Partners in profit - the JLP way

We’ll be asking many of our students a simple question over the next few months. Is profit good? Is profit maximisation a strategy for greed? I wonder how the partners at John Lewis might respond to that question…

Anyone who doubts the potential for financial methods of motivation ought to watch this brief news video from Reuters.

The knowledgable business student will know that there is something different about John Lewis Partnership. The business is owned by its employees (partners), not by distant, external shareholders. As part of the organisational structure, employees at JLP share a profit pot for their annual bonus. Everyone gets the same percentage (%) bonus, calculated as a % of their annual basic pay.

This is what happened when the bonus percentage for payment in 2011 was announced to JLP staff.

http://www.youtube.com/watch?v=2tX2GiDm5Ug

Bonus Day at JLP is a big day for staff. The 18% bonus announced for 2011 reflected a big rise in profits in 2010.

The video makes some good points about the motivational impact and role of a profit bonus.

But will the announcement in 2012 lead to the same scenes of excitement? Even JLP (considered the bellweather of UK retailing) has admitted that trading in the early part of 2011 has been weak.