Analysis Of Principles Of Responsible Management
An individual management report critically evaluating the most significant component of a chosen organisation’s operations (John Lewis) and /or behavior that has the most contentious issues arising. Make responsible recommendations that could be implemented to address the arising issues.
The work’s main focus must be on “TRIPLE BOTTOM LINE” (Responsability, Sustainability and Ethics), and how they influenced the organisation.
Further aspects that can be added into the work are:
- Building a responsible strategy and competitive advantage
- Responsible supply chains management
- Responsible human resources Management
- Responsible marketing and communication
- International business responsibly
Principles of responsible management can be explained as creating equilibrium between the interests of people, environment and organizations for the prosperity of present and forthcoming generations. So, superior managerial practices in areas like up-gradation of operations, supervision of performance of the workforce, the setting of targets and establishment of incentives certainly impact the corporate social responsibility practices of a company. In this context, it is important to consider the concept of the Triple Bottom Line. It holds that there should a combination of standardized parameters of financial success with those of social justice and environmental issues.
Triple Bottom Line is also known as a 3P approach- People, Planet and Profits. It is often emphasized that organizations applying this approach would be more successful as it makes them more efficient, competitive and innovative as compared to those who don’t apply it. But sometimes companies fail to execute the '3P approach ' successfully. It results in the occurrence of ethical issues. They arise when a situation, action or decision creates a conflict with the ethics of society. So, this report attracts the attention of stakeholders towards the ethical issues related to low wages paid and the closure of its stores of John Lewis & Partners. It also recommends and highlights the importance of principles of responsible business practices including Triple bottom line to address the issue in this case study.
Principles of responsible management practices pertain to companies taking accountability for its actions upon its workforce, consumers, society and the environment. These principles of responsible management mandate the companies to consider the greater good of their activities and the impact on all those components surrounding the organization locally and internationally. The impact must be considered in terms of legal, economic, philanthropic and ethical components. They guide the decision making and implementation activities of the company in the domain of environmental standards, legal compliance and human rights within its operational activities (Klettner, Clarke and Boersma,2014).
In this context, the Triple Bottom Line approach or 3P approach considers the principles of responsible management, sustainability and ethics and recommends that the organizations should be committed to focus on environmental and social concerns along with their profitability. The concept was coined by John Elkington in the year 1994. His idea was that a company should not only focus on earning profits but also make attempts to improve the lives of people and this planet. This concept focuses on three aspects –profit, people and planet (Venkatraman and Nayak, 2015). So, this report highlights the importance of principles of responsible management along with Triple Bottom Line through the contentious issues related to less payment of wages and closure of the stores of John Lewis & Partners. It also provides certain recommendations to resolve the issue by applying the Triple Bottom Line approach along with the principles of responsible management.
Introduction to the company
John Lewis & Partners is a mutual organization conducting its operations across the United Kingdom. It is a chain of departmental stores and owned by its employees. Its stores are also located in Australia and the Republic of Ireland. It was founded by John Lewis in 1864. In the present scenario, it is one of the largest cooperatives in the United Kingdom. This retail company claims that its prices can be matched with the lowest prices offered by its competitors (John Lewis and Partners, 2019).
Contentious issues arising in John Lewis & Partners
Low wages paid by John Lewis Partnership: John Lewis has always set an example of following the highest standards of conducting ethical business operations. But sadly it has become the recent company to breach the National Minimum Wage rules. As a result, it has to pay £36m on account of the penalty to the government authorities. The upmarket Waitrose supermarket chain and John Lewis departmental stores group has accepted the fact that there was a failure of applicability of the minimum wage rules in the company. The pay of employees was smoothened throughout the year. The company followed the pay averaging system which meant that the staffs were paid the same salary throughout the year.
It was irrespective of the principles of responsible management and variations in the working hours of their employees every month. It also implies that some of them were paid at a lower wage rate than the minimum wages in some part of the year. However, the company argued that this policy was introduced to support the workforce with a fixed and reliable income every month. Furthermore, the management has now accepted its failure in applying the minimum wage regulations. It is quite ironic that the company claims to support its staff by providing more stability in their income by breaking the minimum wage rules.
The provisions of the company cover the last six years which means that some of its workforces would be receiving monetary benefits in addition to their contractual payments and bonus. It is being estimated that thousands of employees are being affected in this case. It was also found that the retailer has decreased the bonus from 10%to 6% which was to be paid to its staff for strengthening its financial statements. The issue aroused after a query was raised by a worker regarding his payslip. It also prompted the review which was conducted by John Lewis with HM Revenue and Customs (BBC News, 2017).
The company claimed that minimum wage rules were quite complicated. The minimum wages are £5.60 for an hour for workers aged between 18-20, £7.05 for workers of 21-24 years of age and £7.50 for people above 25 years of age. The company did not disclose its minimum wage rates but informed that the average wage rates without the bonus for non-managerial staff was £8.90 for one hour. The company is owned by its employees who are also its partners. It said that the pay averaging system is applied with the consent of its partners since 2006 under the principles of responsible management.
John Lewis has to revise its yearly profits for 2016-17 by £36 million to £ 452.2 million as a result of its due payment to thousands of its staff. It has started contacting those employees who are affected by this pay averaging system and begun working with HM Revenue and Customs for ensuring that its payment practices are within the regulations. This error has been detected after 3 years of forceful payment of £40million by John Lewis to its employees when it was realized that the holiday pay was underestimated for seven years (Sullivan, 2017).
Closure of stores by John Lewis due to discount rivals and tough online competition putting many jobs at risk
In 2017, it was estimated that John Lewis would cut almost 800 jobs in its restaurant and store business to be cost-efficient. It was announced some weeks later after the declaration of closing six stores and removal of a level of managerial personnel by Waitrose, a grocery chain sister concern of John Lewis. It would put 700 employees at risk. John Lewis announced the centralization of the administration of its carpet and curtain estimation and fitting services which has led to the cutting of the jobs of its office in Didsbury, Manchester.
Several chefs were also being dismissed as John Lewis decided to switch itself from preparing food at its cafes to delivering readymade food by its external suppliers. However, the workers were offered alternative jobs but most of them were expected to resign. The group also shut staff canteens in 2016 and introduced longer work shifts for delivery boys. These dismissals were the biggest since the year 2009 when 700 workers working in call centres were made idle. This restructuring was done due to the fall in profits of the departmental stores. The operating profits were decreased by 31% in spite of a rise of 4.5% in sales in the last six months. It was due to the heavy investment in machinery by the company for supporting its online business and an increase in salaries of the staff (Butler,2017).
Furthermore, in 2019 John Lewis had to close its Knight & Lee departmental stores in its Hampshire branch putting 127 employees at risk. The largest employee-owned partnership company of the UK announced the closure of its Knight & Lee stores partially due to the need for significant investment owing to their condition and size. Knight & Lee is the smallest store in the estate of John Lewis. It is the first time that the company has closed its departmental stores since 2006. The Southsea shop was closed in July 2019. The company also warned that its yearly staff bonus was under threat because of its fight against tough business conditions( Chapman,2019).
The company informed that due to the combination of factors like the requirement of substantial investments along with the opportunity of selling freehold property prompted it to take this decision in the best interest of its stakeholders. Moreover, the business of its other stores is not performing well as it was used to be in earlier times. The Waitrose supermarket is struggling with a decrease of 23.4% in its previous year operating profits. There was also a deduction of partnership bonus distributed yearly to its employees. It was decreased to 11% of the pay as compared to 15% in the last year (Frost, 2019).
The company had also predicted that the profits in the year 2016 were expected to fall between £270 million to £320 million which were less than £342.7million in 2015 due to difficult business conditions and extra costs of pension ( Skapinker and Felsted,2015). It has resulted in a loss of jobs of 127 employees. It has also been predicted that the company shall be considering the closure of some of its more stores as it incurred losses in the first half of 2019. The managerial teams of John Lewis departmental stores and Waitrose grocery stores have been merged to save £100 million (Craven,2019).
Recommendations that could be implemented to address the arising issues
Applicability of Triple Bottom Line: According to the Triple Bottom Line (TBL), the companies should also focus on societal and environmental concerns as they do on their profits. So, there are three bottom lines to be considered by John Lewis- profits, people and planet. The TBL framework inculcates sustainable practices in the commercial operations of the company. The principles of responsible management, sustainability and ethics should be followed by John Lewis. It recommends that the organization should also consider social and environmental matters along with profitability for measuring the full cost of operating the business (Wilson, 2015). Therefore, the three bottom lines also referred to as three Ps are discussed below :
People: People are the employees and workforce involved in conducting the operations of John Lewis. They are the society in which the company executed its business. The other way to perceive the element of people is up to what extent does the company benefits the community. A company following the principles of responsible management and approach of the triple bottom line pays fair wages and ensures a better working environment at the workplace. The companies following the TBL approach also consider the influence of their activities on the people associated with them. John Lewis should consider the wellbeing of every employee. It should not exploit its workforce by giving them low wages in the name of providing just and equitable wage rate to all of them (Moon, 2014). Therefore, John Lewis must follow the TBL approach and give back to the society in which it operates.
The company is dismissing its employees as a part of its restructuring program. So, the other alternative to prevent this downsizing can be assigning those employees to its other departments. It can also cut down their salary and incentives provided they are not below the minimum wage rate. It can also provide unemployment benefits as compensation to the employees who lost their job (Schroeder and DeNoble, 2014).
(Source: University of Wisconsin,2019)
Planet: The companies following the TBL approach endeavour to reduce the impact of their ecological footprints. So, John Lewis should strive for sustainable practices by identifying the fact that adopting green practices may make it more profitable in the longer run. The company should perceive the whole life cycle of its activities and determine the full cost of operating business in order to implement the principles of responsible management. It should be in the context of what it is doing regarding the protection of the environment. In this regard, it has started banning the selling of 5p single-use plastic bags at its stores situated in Oxford.
This activity is a part of its trail for testing and changing the behavior of its consumers. The company should aim to encourage a 'reduce, reuse and return ' culture amongst its consumers so that it can prove to be a model for its other stores. The company must motivate its consumers to bring a bag or purchase a recyclable one. In this way, John Lewis can save tonnes of plastic in the coming year. Also, it should reduce the use of energy and dispose of noxious waste in a safer way(Smithers,2019).
Profit: The companies following the TBL approach perceive profitability as a part of their entrepreneurial plan. Sustainable companies consider that profit is not opposed to people and the planet. John Lewis should consider that profitability shall sustain and empower the whole society including their employees which are also known as its partners. The issue of closure of its stores and dismissal of its employees can only be resolved when the supply chain and the local business of the company thrives. It should fully control its market and own its position amongst its target consumers (Schulz and Flanigan, 2016).
Principles of Responsible Management
It is also recommended that John Lewis must extensively adopt the principles of responsible management which include building a responsible corporate social responsibility (CSR) strategy and competitive advantage. CSR is a self-regulatory norm that goes beyond the regulations set by any government authority for monitoring any industry( Fernie, Fernie and Moore,2015). CSR can assist John Lewis by mandating it to comply with all the legal, consumer and employment laws. It also considers the moral obligation of a company on society. If the minimal wages paid by a company are lower than those paid by its competitors, then it is the moral obligation of the company to develop a business strategy which pays more wages to its workers along with increasing its profitability which could end up with a clear competitive advantage(Høgevold et al.,2015).
Furthermore, an effective CSR strategy includes responsible supply chain management systems. John Lewis must cooperate with its suppliers for ensuring an improvement in its execution of CSR strategies. The high-risk suppliers must be particularly focused when they belong to industries having specific challenges or when they are from countries where the legislations are not fully complied with. Moreover, in the context of principles of responsible management, Bombiak and Marciniuk-Kluska (2019) say that a socially accountable human resource management is focused on developing a good relationship with the employees to foster a sustainable organization building.
John Lewis is expected to not only generate profits but also consider the influence of its activities on people and the planet. Another crucial component is socially accountable in marketing and communication. This concept holds that efforts should be focused on gaining the attraction of those customers who can make a positive impact on their buying habits. John Lewis must adopt socially accountable components in its marketing policies as a means to assist the society with its services and products which are beneficial to society. The company should also responsibly manage its international commercial activities. It should adopt activities that are based on ethical behavior and transparency and are aligned with regulations and international standards. It should also consider the expectations of its national and international stakeholders (Žukauskas, Vveinhardt and Andriukaitien?, 2018).
This report can be concluded by stating that approaches such as Corporate Social Responsibility and Triple Bottom Line reveal a multifaceted phenomenon thereby forming relations with several stakeholders. The strong commitment of John Lewis towards sustainability, responsibility and ethics can develop positive relations with its stakeholders. It also develops trust, commitment and job satisfaction amongst the employees. The company should also adopt the principles of responsible management by following a stable and long term policy which response to the values and expectations of its stakeholders. So, this perception of harmonized interests in John Lewis can lead to an exchange of mutual commitments thereby resulting in satisfaction with the expectations of company and its stakeholders.
BBC News (2017) John Lewis takes £36m hit for minimum wage error [online] Available from:https://www.bbc.com/news/business-39854298 principles of responsible management [Accessed 17th December, 2019]
Bombiak, E. and Marciniuk-Kluska, A.(2019) Socially responsible human resource management as a concept of fostering sustainable organization-building: Experiences of young polish companies. Sustainability. 11(4), pp.1044.
Butler, S.(2017) John Lewis expects to cut nearly 800 jobs [online] Available from: https://www.theguardian.com/business/2017/feb/23/john-lewis-to-cut-800-jobs [Accessed 17th December, 2019]
Chapman, B.(2019) John Lewis to close Knight & Lee department store, putting 127 jobs at risk [online] principles of responsible management Available from: https://www.independent.co.uk/news/business/news/john-lewis-close-knight-lee-department-store-jobs-cut-risk-a8742816.html [Accessed 17th December, 2019]
Craven , N.(2019) John Lewis 'must axe stores to survive' as High Street conditions are set to worsen, says retail veteran[online] Available from: https://www.thisismoney.co.uk/money/markets/article-7541531/John-Lewis-axe-stores-survive-conditions-set-worsen-says-retail-veteran.html [Accessed 17th December, 2019]
Fernie, J., Fernie, S. and Moore, C.(2015) Principles of retailing. UK: Routledge. Pp. 1-50.
Frost,K.(2019) principles of responsible management John Lewis & Partners is closing one of its oldest stores[online] Available from: https://www.goodhousekeeping.com/uk/lifestyle/a26007224/john-lewis-partners-closing-southsea-store/ principles of responsible management [Accessed 17th December, 2019]
Høgevold, N.M., Svensson, G., Klopper, H.B., Wagner, B., Valera, J.C.S., Padin, C., Ferro, C. and Petzer, D.( 2015) A triple bottom line construct and reasons for implementing sustainable business practices in companies and their business networks. Corporate Governance. 15(4), pp.427-443.
John Lewis and Partners (2019) Who We Are [online] Available from: https://www.johnlewispartnership.co.uk/about/who-we-are.html [Accessed 17th December , 2019]
Klettner, A., Clarke, T. and Boersma, M.(2014) The governance of corporate sustainability: Empirical insights into the development, leadership and implementation of responsible business strategy. Journal of Business Ethics. 122(1), pp.145-165.
Moon, J.( 2014) Corporate social responsibility: A very short introduction. principles of responsible management UK: OUP Oxford. Pp. 1-20.
Schroeder, B. and DeNoble, A.( 2014) How To Design A Triple Bottom Line Organization: A Start-Up Case Study. Journal of Organization Design. 3(2), pp. 48-57.
Schulz, S.A. and Flanigan, R.L.(2016) Developing competitive advantage using the triple bottom line: A conceptual framework. Journal of Business & Industrial Marketing. 31(4), pp.449-458.
Skapinker, M. and Felsted, A.(2015) John Lewis: trouble in store. principles of responsible management Financial Times [online] Available from: https://www.ft.com/content/92c95704-6c6d-11e5-8171-ba1968cf791a [Accessed 17th December , 2019]
Smithers, R.(2019) John Lewis trials sustainability schemes at Oxford store. Principles of responsible management The Guardian [online] Available from: https://www.theguardian.com/business/2019/oct/28/john-lewis-trials-new-sustainability-schemes-at-oxford-store [Accessed 17th December, 2019]
Sullivan, C.(2017) . John Lewis falls foul of minimum wage rules. Financial Times [online] Available from: https://www.ft.com/content/e3c0dde6-3497-11e7-99bd-13beb0903fa3 [Accessed 17th December, 2019]
University of Wisconsin (2019) The Triple Bottom Line [online] Available from: https://sustain.wisconsin.edu/sustainability/triple-bottom-line/ principles of responsible management [Accessed 17th December, 2019]
Venkatraman, S. and Nayak, R.R.( 2015) Corporate sustainability: An IS approach for integrating triple bottom line elements. Social Responsibility Journal. 11(3), pp.482-501.
Wilson, J.P.( 2015) The triple bottom line: Undertaking an economic, social, and environmental retail sustainability strategy. International Journal of Retail & Distribution Management. 43(4/5), pp.432-447.
Žukauskas, P., Vveinhardt, J. and Andriukaitien?, R.( 2018) Corporate Social Responsibility as the Organization’s Commitment against Stakeholders. Management Culture and Corporate Social Responsibility.Pp.43-54. principles of responsible management DOI: 10.5772/intechopen.70625