Trevor Phillips Address to the EOA Conference – 24/11/2015
Let me first say that it’s an immense privilege to be here and to speak to you. I know that this is what speakers routinely say as a way of emphasizing their own humility, but in my case, and in this context, my humility is more than justified.
As Winston Churchill is reputed to have said of Attlee, when it comes to talking about employee ownership, I am“…. a modest man with much to be modest about”.
A year ago, I knew nothing much about the retail sector, still less about the John Lewis Partnership, and absolutely nothing at all about employee ownership. If you’d asked me about the latter, I’m pretty sure I’d have confused it, as most people do, with the cooperative movement – related but not the same.
So I am in no position to lecture a room full of people who have real experience and real authority in this field.
What I can do is what I do in my day job as a journalist – which is to report to you faithfully what I have seen and heard, and tell you what I make of it. I hope that this perspective might add to the range of insights and data you are considering in making your own business decisions.
The process that has brought me to this platform has in itself been an incredible education for me.
I’d like to share some of that journey with you, and to tell you why I think that what we saw celebrated yesterday evening, and what we are discussing today, offer us a glimpse of at least one part of the answer to some of the questions most vexing our society:
- how do we make our nation more prosperous through innovation and increased productivity?
- How do we make sure that that prosperity is shared fairly?
- And, in the words of one of the towering figures of employee ownership, how do we achieve happiness for those who work in enterprises, through “worthwhile and satisfying employment in a successful business”?
John Spedan Lewis, of course.
In short, not just how do we become successful – but how do we become successful in the right way?
A little later I want to say a bit more about the growing importance of employee ownership to the wider 21st century economy; to explain why I agree with what Deb Oxley said this morning – that the time is right for the ideal of employee ownership to move from the margins of our business thinking right into the mainstream; I want to propose where I think this movement should be pitching its tent next; and I’d like to end with a little advice for the Chancellor.
This might all seem a bit presumptuous for someone who has been involved in this movement for less than a year. But, the journey that brought me here, has, as I say, taught me some lessons.
Eight months ago, I was, much to my own astonishment, elected to the post of President of the John Lewis Partnership Council.
The Council is, of course, the highest body in our democracy, and one of the Partnership’s three governing authorities, the others being the Chairman and the Partnership’s Board – to which we also elect five members.
I believed, at that time, the post of President to be the more or less ceremonial, perhaps something like the Chancellor of a university.
I almost immediately learnt better. The Presidency in John Lewis is far from titular.
But I should explain that the haunting sense that someone somewhere had made a terrible error isn’t false modesty; it’s actually based on long experience. There will be many of you who are already wondering what we’re both doing here – yes, he’s called Trevor, he wears spectacles and I’m sure I’ve seen him on TV – but unless he’s changed a lot since he stopped reading the News At Ten, something’s very wrong here…
That sense of wrongness was reinforced within six weeks of my election, when I went into our flagship store in Oxford Street, and was accosted by two partners, both of them young black men, immensely excited at the idea that the Partnership had somehow acquired a black President, having seen the picture on the front cover of our Gazette.
One of the bustled up to me and said “ Amazing – it’s you!” But then his face clouded and he asked “ Could you tell me your name though – because I think you’re the man from the equality commission or maybe you were a politician – but my friend says that the new President is Howard from the Halifax ad on TV”.
Well, I’m me, I’m afraid.
And that’s what has really worried me.
I do have some experience other than being a journalist and Chair of the Equality Commissions. For nearly a decade I was an executive in what became ITV, and then ran my own businesses, first in TV production and latterly in data analytics, for twenty years. And I have been a John Lewis and Waitrose customer for nearly four decades now.
But these seem rather thin qualifications for this post at this time.
Ours is a business facing immense challenges and fierce competition. The partnership is, rightly, widely admired, both for its values and its business acumen. It has navigated the choppy waters of the past decade better that most other British businesses. It is, in my opinion, blessed with committed partners and a set of outstanding leaders.
However, whatever our lovely Christmas ad suggests, we don’t have a magic telescope that shows us the future in detail, whether here on earth on any heavenly body. What we do know is that we, like most businesses, are going to face, not just tough economic times, but existential choices being forced on all of us by technological discovery, by cultural change and by globalization.
The views of the Partnership Council – who have the constitutional duty to hold the Chairman to account, and can in the final analysis dismiss him – are going to be vital to the way the Partnership faces into this challenge.
However we tackle those challenges, not one of them is going to be conquered without the ingenuity and enthusiastic support of our partners; and the President’s role is to play a part in marshaling that wealth of inventiveness, experience and determination amongst our 94,000 co-owners.
Against this background you would have thought that the partners would be looking for a leader with at least three key qualities:
- some background in the retail sector or one its close relations
- some credentials in running a democratic organisation
- some experience of the unique culture of the John Lewis Partnership
I can claim a smidgeon of credibility on some of the brief from my TV experience.
Broadcasting is now an extraordinarily competitive business which has gone through and is still going through a major technological revolution – and there is still some question as to whether print journalism will survive the digital revolution.
As for democracy, I can say that my public life started as the President of that most rumbustious of democracies, the National Union of Students, and later I spent three years as the Chair of the London Assembly, leading the tricky task of riding herd on Mr Ken Livingstone.
But in truth, by conventional recruitment standards, you wouldn’t pick me.
However, I think that’s exactly the point. I am here today because the John Lewis Partnership Council – remember, the partners, not the executive – decided to take a risk, and not to make the conventional choice.
For the first time since 1928, Council elected a President who came from outside the company. They want to make sure that our democracy remains restless and hungry for improvement, That we would never rest on our laurels. And part of their solution is to make sure that voices of people who are independent, not part of a cosy internal consensus are heard within our councils, starting with their own President.
So the very first lesson I learnt is that our partners put the long term future of the business first. They are all too aware of the fate that has overtaken successful companies – IBM, Nokia, to name but two – who believed that their continued success was assured, because they were admired and trusted. Those companies became complacent. It is the partners, who own the business, who are most active in ensuring that we will never settle for better, when the best is available.
Perhaps in our organization, that can be taken to lengths that a normal person might consider neurotic; but it is part of our DNA, and it comes from the foresight of our founder John Spedan Lewis – who appointed the last external President 86 years ago. But now it is the partners who are urging the business to face into the difficult decisions, and not to go into denial.
I’ve seen that in my own appointment. And by the way, the very first question one of our own partner democrats put to me in a meeting of one of our local bodies was put this way: “How great you’ve joined us. Now, what value are you going to add to the business?”
Right between the eyes.
It’s worth saying also that when I was first interviewed by the Council, they told me it would be a long process, possibly taking a couple of months. They called back the following week and said, “Actually we’ve made up our minds; we want you to be our President. When can you start?”
A confident democracy doesn’t have to slow up the business.
This directness and focus on what’s right for the business is characteristic of our Partnership Council – and by the way this is a pretty tough democracy. In our recent elections, for the 66 elected places on council, virtually all the seats, each representing up to three or four thousand partners, were contested, some by as many as eight candidates.
In our new council, two thirds of those elected had not been members of the previous council. Of those who stood for re-election over 40% didn’t make it back for a further three year term.
And in the contest for five Partnership Board members seventeen candidates fought it out in hustings before the Council.
These are all, in my view, signals of a democracy much more alive and robust than, say, our local authorities.
We also see this robustness in the letters page of our gazette, where partners write about issues from delivery schedules to debt levels, and to which, by the way, our managers are constitutionally required to give substantive answers.
We see it in the behaviour of our partners on the shop floor and in our distribution centres, and in our contact centres.
The customer service of the Partnership is of course, legendary.
You will, I know, recognize the stories – the Waitrose selling assistant who advises the customer that they can buy a less expensive product than they intended to, the JL kitchen delivery guy who noticed a scratch on a unit before the customer does and immediately orders a replacement without having to call up a manager somewhere else – on and on it goes. The levels of trust are, in fact pretty much off the chart – though, of course, our Partners are right now debating why we aren’t making them higher.
All of this is not just to big up John Lewis.
It’s hard not to be dazzled by it. But I know that no organisation is perfect, and the Partnership never stops reminding itself of the fact that it’s no exception.
But my point is that I think that there is a direct relationship between the ownership of the company and the esteem in which I and millions of others hold the Partnership.
This combination of respect, admiration and affection doesn’t come from extra special training. Other companies do that as well, and possibly better. Nor, as one of my conspiracy-minded relatives teases me, does it come from some special green or orange pill that is handed out when you join.
I think it is a direct product of the culture of co-ownership. Our partners are attuned to putting what the customer both wants and needs first. And equally importantly, partners have the autonomy to take the necessary action to make sure that the customer’s desire is fulfilled. Neither of these qualities comes about by magic. They’re in the culture.
I talked earlier about the DNA. Let me give you a couple of examples of what I mean.
Having been appointed President, I assumed that I would be a rather important person. And, indeed, I am treated with respect and care by partners wherever I go. Typically, if I visit a store, I’ll be shown around by a senior manager, often the boss of the branch.
But you will know that the absolute rule in our stores is that if a customer asks where something is, you take the customer where they need to go, rather than, as in other places, pointing or giving the aisle number. On no occasion has the partner I am with hesitated, within a heartbeat, to go off with the customer, dropping me cold at the fish counter or leaving me to amuse myself with kitchen appliances.
Even more striking is what I’ve seen in the parts of the business that on the surface, seem least likely to be any different to anywhere else – the functions which are in most organisations, low paid, low-status, repetitive and heavily supervised.
I’m speaking for example about contact centres.
I have some experience of this kind of business; I was executive chair of an organisation that ran a contact centre with well over a hundred staff. It was a nightmare – expensive, difficult to keep up morale, huge levels of turnover, and prone to causing reputational damage.
I also happen to have a daughter who is head of operations for a tech start-up, and who has built a contact centre from scratch. Hers is better, but for most of those who work in it, it’s a way station until something more fulfilling comes along.
The JL contact centre in Hamilton is different. The staff do not work to a script. Their reputation is high. Their morale is exceptional and turnover, as elsewhere in the Partnership is low. And the staff there were absolutely clear with me why it’s like that.
It’s not the pay – we match the market, and then we reward great performance; but I don’t think that by itself explains why people stick with us.
The reason they told me they come and stay is because through our democracy, they are able to influence the way they work. If a team thinks they can improve the work flow, they get the chance to try it; and if it doesn’t work, a manager has to explain why it didn’t work.
And either way, the business is held accountable to our partners.
The other area in which I think I saw something remarkable is in our largest distribution centre in Magna Park near Milton Keynes. I’ve never worked in a warehouse, but prior to my time in TV, I should say, I was in the petroleum business, as a young chemist, working in a big oil refinery on the Thames estuary; so I have good idea of what a process industry feels like.
In fact since then, I’ve spent many a dreary day filming in warehouses, and places like them. It used to be one of the standard tasks for a young producer – go to a factory or a warehouse and get us some pictures that say “industry”.
My experience is that the one thing that these places tend not to say is industry, in the sense of active participation and purposeful operation. I am sure that since my day, much has changed, with automation, better organisation, speed of processing and so forth. But a fortnight ago, as I walked the floor at Magna Park for a couple of hours, two things stood out.
One was that groups of partners were constantly putting their heads together, collaborating and making decisions about how to fine tune the process – reorganizing product locations, managing the storage bays and so forth; I later learnt that the very design of the line on which the products were readied for dispatch owed a great deal to the partners themselves.
The other was that the partners were working, apparently cheerfully, without any recourse to the approval of a supervisor. I even saw two young women dancing their way back from their tea break – at four o’clock in the afternoon, when many of us would be thinking – how long do I have to do this before it’s 5 o’clock?
I am told that the capacity of partners to be autonomous, agile and active delivers millions, possibly tens of millions of efficiency savings.
What a contrast to the very first workplace I really saw as a child. My father was a postal worker for many years. He worked in a sorting office – Mount Pleasant, then the largest in Europe, where the men were brigaded by the hundred into rows carrying out repetitive tasks, with no chance of initiative or autonomy. Their most demanding task was to be able to hurl a package for, say, Aberdeen or Aldershot, twenty feet so it dropped into the right bag. That was what passed for creativity in that environment.
And if I may make a personal observation, just as in my Dad’s time almost all the workers I saw at Magna Park were recent immigrants. But today, some of those immigrants are supervisors as well as pickers and line workers. Not enough, by any means, but back in the day the score on the door was zero.
I am sure all this is not unique to our company – but I will say that I am certain that the good things I saw owed much to our culture of co-ownership. And the point is that it is good business.
The culture of co-ownership absolutely underpins the aim of increased productivity – the only way that any of us is going to square the difficult circle of greater competition, squeezed margins, and better pay. As Charlie Mayfield pointed out earlier this year the top 50 EO businesses increased productivity by 4.5% and outperformed other businesses on a series of important metrics.
So my experience of the past eight months has convinced me that there really is something special about the employee owned business – and that it isn’t just about the dividend or even the democracy. It is that the culture of ownership sits at the very core of the success of some businesses.
Let me emphasize that I am not here to say that I think the answer to everything is the John Lewis Partnership. I don’t.
First, the size and specificity of our business model mean that it would be hard to start such a business today – nobody creates enterprises, employee owned or not, like this today.
Second, the origin of the business – the granting of ownership to partners in an incredible single act of generosity by an individual – is extremely unlikely to happen in that way again. Eccentricity, by definition, can’t be a model for business.
And third, even if we thought it was possible to recreate the model launched nearly ninety years ago by Spedan, whilst the principles endure, I think we’d be forced to admit that in many ways, it probably isn’t the right model even for the John Lewis business of the 21st century.
The fact is that there are many models of employee ownership on display today. Part of the beauty of this movement is its diversity, and its capacity to innovate. I hope that what is happening here today is that we are learning from each other, and through the good offices of the EOA, beginning to promote the possibilities of this approach to building successful enterprises of the future.
I think that this matters more than at any point in my adult life. Our society is changing rapidly and fundamentally. I’ve already referred to some of the reasons.
But let me cite two further reasons why I think the moment is right for employee ownership to move from the margins to the mainstream, and why it isn’t just an alternative for some kinds of business, but actually the best alternative.
One reason is that our people expect more from their working hours. Above all they expect their voices to be heard.
We are better educated – almost half of our young people are going to be graduates – and they have grown up in a wealthy liberal democracy. Our consumer society is acculturating us to the expectation that our opinions matter.
Students who pay for their degrees demand that their opinions be listened to. Patients who pay for the NHS insist that they are properly informed and treated with respect. Shoppers insist that they know exactly what goes into their baskets, where it comes from and who made it, at what price
People at work are no different.
For many years, as Chair of the Equality Commission, I focused on the task of creating workplaces where people could be open about who and what they were, without their gender, race or sexual orientation, or any disability being a disqualifying factor.
But that was, to me, always a subsidiary task. Just being let through the door isn’t the point. What is more important is that each of us wants to be able to contribute and to make a difference. And in the places where we spend the largest single slice of our lives, what could be more fulfilling than feeling that we are doing our job better, that we are needed, that our opinions and our knowledge matter?
The corollary is that if we are not afforded that respect and engagement we feel it much more keenly.
The other reason that I think the moment has come for employee ownership to acquire a far higher profile is the issue of trust. It is a commonplace that many of our great institutions have lost the people’s trust.
I have made a career of charting the collapse of faith in some of those institutions – political parties, the police, the banks, the media itself. We no longer trust the churches. And according to the ONS half of us as individuals don’t trust the other half. Many of us don’t even trust the official statistics that tell us who we trust and don’t trust.
Our health and educational institutions do hold on to a thin veneer of trust, pretty much by their fingertips.
In these turbulent seas, societies need rocks to which to cling. And in future I think those rocks may surface in the places people least expect – including the market. I think there is an opportunity for enterprises which are patently not guided by short term self interest to become those rocks.
It is of course the sine qua non of the John Lewis business. But it is true of many others – and we need all of them to shine more and more – not just for the good of their own members, but to be beacons for the values that have served us well – fairness, toleration, solidarity and the desire to hand on a better society to our children’s generation.
And when speaking of the future, we need to have enterprises that are ready for all aspects of that future. If I may return for a moment to the point I made a little earlier about diversity in our society. By the middle of this century more than a third of people who live in the UK will be immigrants or the children of recent immigrants. Across Europe, one in ten will be Muslims.
I would like to say that nothing, nothing, could be more important now in Europe than fostering integration between different faiths and traditions. We have seen the price paid by our French neighbours recently, and we too have paid a price in lives. There will be more of this grim toll to come.
It is not business’ responsibility to lead on security or indeed on community relations. But the truth is that it is in the workplace that most people gain a sense of belonging, make friends, and come to feel that they have a stake in our society. I think this will be more and more significant with time – not least as two other major ways of gaining a stake in society, home ownership and the promise of comfortable, well-funded retirement, are both receding across the horizon for young people.
In my parents’ generation, amongst the main agents of integration were churches, trades unions and political parties. Today, none of those institutions has the scale, the authority or the will to play that role. Business cannot replace them, but it can play its part.
If we truly want people to feel they have a stake in society what better way than to literally give them a stake in the enterprise for which they work?
And we know there will be big opportunities for such ownership. I am aware that many business owners are considering the options as part of their succession planning; and that many start-ups see employee ownership as a great way to attract top talent. Both are right to think of this pathway.
But I do not think that the days of the large, employee owned business are over. Indeed they may just be beginning, as the largest potential patron of all starts to divest itself of assets that it considers better off in the private sector. I am speaking of the state; and even for those of us who come from a left-wing background, privatisation does not have to be a dirty word.
I don’t know what the Chancellor has in store tomorrow – but we can pretty much guarantee that it won’t involve widening the reach of the state. Nor, in my opinion, should it.
I accept that some businesses have to belong to the state. I hope that the Treasury has no options on the table to outsource GCHQ for example.
However, some businesses are in the public sector for cultural and ethical reasons rather than economic or security reasons. This is particularly true of talent-based enterprises. But the truth is that the state is spectacularly bad at managing businesses that depend on innovation and creativity. So the more of these that are spun out the better.
In recent years increasing numbers of businesses have been spun out of state control, often going to private bidders, but also into employee ownership. So far the story of these spin-offs is a good one. We saw some of that last night, for example in the thrilling case of Remploy.
There will be more such transformations, I hope. And there are some areas which were previously thought essential to hold in public hands in order to circumscribe the way they carried out a vital function. Employee ownership may provide an entirely new pathway that preserves their values without trapping enterprises in the government’s bureaucratic embrace.
I think this may now be true of my own industry, broadcast journalism.
The BBC, ITV and Channel 4 were for most of my career defined as public service broadcasters in order to make sure that their output could be regulated. That was understandable. Between them they held enormous power to tell our national story, and it is vital to a democracy that we share, as far as is possible, access to information and knowledge between all our citizens.
But there was always a downside to that picture. I have written and spoken millions of words for public service TV and radio over the past 35 years. Every single syllable has been subject to some restriction laid down by a body of the state – a regulator or Parliament itself. And the penalties for flouting those rules are severe. You may recall that just a few years back, ITV had to pay over five million pounds for a breach in relation to phone-in competitions – after my time I should hasten to add.
And before that one of my own former colleagues lost his job as Director General of the BBC for – in my view – getting on the wrong side of the then government.
As it happens, I was on the government’s side in that dispute – but I believe that a free broadcaster should also have the right to get it wrong.
The problem is that today, the reason that we had for keeping broadcasters on the state’s leash is daily evaporating. There is a proliferation of sources of news and entertainment – and no broadcaster can guarantee that it will have any specific offering. As we’ve seen the BBC couldn’t, even with a huge state subsidy, compete for Premier League football, for rugby, or for cricket. The Top Gear team and now the Voice have both gone elsewhere.
The citizen is served these days, by a diverse range of offerings, and he or she wants to make his or her own choice. He or she may then need to be reminded that means that they’ll need to stump up some money, but I can’t say that I think that state control of the BBC or Channel 4 has long to go.
The current Director General of the BBC, Tony Hall made a similar point yesterday, when he said that he thought that the BBC’s independence was being eroded, and put forward the idea of what sounds like a democratic veto by license fee payers over the future of the Corporation. Perhaps the next step might be the ownership of the BBC by its employees, suppliers and funders.
I think that’s a long way away. The BBC will survive in one form or another. The body I am more worried about today, is Channel 4. It is the most daring of the broadcasters. It is also the most diverse in its offerings. If it were privatised how could that character be preserved?
Well, why not put it in the hands of its employees and its suppliers, with a constitutional requirement to provide that diversity? In fact it wouldn’t be that much different to today commercially – it takes ads and has to compete in the market now.
But actually an employee owned Channel 4 would no longer have Big Brother – I mean the government – leaning over its shoulder.
In passing, I suspect this is not an original thought. I understand that Channel 4 itself is exploring this option, just in case. Who knows, in years to come, you may see my friend Jon Snow at this podium extolling the virtues of a democratically owned broadcaster.
In any event, if we do want to take the opportunities that are coming let me finally say that there is work to do.
And I am delighted that the EOA is leading the way, with a series of initiatives:
- winning the battle for tax reform that favours employee ownership
- establishing a common definition of an employee owned business to make sure we are all singing from the same hymn sheet
- developing new streams of information to ensure that we can share information about what works
- and the recognition of excellence with the new awards
But most of all, as Deb set out so clearly this morning, I think that we can now begin to tell a forward looking story about employee ownership.
Not just a story of the great men of the past, but a story of the great enterprises of the future.
A story of those who will own them.
And a story of those who will lead them.
A story that offers at least part of the answer to the question :
“So tell me – exactly what does a better capitalism look like?”.
I think that in this hall, I am looking at the picture of that better capitalism, right now, right here.