UK: Royal Mail - will deliver by 2000 AD. (2 of 3)

UK: Royal Mail - will deliver by 2000 AD. (2 of 3) - The Balkanisation of The Post Office is commonly perceived these days as a prelude to privatisation. Not so, insist senior Post Office managers, past and present. It was recognised, they say, that sepa

by
Last Updated: 31 Aug 2010

The Balkanisation of The Post Office is commonly perceived these days as a prelude to privatisation. Not so, insist senior Post Office managers, past and present. It was recognised, they say, that separating the organisation out into its component parts would make it easier to privatise piecemeal, but that was not the object of the exercise. The aim was simply to stimulate performance, regardless of who the owners might be. In any case, it seems that the Government has not yet made up its mind on the privatisation issue.

"I think the Government has a real dilemma," says Bill Cockburn, managing director of The Royal Mail. Since the postal service is highly capital intensive, the cost of entry to any competitor would be low. So why not remove the statutory protection of the £1 letter (the price beyond which the post ceases to be a state monopoly), sell The Royal Mail and give the public the benefit of competition by opening up the service to all comers?

The answer, say the postmen, is that The Royal Mail, unlike certain foreign PTTs (post, telegraph and telecommunications companies), delivers to every home in the country. Any obligation to match The Royal Mail at every point would instantly make the cost of entry prohibitive; besides, to duplicate deliveries would be ridiculous. On the other hand, to allow competitors to pick and choose services while requiring The Royal Mail to maintain national coverage would put the latter at a gross disadvantage. "The Royal Mail is very vulnerable to being cherry-picked," says Cockburn. "Huge as The Royal Mail is, there is a very delicate balance between costs and revenues."

Nevertheless, the postmen are reconciled to the prospect of a surge in competition. Hence the proposal that they should handle material for rival carriers, such as TNT and DHL; perhaps undertaking local delivery, on terms to be agreed, in much the same way that BT lines transmit calls made by Mercury subscribers. Such an arrangement might be mutually beneficial, thinks Cockburn. "Maybe the TNTs would help to grow the market." For the time being, until the Government decides on privatisation and competition, and until new patterns and price structures are established, The Royal Mail is condemned to live in what academics call "conditions of uncertainty".

Yet there could be opportunities as well as threats in the present situation. The British Government is not the only body with a finger in the post. The European Commission's long-delayed Green Paper, due any day now, is expected to push for fewer restrictions in postal services across the European Community. Since the UK Post Office (including The Royal Mail) is already positioned towards the free extreme of any "Richter scale" of liberalisation - from rigid government control to free market operation - Cockburn reckons that it has little to fear from Brussels. And still less to worry about if the Eurocrats, as is also predicted, come out in favour of "reserved" postal operations charging a basic price for a basic service. On the contrary, given that The Royal Mail is the fastest, cheapest, most profitable, etc. operation of its kind, Cockburn believes that it is "extremely well placed to serve Europe" by deluging the continentals with their own junk mail.

But in either case - whether in order to recognise and seize market opportunities or to deal successfully with emerging competition - The Royal Mail could be required to demonstrate unaccustomed flexibility and fleetness of foot. The question is therefore whether the cultural revolution brought about under Sir Ron Dearing went far enough. Cockburn, whom Sir Ron promoted to the board, then put in charge of The Royal Mail in 1986, thinks not. Anyway, times have moved on. And now Cockburn, a small, engaging and fast talking Scot of 47 years, who joined The Post Office three decades ago straight from school, has inaugurated his own reforms.

The declared aim this time is nothing less than the creation of an enterprise culture in the letter-post service - "to get managers as passionate about the revenue side of the business as about the cost side". In terms of the organisation chart, the details are simply stated. The 64 districts of the Dearing design are to be distributed among nine geographical regions which will become the principal operating divisions of The Royal Mail. But this does not imply any return to the status quo ante. In the old days the regional director was not accountable: he was a high-ranking facilitator. The new regional general managers will have full bottom-line responsibility - for bringing in business as well as controlling costs.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today