Once upon a time a man named John Sr. had two successful businesses. Each business had dozens of employees. John Sr. managed and grew the two family businesses with the help of his two sons. The older son was named John Jr. Shortly after the brothers were named directors of the growing businesses, John Jr. learned that the three of them together were paid as much income per year as all the other people working in both businesses – combined!
His discovery of this stark difference in reward – the founder and his two directors being paid as much profit from the businesses as all the other workers combined – nagged at John Jr. for months. Why, he pondered, should three people working in the businesses be paid as much as all the dozens of others combined? After all, weren’t they all contributing to the success of the growing businesses? John Jr. knew the businesses weren’t successful just because of him, his dad, and his brother. It took a lot of people to run the operations, and more were going to be needed to handle the continued growth.
John Jr. checked with his business friends and discovered that they too divided their profits between the top few people and all the rest in the same lopsided way. But that wasn’t reason enough for John Jr. to continue doing business that way. He wasn’t sure how to approach his dad and brother with the conviction that the division of profits was fundamentally unfair. Neither did he have a solid idea of how to better divide the wealth generated by the businesses among everyone helping to create that wealth.
One day while John Jr. was on his way to work, he was seriously hurt in a traffic accident. Who knows whether this was a stroke of bad luck or the hand of Providence? Either way, John Jr. was forced to stay home for weeks to recover. On the upside, because he couldn’t do anything but lay around waiting for his body to heal, he was able to spend concentrated time thinking about the businesses and all the people who worked in them.
Soon and while still recovering, John Jr. hit on a simple realization and a follow-on novel idea that would fuel both his leadership and astounding growth of the businesses for decades to come. First, there was the simple realization that everyone working in the businesses were his partners, not just his brother and dad. Second, there was his novel idea that the top priority of the businesses should be the happiness of all the people working in the businesses, not just the happiness of his dad, his brother, and himself.
Happiness of all the people? Wait! What?! Oh yeah ….
Just as quickly as John Jr. was able to return to work, he started implementing changes to improve working conditions and company culture. He gave raises, shortened working hours, set up an employee co-determination board, established a third week of paid holiday, and more. All these changes were well and good, and achieved the intended improvements that in turn led to faster growth and higher profits.
But changes do not come without challenges. The one challenge John Jr. couldn’t successfully resolve was his dad’s growing displeasure and conflict around the impact the innovations had on the drop in John Sr.’s annual income. Income that had been his but was now being shared with the businesses other so-called “partners.” This conflict eventually led to John Sr. and John Jr. dividing and each separately running the two businesses for several years. During this time John Jr. continued to experiment with innovations in his operations that included profit sharing, defining sustainable values, and the company’s ultimate purpose. Eventually the father and son reconciled, and John Jr. took over both businesses after John Sr. died.
The innovations continued, including John Jr. merging and restructuring the businesses based on his insight that by putting the happiness of all his partners first the company can better serve its customers. Here is John Jr.’s insight, stated as the newly re-structured organization’s Principle 1: The happiness of all its members, through their worthwhile and satisfying employment in a successful business. Because the Partnership is owned in trust for its members, they share the responsibilities of ownership as well as its rewards – profit, knowledge and power.
Here's a quote from an interview with John Jr. after decades of running his innovations:
The present state of affairs is really a perversion of the proper working of capitalism. It is all wrong to have millionaires before you have ceased to have slums. Capitalism has done enormous good and suits human nature far too well to be given up as long as human nature remains the same. But the perversion has given us too unstable a society. Differences of reward must be large enough to induce people to do their best but the present differences are far too great. The John Lewis Partnership was started to find out what would in fact happen if business were managed otherwise. So far, the thing seems feasible.
As this story isn’t a fairy tale it doesn’t close with the usual “And they all lived happily ever after” even if they do. Rather, we pause it for now to recognize the searing wisdom and courage of John Spedan Lewis (John Jr.), and to praise his pioneering foresight into a partnership ethic.
Perhaps, to our fault of being Americans, we were not aware of this British business icon when we wrote Better Capitalism. Rather, we recently learned of him through a purpose-driven friend, Jeff Mowatt of Gloucester, England, and the connection magic of LinkedIn. Now that we know we’ll study and learn from the 150 year legacy and long-running success of the John Lewis & Partners and Waitrose & Partners brands (even in the face of their current challenges, like virtually every entity that is pivoting in the face of the COVID-19 pandemic).
Meanwhile, what would it look like for your organization to make the workplace happiness of you and all its workers a cultural priority? We invite you to contact us to learn how we can help make that kind of partnership ethic and culture change in your organization.
What about you? Share your story, question, comment, idea, disagreement -- yes, we welcome disagreement for the sake of mutual benefit! -- with us at blog@PartnershipEconomics.com. We will give a thoughtful response, with prioritized attention to emails from our subscribers. Subscribe here >>
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