John Lewis: how does 100% staff ownership work - and is partnership changing model to attract investment?

The John Lewis Partnership (JLP), which is currently 100% owned by its staff, is reportedly ‘exploring’ plans to change its ownership model as a way of attracting new investment.

The retail giant - which runs its own department store chain as well as Waitrose - last week cautioned over potential job cuts as it told staff it will not hand out bonuses due to a hefty lost. This is only the second time this has happened since 1953.

It came after sales at Waitrose fell by 3% while revenues at John Lewis were up by just 0.2% in the year leading up to 28 January. This caused the partnership to crash to a loss of £78 million before exceptional items - representing a slump from its £181 million profit in the previous year.

Once additional, ‘exceptional’ costs such as significant writedowns on retail properties were taken into account, JLP recorded a £234 million pre-tax loss. It blamed “inflationary pressures”.

Now, in response, Chairwoman Dame Sharon White is understood to be in the early stages of exploring a plan to change JLP’s mutual structure, with the hope of raising between £1 billion and £2 billion of new investment, The Sunday Times reported on 19 March.

The newspaper’s report said that JLP would consider selling only a minority stake, since its priority would be to maintain majority employee ownership - but nothing has been confirmed. It’s also worth noting that even a ‘minority’ sale could require a change to JLP’s constitution, something which would need to be voted on by its partnership council - made up of a group of about 60 staff.

Any money raised through selling shares would go into the business, rather than the pockets of staff, according to the Sunday Times.

A JLP spokesperson said: “We’ve always said we would seek partnerships to help fund our transformation and exciting growth plans. We’ve done this with Ocado in the past and now with abrdn. Our partners, who own the business, will be the first to hear about any developments.”

But what exactly is JLP’s staff-ownership model, why could it change, and how likely is it to happen? Here’s everything you need to know.

What is The John Lewis Partnership’s staff-ownership model?

In simple terms, JLP’s staff ownership model gives every employee a stake in the company. This means each employee is a part-owner of the business and gets a share of the group’s annual profits - as well as a say in how the company is run.

Research suggests that this model significantly improves company productivity, as employees are given a tangible incentive which encourages them to work harder - thereby helping the company to thrive.

Why could the staff ownership model change?

Although its staff ownership model is something of a flagship feature of the company, JLP is ‘exploring’ plans to change this as a way of attracting more investment. This would be done by selling shares to investors, so that the company can have a greater influx of outside money.

It appears that this move has been motivated by the losses JLP has endured over the last year, with executives looking to give the company a boost.

How likely is it to happen?

The potential change will no doubt prove controversial, as ever since the founder’s son John Spedan Lewis created the company’s model more than 70 years ago, it has been regarded as something of a beacon of progressive ownership. Mr Lewis declared at the time of the partnership’s launch that it was “all wrong to have billionaires before you cease to have slums”, describing the new model as an experiment into a better and fairer way of doing business.

It proved to be a hugely successful move - with many lauding the company as the ideal employer due to its focus on staff. So the new model stuck for many years.

However, the report in The Sunday Times suggests this is about to change. In terms of likelihood, the fact that a shift to the structure is even being considered is a pretty big move, so it seems that the company may indeed start to operate differently. But it is unlikely to happen too quickly - and the change may be less significant than people fear, with JLP reportedly considering only selling a minority stake.

JLP has also said that any outside investor would have to share the partnership’s employee-centric values, and that its priority is to maintain majority employee ownership, the Sunday Times reported.

What has the reaction been?

People have already taken to social media to express their response to the news - which has largely been negative. One user wrote that ending its employee partnership model would be a “shortsighted and backwards step”, while another said she would be “really, really sad” if this does happen.

A third wrote: “This is a terrible, terrible idea - but also reflective of the challenging economic climate as well as the previous poor management of the business. John Lewis Partnership is a special business with a unique employee-owned model. Long may that be allowed to stay and prosper.”