John Lewis and the benefits of mutualism

Co-ownership leads to increased productivity and higher levels of commitment and wellbeing, says Patrick Lewis

In the last few days before Christmas I would normally have been behind a till helping our cashiers to cope with the huge increase in trade. Transactions run at double the normal rate over the last two weeks and all our people and processes are tested to the maximum. The only way to understand whether we are getting it right for our partners and our customers is to be there. Nothing ever goes perfectly to plan. What always pulls us through is an extraordinary team effort and willingness on everyone’s part to take responsibility for our whole operation.

But not this year. I was in a hospital bed, and as I lay there, scanning the ceiling tiles, I couldn’t help but reflect on the extraordinary commitment from doctors and nurses delivered seven days a week, 24 hours a day with some challenging and challenged patients. The similarity between the high levels of commitment demonstrated by members of the John Lewis Partnership, during our busiest periods was striking.

The partnership was founded on the doctrine that mutual dependence is necessary to social wellbeing. And during my time as a mutuals ambassador, I have observed an increasing interest within the public sector to explore the idea that some public bodies can be part-owned by their staff and, where appropriate, their users.

Mutualism as a word can be confusing. To me it’s about togetherness — shared responsibility and shared reward. While not a guarantee of success, it does bring some very clear advantages.

What we have discovered at John Lewis is that co-ownership leads to increased levels of productivity, low absenteeism, low staff turnover, higher levels of commitment and higher levels of wellbeing. Employees within our business enjoy a higher wellbeing at work than the national average. Having made this observation there is, in my view, a strong case for concluding that mutualism may be a strong model for delivering some of our public services.

Where frontline staff do not feel connected, able to influence, or ultimately responsible for the whole of a public service, mutualism may be a worthy consideration. There are thousands of frontline staff who know how the services they deliver can be run better.

l offer advice and support to emerging and existing mutuals, whether that’s troubleshooting concerns or sharing our experience. And what I have observed is that entrepreneurial public servants are increasingly seeing the merit in exploring the mutual path.

What emerges very quickly, is the importance of understanding the pros and cons of mutual ownership. Mutualism is excellent at providing solutions and improvements in some services and situations, but there are also areas of public services where it would clearly not be appropriate. The model is probably not ideal for high risk organisations which need large sums for research and development if that involves employees taking on unacceptable levels of risk. Similarly, it can be hard to make it work in industries where substantial capital is required to invest in infrastructure. Mutuals secure their investment capital from profits or borrowing and in many models cannot distribute equity stakes.

The flip side of this constraint is that the capital that many mutuals do invest, tends to be on much longer term basis. When the limitations of short-term investment horizons have been so transparent, this gives a clear advantage. Recent research has shown that employee owned firms do relatively better than the average plc firm through recessions. At John Lewis we have consciously increased our capital investment in the downturn, as others have been cutting theirs, because the opportunities are there.

Where employee owned models have been shown to work particularly well is within service industries. Why? Because here the value of services is directly based on the individual employees and the discretionary effort they devote to their work. So is this simply enlightened self-interest? I don’t believe so. Within John Lewis, for example, the employee owned model encourages us to employ partners who are motivated, committed and passionate about the business. Each of us gets involved in the difficult decisions, and this is the anchor for much of our success.

The biggest caveat is the need for enormous patience and determination.

By definition, great mutual organisations are built steadily over a long time, and require consistency of leadership. If the target is solely short term results, it is very hard to build the culture of shared ownership that then becomes the engine of future success.

From the seeds that have been planted over the past two years, there is no shortage of motivation to build a strong mutual sector in public service. All it needs is encouragement and consistency of leadership to support the emerging teams in becoming self-sufficient and successful organisations. I’m convinced that if we provide that we will have many shining examples of independent organisations providing public services that provide both a market leading service and working experience and would sit comfortably against the best in any other country.

Patrick Lewis is director of partnership services at John Lewis Partnership

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