Think BR: What creative businesses can learn from John Lewis
Creative agencies of all sizes could benefit from the much-loved retailer's ownership model, writes Campbell McDonald of Baxi Partnership.
Campbell McDonald, director, Baxi Partnership
It’s no surprise that John Lewis does not want for agency-based admirers across the creative industries.
It has a hugely recognisable brand, a commercial strategy informed by an unrivalled understanding of its audience of customers, and of course those Adam and Eve Christmas ads.
But there is more that creative agencies can learn from this high street institution than rigorous brand discipline and how to make the most talked about TV advert of the festive season.
John Lewis’s employee owned structure - where each member of staff is a partner who can influence the direction of the company, hold the management to account and receives a share of the firm’s profits as a bonus each year - is a model that holds powerful insights for the future of the creative sector.
It is a greater proliferation of this kind of ownership structure that deputy prime minister Nick Clegg is calling for when he espouses his vision of a 'John Lewis' economy.
Clegg has floated the suggestions of tax incentives for employers who sell their businesses to their employees and for staff to have the right to request shares in their companies - initiatives which he hopes will encourage more firms to move into full or substantial employee ownership.
John Lewis is only the most cited example among hundreds of flourishing UK business owned by their staff.
Examples exist in a range of sectors including design, architecture, professional services, healthcare and manufacturing: take Arup, the 10,000-strong engineering company responsible for Beijing’s Bird’s Nest stadium, or Childbase, the provider of nursery services with both the highest profitability and Ofsted rating in the industry.
But while employee ownership is spreading fast across the British economy it has yet to make a significant impact on agencies within the creative sector.
This lack of penetration is a missed opportunity. Leaving aside research that shows employee-owned companies create jobs faster and are more resilient in tough economic times, employee ownership is uniquely suited to media, marketing, advertising and PR agencies.
In few other industries do businesses rely so completely on keeping key performers happy, keeping them driven and, most crucially, keeping them on the payroll.
Employee ownership can be a perfect fit for knowledge-intensive businesses that rely on the recruitment, retention, and motivation of key staff.
Marketing, PR, and advertising agencies can rise or fall, live or die according to the performance of a handful of crucial employees; staff who represent crucial intellectual capital and hold key commercial relationships.
A report by Cass Business School recently proved that companies in which employees have a significant owning stake have higher rates of staff satisfaction and lower rates of staff turnover and.
Employees in these companies are typically paid more, and thanks to their owning stake have financial incentives directly linked to the company’s performance.
Many agency owners feel they’re faced with a binary choice or sell or not, where in fact there are a number of ways to realise the benefits they’re looking for through passing ownership to employees.
A range of tailored employee share schemes exist that provide tax incentives to businesses transferring shares to employees; allowing businesses to pass a certain level of ownership to their staff whilst retaining some equity.
Last month the Treasury committed to further using the tax system to encourage the take-up of such initiatives, and dedicated companies exist to support business owners in structuring, tailoring, and implementing these schemes.
Employee ownership also provides an ideal option for the sort of serial entrepreneurs and agency builders that characterise the creative sector.
Marketing, PR and advertising are filled with individuals who set up, build up, and sell up, often in cycles of less than five years.
These figures inevitably stamp their mark on the companies they leave behind, but high staff turnover means the ethos of the business they built fades whilst their names remain on the letterheads.
Employee ownership offers another way forward for owners looking for a viable exit strategy whilst preserving the character of the businesses they have built.
As well as maintaining the integrity and continuity of a business, a transfer of ownership to employees can recognise and reward the contribution employees have made to the agency’s success.
Staff who have some kind of a stake in the business, whether directly financial or not, are more likely to stay with the company and more driven to continue its growth.
And while the model has not yet made its presence felt across the creative sector, there are signs that media and marketing businesses are beginning to wake up to its benefits.
Employee ownership allows innovative agencies to safeguard and nurture the most valuable asset of any creative business - its people.
Through applying precisely the kind of ambition and creativity the sector is renowned for, the so-called 'John Lewis model' has the capacity to reshape the media, marketing, advertising and PR industries for the better.
Campbell McDonald, director, Baxi Partnership
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