Member Article

John Lewis-style business model key to sustainable recovery

Dr. Pushkar Jha has worked on path-breaking research that platforms a new Whitehall policy initiative on employee ownership. This research has been conducted in collaboration with Professors Joseph Lampel and Ajay Bhalla at Cass Business School. Dr Pushkar Jha is a Lecturer in Strategy at Newcastle University Business School.

Employee-ownership is proving popular with Whitehall policymakers as the UK looks for new ways to push economic growth. Newcastle University Business School academic Dr Pushkar Jha explains how employee-ownership could help nurture those vital green shoots of recovery.

“We don’t believe our problem is too much capitalism, we think it’s that too few people have capital. We need more individuals to have a real stake in their firms; more of a ‘John Lewis economy’, if you like. And what many people don’t realise about employee ownership is that it is hugely underused tool in unlocking growth.” – Deputy Prime Minister Rt. Hon Nick Clegg, referencing our ‘Model Growth’ report on 16th January 2012.

Since Mr Clegg’s speech at Mansion House in January the Government has begun to seriously consider championing a new corporate model, one that promotes equitable distribution of wealth to employees, rather than focusing on stacking up profits alone.

Our research has clearly shown that the benefits of employee-owned businesses (EOBs) are too stark to ignore, and include such things as sales stability over business cycles of boom and recession, greater productivity and reduced staff turnover; yet only few companies seem to be aware of such a model.

Crucially, at this moment in the UK, EOBs actually find it more difficult to raise capital and policy support because it is not as well recognised alongside other conventional organisation structures. In addition there is another fundamental issue: as employee-owned businesses grow, their shared and diffused ownership and governance will need to be balanced with an increasing need for control coordination.

However, large organisations like Arup and John Lewis have managed to overcome such challenges successfully, which proves that business level scaling-up issues can be negotiated with proper mentoring support.

Our next step as researchers is to promote “how” this new model could work in the variety of sectors responsible for our productivity and future growth. This autumn will see the official response to the independent Nuttall Review (the report commissioned by Government looking into the benefits of employee-ownership). So our task as researchers remains as we plot the effects of this concept to industry.

As this month’s Government borrowing figures have shown, the UK needs a long term plan for growth. The Nuttall Review has provided the factual evidence drawing on our research, and crucially, some well thought out recommendations that will put employees in “the driving seat” and make businesses and policy makers more receptive to the promise of employee ownership.

In this age of austerity one might find it surprising that there are better and more economically viable alternatives to fiscal cuts, with the added bonus of a more inclusive social outlook for business.

This was posted in Bdaily's Members' News section by Dr Pushkar Jha .