John Lewis considers plan to change staff-owned structure

The iconic UK retailer, John Lewis, is considering a plan to raise money and mitigate losses incurred due to the COVID-19 pandemic by diluting its famous employee ownership structure. The chain, which comprises of John Lewis and Waitrose supermarkets, has not made a profit for five years, and the pandemic has added additional pressure. The structure of the firm is renowned for encouraging the workforce to perform at a higher level, but management has had to look to significant changes as the business struggles to cope with the pandemic.

If the restructuring plans go ahead, the John Lewis Partnership could become a partial public company or possibly be acquired by a larger public holding company. In this scenario, there is a high likelihood of lower levels of staff ownership, which may impact the company’s unique ethos. For example, in 2019, each employee received a bonus of around 3% of their salary, thanks to the generous profit-sharing arrangement. It remains unclear whether this initiative would be maintained if the ownership structure were diluted.

The central aspect of the John Lewis Partnership structure is building loyalty and bespoke cultures by encouraging staff to buy in with shares and providing a say in how the organization is conducted. The model has become the envy of many firms, and research suggests that consumers perceive the organization as trustworthy and reliable. If the employee ownership arrangements were to change, it could affect customer confidence, and the company’s reputation could decline. The decision to review the scheme now could be seen as a sad day for the famed partnership, which has been a stalwart on UK high streets for decades, and a cherished brand and model around the world.

The review is ongoing, and the firm is currently exploring options to boost reserves, including selling off some of its significant property to developers. Management is also looking at ways to reduce the overall size of the organisation, with the closure of a number of stores already announced. However, the company is in discussions about opening new Waitrose supermarkets in less populated and rural areas of the UK. Ultimately, the situation poses significant risk from a business standpoint, as any dilution of the employee ownership model could see John Lewis lose its unique position, and it will be interesting to observe developments in the coming years.

In conclusion, the ongoing review of John Lewis’s employee ownership model could have far-reaching consequences for the organisation’s reputation, culture, and finances. If the company decides to dilute the percentage of staff ownership, it could see the ethos and model for which the company is renowned disappear. At a time when retail firms are under greater strain due to the impact of the COVID-19 pandemic, it remains unclear what changes John Lewis will decide to make. Still, careful consideration will need to be given to potential consequences for how the company is perceived by consumers and staff alike. Whether John Lewis maintains its position as a leader of retail innovation, with its unique ownership model, will remain to be seen.



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