Caring and sharing boosts firms' profits

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Rare as it might seem, other enlightened companies have also shown that generosity to staff can help enhance profits. Marks & Spencer, which recently consolidated its position as Britain's leading retailer with a strong rise in profits to nearly pounds 1bn, has long had a reputation for looking after its staff and rewarding them well. The paternalistic approach has receded a little recently, but there are still extensive benefits, including a non-contributory pension scheme, various profit share and bonus schemes and comprehensive health care for the 54,000 employees in the UK.

The department store group the John Lewis Partnership has long involved its employees in the success of the company. Staff, who become partners as soon as they receive permanent contracts, have shared in the profits since the Twenties, when Spedan Lewis began the process of transferring ownership of the business he inherited from his father to the employees.

In the Eighties, the profit share passed 20 per cent before slipping below double figures in the early Nineties. Last year, the 35,000 partners in the John Lewis, Peter Jones and Waitrose shops shared in a total bonus of pounds 57m, about half the amount left in profits after tax.

Each person - from the chairman to clerks - received 15 per cent of their salaries, equivalent to nearly eight weeks' pay.

In the United States, the electronics company Hewlett-Packard has attributed its continual growth over more than half a century to trusting its employees and giving them a share of the organisation's success.

Started in what is now known as Silicon Valley shortly before the Second World War, it still sticks to the credo of the founders Bill Hewlett and Dave Packard that employees "come to work to do a good job, not to screw up". From its early days, it has operated a bonus scheme, or profit share, under which all employees around the world receive a share of the profits every six months.

Last month, the pay-out to the more than 100,000 employees was 12.8 per cent, though the basis of the scheme is under review because falling costs are likely to make the amounts paid unrealistic.

The Brazilian manager of Semco, Ricardo Semler, stunned the business world three years ago, when he published a book, Maverick, in which he explained how he had transformed his ailing family-owned manufacturer of pumps, mixers and other industrial equipment by turning the organisation's hierarchy upside down.

Employees set their own hours and, in some cases, their own salaries and everyone - from senior executives to messengers - has access to financial information. In the decade and a half since Semler took over Semco from his father, sales have increased by more than six-fold and profits have risen 500 per cent.

But you do not have to be big to look after your employees and get results. North of the City of London, Henry Stewart runs an information technology training organisation called Happy Computers along the same lines as some of these companies.

Founded five years ago, it has grown by 50 per cent a year, to reach a turnover of pounds 750,000. The 12 employees get 20 per cent of their salaries in the form of profit-related pay, control their work and even write their own job descriptions.

Free ice-creams are available every day, though some staff have begun turning them down on grounds of weight gain, and Mr Stewart, whose clients are mainly charities, says the guiding rule is still "four hugs a day".