a drapery shop could translate into a 21st century fmcg retailer. "But the key has been the commitment of the people who work in the business, which translates into excellent customer service. That will never go out of fashion." {{Z SUPPLEMENTS }}