Partnership and participation
Employees with a stake in their company are more committed to quality and more flexible in supporting business needs, explains Anthea McIntyre.
Anthea McIntyre | Photo credit: European Parliament audiovisual
The John Lewis Partnership, headquartered in my West Midlands constituency in England, is a highly successful retail company which glories in its old-school advertising slogan “Never Knowingly Undersold”.
Its department stores are renowned for quality and customer service, but it has also moved with the times and expanded its business into the world of cyber-shopping, online sales and “click and collect” retailing.
Last year the company’s long-standing chief executive Andy Street left his post to become a political colleague in the UK Conservative Party and to apply his management skills and strategic acumen as West Midlands mayor.
In many ways his time at John Lewis was the perfect preparation for politics - because as chief executive Andy was very much a first among equals. For the partners behind John Lewis are not multi-nationals, city financiers or even shareholders, but its employees.
The retailer’s website declares the partnership to be a democracy - "open, fair and transparent". It tells how John Spedan Lewis gave the partnership to his employees in 1929 with an ultimate purpose "to balance the happiness of partners with a successful business".
Its progress since is the perfect illustration of how employee participation in the running of a business can be beneficial to the company, its staff and customers alike.
As an employee-owned partnership, it operates differently from private-equity backed businesses and stock market-listed companies. Instead of profits flowing to the shareholders, at John Lewis they flow to the staff in the form of the annual bonus.
"Employee-owned businesses typically out-perform those companies in which employees do not have an ownership stake or the right to participate in decision-making"
Last week I took the opportunity to highlight this in the European Parliament, along with some other highly successful British employee ownership schemes. As the UK Conservative employment spokesman, I was addressing parliament's Employment Committee as it considered a new report to encourage the development of Employee Financial Participation (EFP) in Europe.
The report highlights the potential of such schemes for both workers and employers and suggests a number of measures which could be taken at EU level to promote EFP. Part of my speech was a roll call of UK businesses which are achieving better performance by making their staff their stakeholders.
Pointing out that I very much support the need for awareness-raising campaigns, exchanges of best practice, more transparency and information, and the promotion of financial education with respect to retail and equities investment, I invited MEPs to consider the progress of more than 100 companies in the UK with significant employee ownership.
These include several other well know names such as Blackwell bookshops, jam makers Wilkin & Sons - who make wonderful preserves and sauces – and Scott Bader, a polymers manufacturer.
"The development of long term investment by workers in their company can help provide stability and certainty and in so doing makes jobs more secure"
I also highlighted financial data from more than 250 firms (both private and employee owned) which backs up other studies showing that employee-owned businesses typically out-perform those companies in which employees do not have an ownership stake or the right to participate in decision-making.
Employees who have a stake in the company are more committed to delivering quality and more flexible in supporting the needs of the business. EFP can also offer mechanisms for innovative financing as workers may wish to invest in shares of the company where they are employed, thus capitalising expansion of the business - and incentivising themselves in the process.
Equally the development of long term investment by workers in their company can help provide stability and certainty and in so doing makes jobs more secure. Despite these benefits, however, participation in EFP varies between different sectors, company sizes and the demographics of employees.
Particularly when compared with the USA, Europe lags behind. This is partly due to fragmented levels of tax support and lack of regulatory incentives or clear practical guidance on implementation. Employee financial participation schemes present a number of models providing varying opportunities for businesses and employees to work together for their own benefit.
Different frameworks serve different objectives, from direct employee involvement in corporate governance - ensuring long term decisions are taken in the best interests of the workforce - to low-risk performance and profitability bonuses and investment options which allow workers to enjoy financial benefits from the success of their companies.
Whichever model is followed, the benefits can be very real. I realise the whole world cannot convert to EFP and that not every company can be a co-operative. It takes a particular set of circumstances and certain type of workforce to work best.
But in the right hands, it is a very powerful business tool indeed.
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