The John Lewis Partnership is banking on a restructuring and a management cull to turn its fortunes around, but do the proposals go far enough?
The John Lewis Partnership is slashing senior management roles by a third and streamlining operations by combining roles across department store chain John Lewis & Partners with sister supermarket Waitrose & Partners, to allow them to operate as a single business. The partnership posted a £25.9m loss in the six months to 27 July, blaming subdued consumer confidence, IT investment and cost inflation.
The group’s proposal, which is called “Future Partnership”, is expected to lead to cost savings of £100m over time. A core part of those savings is axing 75 of the partnership’s 225 senior management roles. Redundancies will span all head office departments, although the new role structure has not been revealed, and any cuts are subject to staff consultation.
There will no longer be divisional boards or separate managing directors for John Lewis and Waitrose. Instead, the executive team, led by chairman designate Sharon White, will comprise seven new director roles, which will be responsible for the whole partnership.
From 3 February 2020, the executive team will consist of White as chairman, and executive directors Paula Nickolds (brand), Patrick Lewis (finance), Tracey Killen (people), Andrew Murphy (operations) and Bérangère Michel (customer service). Trading and strategy executive directors are yet to be appointed.
Big corporate retailers have directors reporting into directors who also report into directors
John Lewis supplier
John Lewis said the changes would “sharpen its focus on the customer, speeding up the development and rollout of better products and services; harness the power of the partnership’s two brands working more closely together; develop and set its strategy in one place; unlock the competitive advantage of store staff; speed up decision-making; and make internal and customer service systems more efficient”.
One John Lewis supplier said senior roles at the group were ripe to be cut: “My experience with the big corporate retailers such as John Lewis is that they have a lot of directors reporting into directors who also report into directors. You have to ask, ‘Do you really need all [of them]?’
“Directors don’t need all the knowledge, as they should have talent underneath them. It’s quality rather than quantity.”
One recruitment consultant told Drapers the changes would make the business more responsive: “What we’re heading to is a point where every [retailer] is taking those necessary steps to make sure their business is more agile. It’s more about being proactive, and making your teams leaner and robust, rather than the reactive approach we’ve seen on the high street.”
People in John Lewis are cautious and not willing to take risks
In 2016, John Lewis Partnership said it expected a “steady reduction” in the number of people it employs over time. The consultant added that, although redundancies can damage morale for the remaining staff, John Lewis is in a stronger position than its peers, but it still needs to return to profit to ensure it holds onto talent: “John Lewis has one of the highest retention rates for staff in the sector, and it depends on the partnership model for this: it’s a key credential. But this is the first time it hasn’t paid its bonus in 60-odd years. That’s an issue.”
One retail CEO told Drapers that John Lewis’s problems go further than staff costs, and it should be bolder: “It desperately needs some external vision. People in John Lewis are cautious and not willing to take risks. Sometimes you have a meeting and come out feeling so frustrated: they are worried about what someone else is doing, and it’s a sign of [weakness].
“It needs some fresh ideas, and that could be delivered by the merger [with Waitrose] but, in my experience, mergers haven’t always been positive.”
Another concern for some is protecting John Lewis’s differentiation as costs are cut.
“Their fashion team is lean and efficient already, and [I hope] they would protect those fashion roles,” said the buying director at one brand stocked by John Lewis. “Paula Nickolds [currently John Lewis managing director] is a champion of fashion, and recognises that that is what sets it apart from other department stores.”
They added that it could follow the model used by Marks & Spencer, and combine food and clothing in more locations: “Waitrose [supermarkets] trading within John Lewis department stores has been a really good utilisation of the space, and gets good footfall by luring people in.”
The supplier agreed the merger with Waitrose could be positive for the department store chain and could give rise to in-store synergies: “Putting Waitrose into John Lewis stores can work. The John Lewis team should be looking at the return [on investment] of the poorest space on the shop floor. They should be asking, ‘What would I get if I put a Waitrose in?’”
One former Marks & Spencer director said food and merchandise can work together well: “When you have food shops within clothing stores, there is every chance you make a sale based on that footfall, or you would engage a new customer who may typically only choose to buy a sandwich but happens to start buying clothing and lingerie.”
The overall impact of the Future Partnership plan will only be known when it has been given time to bed in, but industry insiders believe that maintaining its more premium positioning compared with rivals Debenhams and House of Fraser is essential to getting back on track.
The buying director said: “John Lewis understands premium brands. It doesn’t chase the lowest price but it does chase value, and that’s a better strategy for the future.”
One former department store director said: “I was in a John Lewis the other day, and all the signage said ‘Exclusive to John Lewis’. That is smart. It’s not easily price comparable and it is giving people something they can’t buy anywhere else.”
John Lewis Partnership will have to be careful to not lose this exclusivity in pursuit of savings.
The Drapers Verdict
With £100m in savings estimated over the coming years, John Lewis Partnership’s plan to cut the higher-paid, top-level staff could reap rewards in efficiency. However, John Lewis’s identity is in part defined by its partnership model, which is arguably one of its greatest assets, so it will need to handle the fallout from redundancies carefully.
Whether the shared management structure between John Lewis and Waitrose will transfer to new ideas on the shop floor remains to be seen. The department store will need to ensure the restructuring does not diminish its offer to consumers, but enhances it. With its rivals Debenhams and House of Fraser in such poor shape, perhaps it is time for John Lewis to be bolder and take a decisive lead on the high street.