How John Lewis Gets it Right

31 December 2015 -

The success of the high-street retailer underlines the difference between efficiency and effectiveness

Simon Caulkin

Productivity is top of the agenda for the government. And the good news is that John Lewis chairman Sir Charlie Mayfield has been appointed head of a task force charged with coming up with ideas for kick-starting UK plc’s stagnant performance.

As it happens, Mayfield has already delivered the key part of his message. Asked about his John Lewis role in a recent interview, he said: “I work for the partners in the Partnership. My job is to invest in them, help them to work as well as they can, and if we do that, we’ll succeed as a business… They hold me to account for that.”

Well, quite. Explained like that, it should be obvious. As Frederick Herzberg put it many years ago, the best way to get people to do a good job is to give them a good job to do. Add in the means to improve and a pay packet that takes wages off the agenda, and you’re well on the way to the fabled high-commitment, high-productivity workplace.

However, there’s a lot more to Mayfield’s blessedly succinct statement than meets the eye.

What he is really talking about is not productivity but effectiveness – and they are rather different.

Like gross domestic product, productivity is a measure of activity in general, irrespective of its value or usefulness. It’s to do with efficiency, doing more with less; the ratio of outputs to inputs. It’s about means. But it says nothing about effectiveness, which is measured against purpose and thus is about ends.

In short, it doesn’t tell you if you should be doing it at all.

This matters, because the story told by effectiveness differs from– and might even contradict – the one that comes from productivity.

At national, aggregate level, high-level abstractions such as education, infrastructure spending and bringing in the private sector make sense in principle – and the first two are, of course, essential.

But they are not directly linked to organisational effectiveness, which is not a question of public vs private, educational achievement or even investment in new IT, but of system design.

Thus, what makes John Lewis effective is what it has that most other companies don’t: in particular, distinctive and sophisticated long-term governance that aligns bosses not with an external body of shareholders but with the associates who actually create value, as well as measures that foster learning and improvement because they are related to overall purpose.

In their absence, it’s not surprising that high-productivity workplaces are so rare.

Contrast this with short-termist governance coupled with silo-based efficiency measures used in customer service centres in both public and private sectors that actually prevent managers seeing how ineffective their service is. Hitting a high target number of calls per hour and answering all calls within three rings may look efficient and productive. But if it’s the third or fourth time a customer has had to call to get the same problem fixed, it is anything but.

This explains the puzzlement of MPs confronted in their surgeries by vociferous constituents complaining about services where managers can proudly show they have ticked all the official boxes – and the frequency with which horrible scandals emerge from hospitals or children’s departments that have previously received inspectors’ top ratings.

More and faster doesn’t automatically mean better.

Productivity is not an unalloyed benefit. You can go further: if obsession with productivity, or cost saving, or any other kinds of efficiency, diverts managers’ attention from the purpose of the activity from the customer’s point of view, it will not only not improve effectiveness: it will have the opposite effect.

As Peter Drucker decisively summed it up: “There is nothing so useless as doing efficiently that which shouldn’t be done at all.”