When John Lewis Partnership chair Sir Charlie Mayfield unveiled a restructure of the bellwether retailer, so radical was the overhaul that jaws dropped across the industry.

After the partnership suffered the first interim loss in its history earlier this year, it is clear why Mayfield thought bold action was needed.

But the scale of change was unprecedented. Out go the managing director roles at John Lewis & Partners and Waitrose & Partners, along with their respective divisional boards. In comes a new seven-person executive team, including current John Lewis managing director Paula Nickolds in a new role as brand director, responsible for both businesses and reporting to Mayfield’s successor Sharon White.

Mayfield, Charlie

Sir Charlie Mayfield aims to make the John Lewis Partnership one business

What astonished many observers was not just the seismic nature of the overhaul but the fact that there was not a single person from Waitrose on the new team, despite the substantial differences between a food retail business and a department store.

Waitrose is also responsible for the bulk of sales and profits at the partnership. It also raised questions about who would actually run Waitrose day-to-day.

Who on the new team would be responsible, and have the experience, to handle the storms that can engulf food retail – whether food safety scares, as with the horsemeat scandal or the very real threat of food shortages as Brexit looms. It seemed “bonkers”, in the opinion of one retail chair with experience of a wide range of companies.

A strong view, and one shared by many retail onlookers, but is it justified?

Joined-up thinking

As he prepares to step down, Mayfield is determined to ensure the 155-year-old business thrives in the years to come and this restructure, part of his Future Partnership plan, is the foundation for this.

John Lewis Partnership said a new model was necessary in order to “enable the organisation to be managed and operated as a single business” and bring benefits such as faster delivery of better products and services for our customers” and enable customer-facing partners to “become stronger in shaping and improving the customer offer”.

The partnership said that a unified approach made sense when “eight out of 10 customers who account for the greatest sales are loyal customers of both John Lewis & Partners and Waitrose & Partners”.

The business could certainly be more joined up. One former John Lewis partner tells the following story. A few years back, the eponymous department store business and Waitrose were selling the same item on their websites.

It was quite a pricey product, costing hundreds of pounds. And on the Waitrose site, it was significantly more expensive than on John Lewis’.

When the difference was pointed out, the reply came back that the price could not be brought down to the same level at Waitrose because that would be less than the product had been bought at.

It was just one instance of discrepancies between the two businesses, despite their umbrella ownership structure, in that case, because of separate buying. You don’t need to look far to find more.

For instance, products in John Lewis food halls, which are stocked by Waitrose, are exempt from the department store’s ‘Never Knowingly Undersold’ pledge.

Or search for a casserole dish on the Waitrose site – a kitchen staple it might be imagined, for Waitrose customers making a beef bourguignon as the nights draw in – and nothing will come up. Not even a ‘this product will be supplied by John Lewis’ like the ‘seller information’ section on Amazon. And that is despite the fact that a search for the same item on the John Lewis site would throw up 93 choices.

Waitrose casserole

There is a lack of consistency between Waitrose and John Lewis

Small points, maybe. But they illustrate that the partnership is not maximising synergies and cross-selling opportunities from the combination of its two businesses, which have sometimes operated in rivalry with one another as in the days when each was led by charismatic chiefs Andy Street and Mark Price.

Mayfield has acknowledged that such a spirit of competition can be a good thing, and has been in the past. In the present tough trading climate, however, collective potential cannot be left untapped. That has prompted the overhaul of the partnership structure.

Along with the managing director roles of each business, out go 75 of 225 senior management roles at head office. That will contribute to savings of £100m “over time”.

Mayfield argued: “The lesson of the last two years is that we need more innovation, faster decision-making and bolder steps to align our operating model with our strategy.”

He says there will be “considerable change” in many other areas as it brings the two businesses much closer together. However, he believes the move will better position it to “break out from the cycle of declining returns that are affecting most established retailers”.

”We will be a more modern and more unified business with a leadership team and cost structure that will enable the business to thrive in the long term,” he said.

“The issues they are looking to address are common across the industry – things like speed of decision-making or a consistent customer journey” 

Christian Hansen, Newton

Mayfield’s initiative is understandable, according to specialist operational improvement advisor Newton partner Christian Hansen.

He says: “The issues they are looking to address are common across the industry – things like speed of decision-making or a consistent customer journey. Having a single board allows you to be more coherent in strategy and operating model.

“There are some functions, certainly support functions or parts of the supply chain, where [John Lewis and Waitrose] are not much different, although there are other parts where there are significant differences.

“It’s an ambitious transformation and there’s a lot of need for that in the industry. You have to start with clarity of vision about where you’re trying to get to, but the execution will be the real challenge.”

Others question the new structure. One retail chair said: “What are the strategic goals? There’s nothing I’ve heard that tells me ‘this is how the business is going forward and it needs to be integrated’, other than cost.”

One industry watcher questioned whether overhauling the top team would make a difference to the customer experience and appeal of each business. 

He says: “I think the organisational changes will ultimately prove to be much less of an opportunity than the things that the customer sees.

“Great products and great service matter far more. While an inefficient organisation makes life harder, I don’t think you can ‘organise’ yourself to becoming more customer-relevant.”

However, Mayfield did flag that he wanted to better serve customers several times as he explained the changes. But these concerns highlight that the tangible benefits of the restructure will be harder to achieve than simply creating a new operating board.

Where are the Waitrose leaders?

There is, of course, the shock that the executive team includes nobody from Waitrose.

The grocer’s managing director, Rob Collins, has decided to leave because he does not believe there is a role that is “right” for him in the new structure, although he has emphatically backed the Mayfield plan.

Collins, Rob 2019

Rob Collins is leaving

But the lack of Waitrose representation is striking. While John Lewis bore operating losses before exceptionals of £61.8m in the first half – reflecting factors such as lower sales in discretionary categories, Waitrose managed a £14.1m increase to £110.1m. That was mainly down to property profits and there was also “an improvement in gross margins and a strong operational performance”.

While revenue at John Lewis fell 2.8% to £1.62bn, Waitrose held steadier with a 0.7% decline to £3.17bn.

One former Waitrose staffer supports Mayfield’s executive restructure, arguing it is “the right thing and should have been done a long time ago”, but nevertheless was surprised at the absence of Waitrose people on the new top team.

The ex-staffer says: “It must be really disappointing for Waitrose colleagues. It’s not a great message externally, nor a great way to get Waitrose colleagues on the journey – they make the money, for goodness sake.”

Who is the shopkeeper?

Many people are unclear about how John Lewis and Waitrose, which share many differences as well as similarities, will be run.

The retail chair says: “The ways the customers interact with [John Lewis and Waitrose] – like average spend and frequency of purchase – is very different. The concept that whoever runs John Lewis can also run Waitrose is bonkers.”

However, as Tesco’s appointment of Boots lifer Ken Murphy as its new chief executive shows, category knowledge is not the be-all and end-all. Outgoing Tesco chief executive Dave Lewis said Murphy was chosen for his strategic capabilities and insisted he has plenty of great shopkeepers on his team.

He said: “If you look at the CEO as being the best shopkeeper in the team, it’s the wrong brief.”

However, from what is known so far of John Lewis’ new structure, says the senior retailer, “it’s not clear who’s doing the shopkeeping”.

The new executive structure, where directors take responsibility for both divisions, is in contrast to others such as close rival Marks & Spencer, where the food and general merchandise businesses are separately run with their own teams, ranging from managing directors to marketing.

While M&S’ travails raise the question of whether its operating model is fundamentally better than what John Lewis Partnership now plans, it does have the benefit of a highly experienced retail chairman – legendary Asda saviour Archie Norman.

Incoming JLP chair Sharon White has no such experience to bring as she takes on a role bringing retail and commercial responsibilities – very different from her previous post leading media regulator Ofcom.

“You want any operating model to be crystal clear in its accountability,” the senior retailer says. “To the outside world, it’s not clear who’s accountable for profitability in the new John Lewis model. It’s a pretty big ask for Sharon White because of her background.”

There remain two posts to be filled on John Lewis Partnership’s new executive – those of trading and strategy directors. It is possible someone from the Waitrose side might be appointed, but not a given. External candidates are being considered alongside partnership insiders.

And the structure below the exec has not yet been disclosed. It may be that it addresses some of the criticisms and concerns raised in the wider industry so far.

The right operating model, reflecting the right retail priorities, is taxing the entire sector as it seeks to adjust to a new landscape, and Mayfield has a strong track record in navigating that landscape.

He has chaired the partnership since 2007, steering it through the recession and investing in the future by building multichannel operations.

There is no question that he does what he sees as the best thing for the partnership, and perhaps as details emerge of how the changes will be executed across the business the plan will be more readily understood.

As one still-to-be-convinced observer puts it: “I’m sure if I was inside the partnership I’d have a different perspective. At least, I hope I would.”

John Lewis Partnership’s new executive team, effective February 3, 2020

Chair: Sharon White

Executive director, brand: Paula Nickolds

Executive director, finance: Patrick Lewis

Executive director, people: Tracey Killen

Executive director, operations: Andrew Murphy

Executive director, customer service: Berangere Michel

Executive director, trading: To be appointed

Executive director, strategy: To be appointed

Current Waitrose & Partners board         Current John Lewis & Partners board

Rob Collins, managing director                                  Paula Nickolds, managing director      
Martin George, customer director                              Craig Inglis, customer director

Mike Sackman, IT director                                          David Hunn, IT director   

Ben Stimson, digital director                                       Sean Allam, director, services

Jo Walmsley, personnel director                                 Libby Jones, director, personnel

Rupert Thomas, commercial director                          Simon Coble, trading director

Wim Van Aalst, supply chain director                          Berangere Michel, ops director

Ross Avery, finance director                                        Andy Mounsey, finance director