If you think the privatisation of Royal Mail in April 2012 was controversial, just imagine what it would have been like if the same had happened to the Post Office. “This is the largest retail network in the UK,” points out group people director Neil Hayward. “It is politically highly sensitive. If you tried to change anything, the letterbox of the local politician would fill up. Everyone feels they own it.”
Instead, while Royal Mail was sold, the Post Office remains in public ownership, partly because of its unique position in British society and partly because it’s a loss-making organisation (for now at least). But despite its cuddly reputation – Postman Pat, anyone? – the operating structure behind the nation’s most trusted brand is deceptively complex.
While the network has more than 11,600 branches, only 300 are directly run by the Post Office. The others are run by franchisees, ranging from high street brands like The Co-operative and WHSmith to your local village sub-postmasters.
That leads to a complicated stakeholder environment, encompassing The Shareholder Executive, the Financial Conduct Authority (the Post Office has diversified into financial services), three unions (the Communication Workers Union [CWU], Unite, and the National Federation of SubPostmasters), and a variety of third parties such as consumer lobbyists. Not to mention the 6,247 direct and more than 40,000 indirect employees.
Then there’s the financial context in which Post Office operates. It is a loss-making organisation, but the government is reducing the subsidy it pays. “Our challenge is to get to a situation where this is a public service but commercially sustainable,” explains Hayward. “[The government] has asked us to do a tricky thing: maintain capacity while reducing the need for public funding. We have to reach break-even by 2017/18.”
In the 2014 financial year, the Post Office turned over £979 million and made an operating loss of £93 million. The subsidy it receives from the government is reducing yearly. “We are moving nearer to break-even while losing a proportion of the subsidy,” Hayward explains. “In a few years time that subsidy will be reduced to £50 million a year, which is what is required to keep a community network open.”
As if that wasn’t enough, the Post Office is going through a process of modernisation. It’s begun to transform its branches with new technology and a fresher look and feel, and opened an extra 100,000 hours last year to better meet customer needs.
As HR challenges go, it’s a tough one. But it’s one that Hayward, who joined in February 2014, is relishing. Including HR director roles at organisations including Serco, the Ministry of Justice (MoJ) and BT, Hayward’s career feels somewhat as if it has been leading up to this moment.
“There’s a phenomenal amount of change to manage in a heavily unionised environment,” he tells HR magazine when we meet at the Post Office’s shiny new base in the City. “It’s a company with a strong brand and heritage – almost like a 300-year-old start-up. This is the most exciting and biggest challenge of my career.”
When Hayward led HR at the MoJ between 2009 and 2011, he was appointed to make efficiencies and cut costs, yet in his tenure engagement scores rose. “I proved to myself that you could take costs out, impact on jobs, work with unions collaboratively and ensure people felt better about you as an employer at the end than they did at the start,” he recalls. The secret? “People were properly informed and engaged. We were implementing ideas that came from the bottom up and driving change at all levels, not just top down.”
He is now putting that experience to good use, with an emphasis on engagement and communication. “We made a major effort to talk to people across the organisation about the commercial situation facing the Post Office,” Hayward says. “We have changed the mindset from people believing we are a public service, and that the government will write us a cheque if we run into trouble, to understanding we are trading as a commercial entity, without losing any sense of our social and community purpose.”
Compared to last year, employee engagement levels (for directly employed staff) have risen 4% to 62%, on an 89% survey response, with increases too in understanding of wider performance and strategy. For sub postmasters, engagement is lower (46%, but up 2% year-on-year), with a much lower turnout level (26%). “It’s harder to engage with someone running their own business,” says Hayward. “We need to work much harder to get a higher response.”
An organisation-wide network of engagement champions has been established and at the top table Hayward believes engagement and internal communications have moved from being “important” to “fundamental”. The Post Office is also embracing digital, even crowdsourcing ideas for improvement from staff at all levels via an online platform. One suggestion to review how often branch stock needs to be refreshed has saved “hundreds of thousands of pounds in deliveries”.
The split from Royal Mail has brought “a liberating sense of the change being in our hands”, adds Hayward. “This wasn’t the Royal Mail’s core business. It didn’t feel like it was the heart of everything and wasn’t the priority for investment. Now we’re communicating with confidence that this board is in charge and it’s not someone else telling us what to do.”
Of course, as with any major change programme, there have been industrial relations challenges, especially given the Post Office is highly unionised – around 85% of frontline and 40% of management staff are in a union. When Hayward joined he recalls it being “quite a fraught period”, with several days lost to industrial action over pay disputes. “In the old days, there would have been pressure from the board to buy the union off, but the old days are gone,” says Hayward. “We cannot justify a pay increase that is not self-funded by efficiencies.”
Ideally, he wants to get “to an environment where we have a working relationship with trade unions where we and they are doing our best to make the Post Office a commercially successful business”. A new Collective Engagement Framework and Business Consultation Forum has since been agreed with both the CWU and Unite.
While some senior colleagues without much experience in industrial relations view it as “organisational treacle”, Hayward sees the value in collaborating with unions. “It’s important my understanding of the issues on the ground goes wider than survey tools,” he says. “A good relationship with the trade unions reveals issues and shines a light on dark corners of the organisation.”
The Post Office’s move from a rather tired building to a much fresher location is symbolic of positive change, he believes. And beyond the superficial, ways of working have evolved too. No one has a set desk and people self-designate as “huggers”, whose main place of work is the office, or “hoppers”, who mainly work from home but ‘hop’ into the office when needed. Hayward himself is a hugger.
“It’s building the work environment around what makes sense to the individual,” he says. “I’m able to communicate with anyone at any point in the day, so if I’ve delegated, empowered and trusted my team and set objectives with clarity, why do they have to be here? I only care about whether the work has been done to the right standard. We are saying we trust people to design the way they work. I believe it will have a huge impact.”
Hayward clearly has a rigorous, analytical mind. He rejects the “spurious science of best practice” in favour of a “joined up” approach. In the next generation of HR leaders, he wants to see “strategic orientation and the ability to visualise programmes” end-to-end.
His own and his team’s credibility comes from being commercially aware and business savvy. As one senior colleague commented to him: “Your team is able hands, not just adorable hearts.”
“There’s no point being the bad guys, but you’ve got to be making a difference,” he says. “Being nice isn’t enough. If you haven’t got the drive for impact and results, don’t have the ability to challenge, don’t understand the commercials and aren’t prepared to take accountability, you’re probably going to be in an administrative role rather than at the table driving change. I expect my HR business partners to be a commercial voice, challenging people around whether it’s the right thing for the business. With that credibility they have the ability to influence.”
The ability to influence the strategic direction of the Post Office is one of the reasons Hayward feels he’s found a career-defining role. “I challenge – and corporate life doesn’t always welcome that from a ‘support function’,” he says. “My credibility is being able to comment on everything that’s happening in our organisation, and have an opinion based on fact. That’s not just an HR role. And to be in a team creating a sustainable future for an organisation that’s part of the fabric of British society is a great motivator.”