SHAPING FOR COMPETITIVE SUCCESS

BACKGROUND

In response to the Labour Government review of the Post Office launched in 1997, the Post Office (PO) board embarked on a project that it hoped would ensure that the business was equipped with the organisational capability to deliver its commercial strategy, in what was becoming an increasingly competitive international postal market. This project was originally entitled "Shaping up for Competitive Success".

The conclusions drawn from this review were agreed by the PO board late in 1998, with the initial decisions about the new internal structure of the business being communicated during early 1999 under the heading of Shaping for Competitive Success (SCS). Final decisions on SCS were made by the PO board in June 1999 and, as more detail was announced, it became clear that the effect of the decisions being made would be to change completely the internal structure of the Post Office by the end of March 2000.

PURPOSE

The overall purpose of these changes was ostensibly to make the business more responsive to the changing postal market, and to create shorter management links to customers by creating business units specifically dedicated to these customers in each market. According to Post Office Chief Executive, John Roberts, "SCS will help us get closer to what is happening in our markets and allow us to respond much more quickly" (PO Courier, April 1999).

The changes were also seen as part of the wider strategy to maximise performance in each of the areas of PO business, and become a truly international player in the global distribution business, as the industry faced up to even greater competition. In the Post Office Annual Report 1999-2000, Roberts went on to describe SCS as "the largest change in any British business last year".

As part of this strategy greater emphasis was to be placed upon the introduction of an internal market, and market testing for activities outside the PO core business (however that is defined). The provision of these services should then be challenged at each level to ensure that they offered quality and value for money exceeding that which would be available on the open market. Moreover a key principle of SCS was not to let this internal restructuring and establishment of new boundaries get in the way of customer needs, and that customers should receive a common experience when they are in contact with PO businesses.

The CWU has had little involvement in the actual planning process which produced SCS, but has been clear in that it recognises the need for change in the new competitive environment. However, the Union has been keen to take positive steps to ensure members' terms and conditions and long term job security are not eroded by this internal programme of restructuring, and any subsequent harmonisation of the terms of employment.

SUMMARY – MAIN CHANGES IN STRUCTURE

Broadly speaking the main PO businesses had previously been divided up and managed through a defined regional structure. Royal Mail had 9 divisions, Parcelforce 3 territories and Post Office Counters (POCL) 7 regions (Subscription Services Ltd [SSL] was not divided in such a way).

In essence, what SCS proposed was that the existing PO business units would be re-shaped internally – although the current well known brands such as Royal Mail, Parcelforce, Post Office Counters would remain in place as far as the public and the customer was concerned.

The new organisation would consist of a range of "market facing/customer units", which would be responsible for specifying the products and services offered, as well as a number of "supplier/service delivery units", which would be responsible for actually delivering those products and services. To confuse the situation further, 7 out of the 12 new "market/customer units" would also have responsibility for delivering services (see Figure 1) – whilst another category of "service support units" would operate under the Post Office Services Group, with an onus on providing high quality support in the competitive market tested manner outlined above.

It was also decided that the service delivery aspect would be split into 3 new territories based on postcode boundaries – namely East, West and North – which would replace the existing divisions, territories and regions (above).

New Management Structure

The categorisation of the main new business units – between "market/customer units" and "supplier/service units" – is demonstrated in Figure 1, below. This table also illustrates the key management responsibilities of the relevant members of the PO board. Most of the titles of these new units were then launched – with their actual operation beginning in the period between July 1999 and April 2000 depending on the business.

FIGURE 1: Management and classification of major new business units
PO BOARD	Richard Dykes	Stuart Sweetman	Kevin Williams	Jerry Cope	Richard Close
Market/Customer Units	Business & Consumer Markets	Network Banking	Logistics & Contract Distribution*	International Services*
	Media Markets	Customer Management*	Packages & Express*
	Cash Handling & Distribution*	Stamps & Collectibles*	Corporate Clients
	New Enterprises		Sales & Customer Support*
Supplier/Service Units	Royal Mail Service Delivery	PO Network			Property Holdings
	PO Services Group (POSG)
* Unit also delivers services

Migration of Post Office Employees

The most important practical development of these changes for the CWU was the precise way in which the PO planned to migrate employees, from existing PO businesses to these new business units. In particular, several new units would draw on the resources of more than one business.

Figure 2 (below) illustrates these changes, by showing where employees and the core competencies in each new unit will migrate from under SCS. It also summarises the key responsibilities of these units.

FIGURE 2: KEY MIGRATION OF POST OFFICE EMPLOYEES
FORMER PO BUSINESS UNIT	NEW PO BUSINESS UNIT	Responsibilities
SSL/ROYAL MAIL	Customer Management	All customer management, call handling for PO Group
ROYAL MAIL	RM Service Delivery	Largest business unit. Responsible for bulk of RM operational activity and letters business.
	Media Markets	Large scale mailing and direct mail.
	Stamps & Collectibles	Issuing stamps, philately etc.
	Business & Consumer Markets	Principal unit for marketing and developing key RM products and services.
ROYAL MAIL/PARCELFORCE	International Services	Cross border mail and packages, overseas domestic markets.
	Logistics & Contract Distribution	Combination of logistics, trunk transport and warehousing of Parcelforce, and distribution network of RM Streamline.
	Sales & Customer Support	Sales team acting as a link between market units and business customers.
PARCELFORCE	Packages & Express	Addressing the growing market in express delivery and 3-dimensional packages.
POCL	Post Office Network	Overall operation and development of PO network, and service to other markets units.
	Network Banking	Development and marketing of POCLs range of banking products.
POCL/CASHCO	Cash Handling & Distribution	Products and services (including cash supply and movement) to fund/defund the network.

Some staff were also transferred to the New Enterprises and Corporate Clients business units – principally from Royal Mail and the Post Office Corporate headquarters – and to POSG.

"Service Support Units" - Post Office Services Group (POSG)

The re-categorisation of business units under the auspices of the Post Office Services Group (POSG) was a further result of SCS. This group comprises of many parts of the Post Office which are run from the PO Group Centre. These units include:

Communications Services	PO Consulting
Employee Health Services	Headquarters
Business Systems	Legal Services
Purchasing Services	Research Group
Quadrant	RoMEC
Security and Investigation Services	Training and Development Group
Transaction Services	Vehicle Services
Information Technology

The establishment of several of these units also led to the subsequent transfer of employees, both before and after the SCS programme. For example:

• RoMEC – Royal Mail Engineering and Construction (RoMEC) specialises in the provision of support services, engineering and maintenance etc. to the Post Office and was already part of POSG. Early in 1999 Royal Mail cleaners were transferred to this business unit.
• Transaction Services (formerly Support Services) – By April 2000 many administration grades in units from across the former businesses (including Royal Mail, POCL and Parcelforce Worldwide) had transferred to transaction services. This unit processes the high volume of data across all the PO businesses, and has taken on responsibility for paying suppliers, billing customers and personnel transactions such as payroll.
• Vehicle Services – Motor transport grades in Parcelforce joined those from Royal Mail in the Vehicle Services business unit from the end of November 1999, as it assumed responsibility for vehicle maintenance in Parcelforce.

CONCLUSION – THE IMPACT OF SCS AND APPROACH OF CWU

Strategic Considerations

There are a number of strategic implications for a trade union to consider when faced with such a major re-organisation of a business.

• Market Testing –

  One of the key principles of SCS, which has been expressed by the business is to bring "the disciplines of the market to any activity which is considered to be outside of our core business" (SCS Business Manager Brief). However this strategy inevitably begs the question of what are considered to be "core" and "non-core" services – as well as who decides this and under what criteria. This could become a particular concern if certain business units were seen to be outside the core activity and vulnerable to joint ventures or even sell-off or disposal by the business.

• Fragmentation –

  It could be argued that the large number of business units and the complex pattern of management necessitated by SCS could eventually lead to a fragmentation of the Post Office in its current form. The emphasis placed on management focus, and the need to meet various individual customer demands, may in turn mean the business losing the synergy currently provided by having fewer (larger) businesses. The benefit of these businesses overlapping to some extent, with similar or shared responsibilities in some areas, could be lost.

• Trends in Re-Organisation –

  The move towards a customer facing structure under SCS, and away from the traditional geographical organisation, can also be seen as part of a wider trend. Similar changes have taken place in a number of publicly owned (and former publicly owned) utilities. In BT, for example, a similar re-organisation took place under the heading of Project Sovereign in 1991, when the geographical structure was replaced by customer facing units. However it may be that (as in BT) the Post Office decides that future re-organisations are necessary, for example to counter the potential problems of fragmentation outlined above.

CWU/ PO Negotiations

Deputy General Secretary (Postal) of the CWU, John Keggie, set out the Union's immediate concerns and general approach to SCS in letter to the PO in July 1999. In particular this expressed the concern of the CWU regarding the impact of SCS on:

• Job Security – requesting a clear and unambiguous assurance of security of employment.
• Terms and Conditions – seeking an assurance that any harmonisation would not lead to terms and conditions being eroded.
• Industrial Relations – seeking an assurance that national and local agreements continue to apply unless renegotiated.

Following further negotiations, the CWU and the PO issued a joint statement in September 1999 regarding structure of the PO under SCS and the implications for employees (Special Briefing 267/99). This statement included a commitment from the PO to take all reasonable steps to avoid compulsory redundancies, and that terms and conditions that previously applied to employees would flow through to the new business units.

Implications for the CWU structure

• Nationally

  The changes to PO structure under SCS inevitably impact on the industrial relations framework. Therefore the CWU had to confirm firstly that managers of the new business units would recognise existing union officials in the interim period before a new national and local structure was established.

  Once this had been established, a review of the workload and responsibilities of CWU National Officers in the headquarters Postal Department commenced, which was concluded in late 1999. The result of this restructuring is contained in Special Briefing 60/2000, and was rolled out by April 2000.

• Locally

  Although existing field structures have been maintained as an interim measure, there is also a review of local operations underway. The intention of this review is to ensure a future industrial relations interface with managers in the new business units which will preserve the role and terms of appointment of Divisional Representatives, and even extend this to other field officers.

Matthew Payton
Research Assistant
21 June, 2000

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