Human Resource Management in John Lewis Partnership - Case Study Example

HRM in John Lewis Partnership John Lewis Partnership’s overall business strategy is partners’ approach and it entails putting the happiness of its partners at the core of its operations; its overall HR strategy is employee wellness through various HR policies and practices. JLP integrates its HR strategies both vertically and horizontally into its operational structure since they consistently support each other in achieving the overall business and HR goals. Benefits of employee-owned businesses (EOB’s) include sustainable profitability, market resilience, faster growth, as well as quality output and increased human resource value, while its challenges include regulatory and policy challenges in form of problems with government approved share plans, lack of support from government and policy-makers, issues with tax treatment, as well as the approach of HM Revenue and Customs. Ultimately, whereas the EOB model promotes sustainable operational and financial profitability, its application to other contexts is limited to small-scale businesses since its governance model may come under pressure as the firm expands. Introduction This paper examines the overall business strategy and human resource strategy of John Lewis Partnership, an employee-owned company and analyses the various components of HRM policy and practice in JLP under the four main HR functions namely resourcing the organization, human resource development (HRD), employment relations, in addition to, performance and reward. Additionally, it also considers both the vertical and horizontal integration of JLP’s human resource component with its operations, the benefits and challenges of employee-owned business model, as well as the extent to which it can be applied in other contexts. Overall JLP’s business and HR strategy The John Lewis Partnership’s overall business strategy is partners’ approach; the JLP’s way of doing business is putting the happiness of its partners at the core of all operations it does (Aston, 2013). In this respect, the wellness of partners is of key importance to the business strategy of the John Lewis Partnership since the partnership believes that it yields many positive gains for the business (The John Lewis Partnership, 2013), which dedicates itself to serving customers with flair and fairness. The John Lewis Partnership’s overall Human Resource strategy, on the other hand, is employee ownership, which top management at JLP believes has a massive positive influence on the wellbeing of partners; in this regard, the John Lewis Partnership takes investing in people and seeing them as the core of the business as a fundamental Human Resource strategy. Employee ownership is built on values such as strong communication, from the bottom upwards, and thorough consultation, both of which lead to inclusiveness and engagement of the employees in the day-to-day decision-making process at John Lewis Partnership effectively; employee ownership has a multi-plier effect on business gains since employee participation motivates high performance. JLP’s HR policy and practice The human resource is the primary source of competitive advantage to any organization today; all firms can potentially boost both their operational and financial performance through well-structured high performance human resource practices, thus the need to attract, recruit, and retain the best talents. Strategic HR management practices such as recruitment and selection, training and development, as well as performance management are fundamental aspects of John Lewis Partnership’s Human Resource policy and practice. The JLP recruits its human resources through selection and engages in effective talent management through training and development programs, as per the needs of the partnership. The task of resource recruitment goes beyond merely selecting the best people for the job; organizations must invest in human resources, which are not only valuable and scarce, but also inimitable and un-substitutable. Effective talent management is an appropriate way of promoting organizational goals because employee talents can yield unique competencies that no other firm can imitate or duplicate, giving the firm an upper hand in industry competition. The human resource practices namely high performance practices such as incentive compensation, training, employee participation, selectivity, as well as, flexible work arrangements promote performance because they increase employees’ knowledge, skills and competence or abilities. The John Lewis Partnership’s human resource policy and practice incorporates and enforces the high performance practices effectively, thereby leading to the partners’ overall wellbeing, which translates to positive outcomes in terms of both operational and financial performance for the partnership accordingly. For instance, partners receive support in turbulent times as in times such as the aftermath of sickness though adjustments of working durations; when one is returning from sickness, they are more likely to receive reduced hours of work, or a change of tasks altogether (McQuaid, et al 2012, p.11). These high performance work practices inevitably motivate employees to use their knowledge, skills, and abilities to enhance both organizational operations, and organizational performance, which are the primary focus of every organization. Effective managers encourage their employees to think creatively and to establish much innovative solutions to address not only their present, but also the future challenges (Blasi, et al 2008, p.12); talents development and use is undoubtedly the single-most approach to beating competition and remaining sustainable in the long term. The JLP’s inclusion of all partners, from the shop floor upwards, and the consultation of partners ensures both inclusiveness and engagement of the partners and their contribution to the decision-making process accordingly. Since the partnership prides itself in putting the ideas and contributions of its workers into consideration, workers are motivated to be creative in their own ways, thereby effectively transforming both the business operation and business finance accordingly. Additionally, the outcomes of high-performance work practices result to greater job satisfaction, lower employee turnover and higher productivity, as well as, improved decision-making, all of which are fundamental prerequisites to organizational performance. The human resource needs to feel engaged and valued by the organization to be satisfied working for the same organization, and to reduce turnover tendencies, particularly in the highly competitive modern business climate. This is why JLP has put the human resource at the core of its operations, constantly striving to promote the welfare of its staff; the partnership has learnt that it is better to achieve its goals by working closely with its people rather than by working through people. Communication is crucial to JLP, and various ways such as updated noticeboards, accessible computers, and partnership publications keep the partners informed so no one feels excluded from the partnership at all. Dissatisfaction in the human resource inevitably results from non-engagement and lack of commitment to the organization, which is itself a function of low motivation within the work force (Doucouliagos 1995, p.58), and this inevitably translates to low operational and financial performance of the organization. The workforce will not be motivated to work for the organization or be committed to it in any way, is they feel undervalued by the organization; the organization needs to commit itself to the recognition of its workforce for the employees to feel valued and engaged (Boyle, 1992). For this reason, the John Lewis Partnership is not only interested in the careful selection of its workforce, but also in retaining them through deliberate efforts that aim to promote their job satisfaction as core-partners through worthwhile and satisfying employment as well. The partnership seeks to leverage on the specific talents, abilities, and knowledge of its workforce to achieve its objectives since it understands the intricate relationship between employees’ satisfaction and the level of operational and financial performance of the organization. In the perspective of the partnership’s management, employee ownership has a profound impact on the wellness of partners; the workforce is highly motivated to achieve its optimum by working harder to achieve the organizational objectives since they are answerable to themselves rather than to some board of shareholders. Similarly, employee engagement through consultation of partners, and industrial democracy through voice and participation rights ensure commitment to tasks in the John Lewis Partnership (McQuaid, et al 2012, p.11), thereby leading to high operational as well as financial performance. Workers have a number of forums through which they voice their ideas regarding the partnership; in these forums, partners can even overturn management decisions, thus, fostering consultation in the management of JLP. Consultation of partners is imperative in JLP because it fosters a sense of inclusion of both the managers and the managed in the decision-making process. By actively involving them in the decision-making process, the partnership makes its workforce feel valued and important, thus, it becomes strongly motivated to participate in the promotion of the partnership’s objectives within the organization. Active participation of the workforce in the operations of the partnership is a core human resource function that potentially fosters engagement of the employees (Goic 1999, p.145), remarkably diminishing turnover tendencies while ensuring survival of business in the long term. The pay and reward system of the organization is a central pillar of the human resource operations, particularly because it leads to motivation of the workers to make decisions (Kruse, Freeman, and Blasi 2008, p.1). Recognition of workers efforts through appraisals is also another crucial aspect of the human resource function of the organization since it also has a significant impact on the operations and performance of the organization. Besides a good pay that aimed at ensuring the wellness of its partners, the John Lewis Partnership also recognizes its employees through a number of benefits outside of work such as subsidized holidays, theatre, and cinema tickets, all of which motivate both operational and financial performance. The partnership believes that if workers are relaxed outside work, they can contribute more to business outcomes by committing to the partnership and its goals, thus, JLP’s commitment to employee wellness. Strategic HRM at JLP Strategic HRM involves integrating the human resource function with operations through the designing, and implementation of a set of internally consistent policies and practices that ensure a firm’s human capital, comprising of the employees’ knowledge, skills, and abilities, actively contributes to the achievement of business objectives (Huselid, Jackson, and Schuler 1997, p.171). The human resource policies and practices in firms promote their overall performance; evidently, the various HR practices of JLP support its overall strategy, the partnership’s approach to business. For instance, JLP’s human resource strategies, from resourcing the organization, to human resource development (HRD), to employment relations, to performance and reward systems combine with JLP’s operations to promote vertical integration in the partnership. Nonetheless, the different modules of HR practice at JLP are dependable and back each other significantly in realizing their global HR policy (horizontal integration); this is particularly because the human resource is at the core of JLP’s operations. Vertical integration entails directing human resources toward the primary initiatives of the firm, while horizontal integration is the efficient allocation of those resources (Wright, and Snell 1998, p.756); whereas resourcing the partnership focuses on recruitment and selection of appropriate human resources into the partnership, human resource development focuses on talent management through employee engagement, training, and development. The partnership focuses on promoting employee wellness through the various HR policies and practices, thus achieving horizontal integration in terms of the overall human resource strategy and at the same time, the partnership relies on the specific employee knowledge, skills, and abilities to achieve its goals, thereby achieving vertical integration. Employment relations entail strong communication and consultations between the managers and the managed, to promote employee voice and participation rights in the decision-making process of the partnership. The performance and reward system of the partnership ensures that the workforce if highly motivated through pay, and reward, as well as performance management, which entails assessing performance levels and training needs, to bolster operational and financial performance of the partnership respectively. In this respect, all the four components of the human resource function, resourcing the organization, human resource development (HRD), employment relations, in addition to, performance and reward integrate to promote the overall JLP business strategy of employee ownership. Benefits and challenges of EOBs Employer-Owned businesses (EOBs) have a number of benefits and challenges from an employer and employee perspective; firstly, the benefits of such businesses include sustainable profitability, market resilience, faster growth, and expansion, as well as quality output and human resources (EOA 2013, p.5). The profitability of EOB’s correlates effectively with the autonomy of employees in decision-making, which yields innovative ways of doing business; market resilience results from the fact that the EOBs display less sales variability unlike non-EOBs, whose sales keep varying thereby threatening their market survival. EOB’s also experience faster growth due to high employee commitment, which is highly valued in the employee-owned model as a primary source of competitive advantage, thereby promoting faster job creation at the same time. The value added by EOBs on output is higher unlike that of non-EOBs since EOBs leverage the innovation potential of their workforce to promote their organizational goals by giving their employees autonomy in decision-making (Maranto 1994, p.57). Nonetheless, EOBs constantly add more value to their human resource and rewards them handsomely, particularly because of the central belief that the ability to attract and retain talented employees and leverage their innovation potential is a fundamental source of advantages to the employee-owned model, and a key recovery and/or survival strategy. Besides these advantages, EOBs suffer a number of challenges too; for instance, unlike the non-EOBs, the EOB model encounters more regulatory and policy challenges in form of problems with government approved share plans, lack of support from government and policy-makers, issues with tax treatment, as well as the approach of HM Revenue and Customs. On top of that, another key challenge to EOBs is that they have trouble obtaining favourable financing from institutions that are used to doing business with listed companies exclusively (Lampel, Bhalla, and Pushkar 2010, p.5); as a result, the EOBs cannot easily access appropriate funding from lending institutions. Nonetheless, EOB’s also suffer from a serious lack of specialist support from business experts and advisors in the course of their transition to employee ownership, thus, may have trouble dealing with technical issues of operations accordingly Replicating JLP’s employee-ownership model Given that the employee-owned companies exist in a wide range of sectors in the UK such as retail, manufacturing, and engineering as well as in financial services, it is clear that the JLP’s employee ownership model is transferable in other contexts (Employee Ownership Association 2013, p.3). It is possible to extend the JLP employee-owned business model to other contexts, particularly because it entails different models of ownership; for instance, it has the options of direct ownership, collective ownership, as well as a hybrid model of the two. Whereas direct ownership entails making employees registered shareholders owning a majority of shares in the company, collective ownership is ownership in trust, with employees as beneficiaries; a hybrid model of these two models entails partly the collective ownership of the company and partly the distribution of shares to individual employees. A stakeholder rather than a shareholder view of management in EOBs promotes accelerated growth and outcomes since it gives employees a real stake in the business (Bryson and Freeman 2008, p.16) making them more committed to delivering quality and to be flexible in the face of the constantly changing needs of the business. However, the main challenge to extrapolating the EOB model to other contexts is that its governance model may come under pressure as the organization exercises its natural propensity to grow, thereby implying that it can only work in small size firms. Additionally, increasing size could distance front-line employees and senior management, making it difficult to practice inclusive decision-making without jeopardizing speed and flexibility, which are crucial for high performance in today’s fast-changing and competitive business environments. Ultimately, the employee-owned business model of John Lewis Partnership has potential for sustainable operational and financial performance since an investor other than a stockholder perspective of management that is at practice at JLP promotes fast-paced growth and yields profits in the short term, even if it compromises long-term sustainability of firms. A considerable body of literature examined provides sufficient evidence to support the fundamental claim that employees who own a stake in the firms that they labour for are expected to be committed to high value creation apart from being highly flexible and adaptive to changing market environments and varying firm needs. The John Lewis employee-owned business model puts employee wellness at the core of its operations, thereby enhancing employee participation in the decision-making, yielding high motivation, and commitment to the partnership’s goals; in as much as this model can be applied in other contexts, it is limited to small size firms. References Aston. 2013. ‘The Partnership Approach: Learning from John Lewis.’ [Online] Available at: http://www.aston.ac.uk/aston-business-school/events/past-events/learning-from-john-lewis/ Blasi, J., et al. 2008, Creating a Bigger Pie? The effects of employee ownership, profit sharing, and stock options on workplace performance. Working Paper 14230, Cambridge, MA: National Bureau of Economic Research. Boyle, D. C. 1992, Employee motivation that works. HRMagazine, 37(10), 83. Bryson, A. and Freeman, R. 2008, How Does Shared Capitalism Affect Economic Performance in the UK? Working Paper 14235, Cambridge, MA: National Bureau of Economic Research. 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Toward a unifying framework for exploring fit and flexibility in strategic human resource management, Academy of Management.the Academy of Management Review, 23(4), 756-772.  Read More