Sir Stuart Hampson presided over a courageous programme of modernisation during his 14 years at the helm of John Lewis—all without sacrificing the partnership ethos. Two months into retirement, he talks about his past achievements—and the controversy that surrounds his successor

Sir Stuart Hampson is a very popular businessman. As well as being one of the longest-serving bosses of a blue-chip company he has been among the most successful. While ensuring The John Lewis Partnership (JLP) stayed true to the principles embodied in its 1929 constitution-co-ownership and the happiness of its staff—he was a relentless moderniser.

Sir Stuart's 14 years as chairman saw steady expansion, the refurbishment of the Oxford Street and Sloane Square department stores, the extension of trading hours, the expansion of the product range and the establishment of an online presence through John Lewis Direct and Ocado, the home-delivery grocery service.

The partnership's 2006 results, announced shortly before Sir Stuart's departure at the end of March 2007, are a testament to his efforts. Pre-tax profits hit a new high of £319m, up 27 per cent on the previous year, and the 68,000 staff—or "partners"—shared a bonus of £155m, up 29 per cent from 2005 and equivalent to 18 per cent of salaries.

Sir Stuart declared that the group was on track to scale "greater heights" under his protégé and successor, Charlie Mayfield, an appointment that has drawn fire in several quarters. Nevertheless, under Mayfield, the plan is to double turnover and create 35,000 new jobs by building 13 new department stores over the next 10 years.

"The results were phenomenal," says Richard Hyman, managing director of retail consultancy Verdict, particularly since the profits and partner bonuses came despite major capital expenditure. "What's more, John Lewis and Waitrose have come at the top of our customer satisfaction surveys of the 70 biggest retailers for the past eight years," he adds. 

The fact that John Lewis continues to outperform the market is a direct result of its partnership structure, says Sir Stuart. "Our success comes from a host of improvements made by 68,000 people who are motivated to deliver outstanding customer service, which translates into profits that feed back to staff," he says. "It's a virtuous circle."

The results help nail the myth that "partnership" implies something soft, woolly and uncommercial; criticisms that have been levelled against John Lewis in the past. Ultimately, they're a tribute to Sir Stuart's ability to deliver the goods in such an environment. "John Lewis has a team of hugely talented managers, but great management and control is a bit academic unless you know where you are going—and why and how you expect to get there," says Hyman.

Sir Stuart is urbane, conservative, measured—it's easy to imagine him as the senior civil servant he was before he joined John Lewis 25 years ago. He comes across as something of a benevolent dictator. This is partly a function of the partnership structure. As Stephen Overell, head of media relations at the Work Foundation, says: "Paradoxically, the kind of democratic structure you have at John Lewis requires a certain kind of directive leadership that might be less effective in more conventional public companies."

A source close to John Lewis suggests that "benevolent patrician" is a better description. "There is a sense at John Lewis that the chairman represents the original owner, and Stuart sees himself as the custodian of what the John Lewis Partnership stands for," he says. "He has integrity and people trust him. He also has a very good mind and is good at getting the right people in the right jobs. But he's not the kind of gung-ho leader everyone would follow over the barricades."

Far from it: in 1999, some partners revolted, demanding a referendum to discuss a potential sale. (This, it transpires, requires an act of Parliament.) In the end, JLP's council voted against demutualisation, but not before getting in some jabs at Hampson via The Gazette, JLP's  in-house magazine. "I can't pretend it hasn't opened up some sores," he  said at the time. "But I'd far rather have partners' views brought into the open than have simmering discontent which might cause real, long-term damage."

The unique structure is no less challenging today. "Sustaining this culture is hard work," admits Sir Stuart. "It requires management that is committed to operating this way-we are participative, we are communicative, we dislike big egos and we work together. But that doesn't mean we are boring and grey: we have creative and talented people with lots of ideas which they pursue within the spirit of partnership." Creativity and talent have to be harnessed for a common purpose; they have to build the business. "There is no alternative; our constitution won't allow us to break it up, so we have to face up to any difficulties we encounter," says Sir Stuart.

When he became chairman in 1993, Waitrose was viewed as a millstone round John Lewis's neck. "We confounded the consensus by turning it into a highly successful and admired company. It was my job to build it; getting rid of it was never on my agenda."

It concerns him that organic growth is "a less fêted and rewarded task" than the financial engineering that is the stock-in-trade of many of the big private equity houses playing such a dominant role in corporate Britain. "If more businesses could act longer term, we would have a stronger British economy," he argues.

But as Hampson himself notes, it would be a brave chief executive who did what John Lewis Partnership did in 2000, when it spent £107m on redeveloping London's Peter Jones, before deciding to purchase the loss-making buy.com, which became John Lewis Direct and made a big dent in the P&L.

"You need to get corporate governance to support that long-term vision," he says—and this is something he has worked hard at over the years, through his involvement with the think-tank Tomorrow's Company, and through his membership of the DTI Review Panel, which advised on the Companies Act 2006.

"Stuart has been influential in getting his values institutionalised," says Mark Goyder, director of Tomorrow's Company. Goyder points out that the concepts of "enlightened shareholder value" and an "inclusive" approach to business, which take into account all of a company's stakeholders, are now enshrined in law.

While Sir Stuart's CV is distinguished by a lack of commercial non-executive directorships, he is involved in an array of worthy extra curricular activities. For example, as president of the Royal Agricultural Society of England in 2006/7 he commissioned a report that warned of a deep-seated crisis in UK farming, and he is still looking at ways to resolve that crisis, including getting supermarkets to pay farmers more.

Prince Charles recently appointed him as one of his personal ambassadors on responsible business practice and paid testimony to the work he has done with Business in the Community.

Hampson believes the broader societal role of a business leader becomes more important as the boundaries between shareholders, staff, customers and other stakeholders blur. Julia Middleton, chief executive of leadership organisation Common Purpose, agrees. "Sir Stuart exemplifies the statesman-like leader who has an impact beyond their own organisation, to the benefit both of society and the organisation itself," she says. "Some leaders are so focused on their job that they miss context—why did it take McDonald's so long to realise that people thought they were poisoning their kids, for example?"

You cannot rely on the non-executives to pick up on trends for you, continues Middleton: "That's like sending out ambassadors who then relay information to you second-hand in your bubble."

Until recently, John Lewis didn't even have any non-executive directors. Sir Stuart broke with the 140-year-old tradition of promoting insiders to the board by appointing Jane Tozer, former chief executive of UK software group Softwright, and David Barclay, former private secretary to the Home Office in Margaret Thatcher's era, as the group's first independent directors last year.

Charlie Mayfield recently nominated Barclay as his deputy chairman. "The role of executive chairman goes against best corporate governance practice in the public company world, so having an independent deputy chairman provides a bit of extra governance clout to assuage any nervousness," says Sir Stuart.

John Lewis's own brand of governance has always been strong. In addition to the two new non-executive directors, the board comprises five executive directors and five employees elected by the staff. Below this are a number of bodies that give partners a voice and hold management to account. But Sir Stuart improved the group's external accountability, too. For example, he instituted annual results presentations to analysts—something that is not required of private companies—and regularly invited the financial community to discuss what the company was doing.

The only area of governance that still needs to be addressed is the way successors are appointed. Indeed, Sir Stuart's handling of succession is arguably the one shadow over his reign. He changed the rules on appointing new board members so that, while it remains the chairman's right to nominate a successor, he or she now has to seek the board's approval for the appointment. It is said that the nomination of Charlie Mayfield as chairman-designate split the board, with several directors initially seeking an alternative candidate. Some were apparently concerned by his relative youth (he is 40); some apparently felt he was too similar to Sir Stuart for the next stage of development.

What's more, the succession happened with almost unseemly haste. As recently as last November Sir Stuart said he had no intention of stepping down, only to announce his departure the following month. People had also thought that the new chairman would have come up through the ranks, but Mayfield joined just six years ago from management consultancy McKinsey—an unlikely training ground for a John Lewis chairman.

Sir Stuart defends both the timing of his departure and his choice of successor. "We had known internally what was going to happen for a while, but we didn't want to drag it out in public, which is unsettling for everyone," he says. "I was 60 in January and I felt now was the right time to go. The economy is benign, and the business is growing and has a clear plan for the future. It is the ideal time for Charlie to come in and find his feet. Charlie understands our values, he has a lively commercial mind and I felt confident he could take the job on."

Many people saw Luke Mayhew, the former managing director of John Lewis, as a likely contender for the top job, but he quit suddenly two years ago amid rumours he had been told he would never become chairman. Mayhew was, say observers, dynamic, driven and charismatic, a bit racy—as different from Sir Stuart and Mayfield as it is possible to get. "Luke was a class act and I was very sorry to see him go," says one observer. Another source close to John Lewis suggests that "the almost monarchical or feudal handing-on of the baton to the favoured son" is incompatible with good governance, and that this is "an aspect of the paternalistic legacy that Charlie might want to give some thought to".

But the more immediate challenge facing Mayfield is how to maintain the spirit of partnership in a much bigger business. And, curiously, despite Sir Stuart's very tangible achievements over the past 14 years, the nature of the succession means he will ultimately be judged by Mayfield's success in the role.

Sir Stuart's next project is to drive 11,000 miles from the Panama Canal to Alaska in his 1955 Jaguar XK 140, with his wife as navigator. Apart from that, he claims he doesn't know what he wants to do. "People have associated my name with the chairmanship of the BBC, but that doesn't seem to fit my criteria of doing retirement jobs where I can make a difference and have fun," he says.

He will no doubt be drawn further into public duties, but he won't be tempted to interfere with John Lewis. "I have hugely enjoyed the past 25 years. It was more than a job; it was a real emotional engagement in the whole essence of the business. But you've got to let the new team get on with it."

Interested in knowing more about the "servant leader"? Click here to check out this article from Inc magazine.