1 executive master in postal leadership 2010 © 2010 elmar toime 1 postal leadership elmar toime e...
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1Executive Master in Postal Leadership 2010
© 2010 Elmar Toime1
ETCL
Postal Leadership
Elmar Toime
E Toime Consulting Limited
United Kingdom
2Executive Master in Postal Leadership 2010
© 2010 Elmar Toime2
ETCL
Elmar Toime CV
• CEO New Zealand Post (1993 – 2003)– Liberalised market; company with government ownership
• Executive Deputy Chairman, and Chair of Management Board, Royal Mail (2003 – 2004)
• Independent advisor (E Toime Consulting Ltd)
• Boards (postal & logistics sector): – Deutsche Post DHL– Postea Inc (postal technology and services company)– Blackbay (mobility software)– message AG (postal operational consulting)
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Agenda
PURPOSE &
STAKEHOLDERS
PRINCIPLES &
MEASUREMENT
STRATEGY &
STRUCTURE
BUSINESS
TRENDS
PEOPLE &
MANAGEMENT
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Purpose of the Post
What is the Post for?
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Delivery company
Comms company Bank Employment
agencyCitizen
services
The Purpose of the Post
Generally, we speak of a key infrastructure asset:• In a developing economy the Post helps bring Government services to citizens• In a developed economy the Post helps businesses communicate and trade
with customers.
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Efficiency and service mandate
Efficiency
Productivity
Regulation
An infrastructure service must be efficient• costs (and prices?) should be as low as possible
• it must provide a universal service
This has implications for how costs are managed and how prices are regulated
Policy questions: • should customers pay all the costs, or
should there be subsidies?• what are the implications of entering
competitive services?• what are acceptable returns?
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CompetitiveAdvantage
I
Subsidy
HIGHLow Prices
LOWHigh Prices
IV
Compete
II
Protected
III
Market Power
HIGHLow Cost
LOWHigh Cost
Efficiency
Positioning the Post
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Roles of government
Public policy• determines the social
obligations• determines the
competitive environment
Business owner• conducts a business • invests in assets and
businesses
Commercial operations and funded obligations
Profit motive; customer focus; productivity emphasis
How are the two roles reconciled?
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Stakeholders
CUSTOMERS EMPLOYEES
GOVERNMENT CITIZENS
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Agenda
PURPOSE &
STAKEHOLDERS
PRINCIPLES &
MEASUREMENT
STRATEGY &
STRUCTURE
BUSINESS
TRENDS
PEOPLE &
MANAGEMENT
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Business principles
Recognise stakeholders
Sustaining profitability and achieving good commercial returns
Making investment and business decisions which protect and add shareholder value
Valuing employees and being a good employer
Providing reliable, efficient postal services at the lowest cost and lowest price to meet customer needs
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One Company Principles
• one business philosophy– the set of values and principles by which business will be
conducted
• one strategy and direction– the goals of the Company as a whole take precedence in our
decision-making
• one way of allocating resources– to achieve the agreed strategy and direction
• one cash flow– to best manage Post’s financial resources
• one information process– so that we are able to measure our progress consistently
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Value Scorecard
Making
money
Winning customers
Building relations
Delivering the
Future
The Company’s Key Performance Areas reflect its business principles and together provide the four quadrants of the Value Scorecard.
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1. Profitability2. Return on investment
3. Public satisfaction4. Employee satisfaction
5. Customer satisfaction6. Quality of service
7. Growth8. Diversification
Making Money
Building Relationships
Winning Customers
Delivering the Future
Key performance indicators
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Agenda
PURPOSE &
STAKEHOLDERS
PRINCIPLES &
MEASUREMENT
STRATEGY &
STRUCTURE
BUSINESS
TRENDS
PEOPLE &
MANAGEMENT
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• Fundamental strategy:– growth and productivity
Setting strategy
Growth Productivity
Growth provides hope, security, personal development, bigger pay cheque
Productivity gives customers confidence and so improves competitiveness
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What is driving change in the industry?
• The economy has changed– Uncertain recovery from recession– Digital and mobile world has permanently changed demand– The green lobby gathering momentum
• The market has changed– International and domestic competition (without growth)– Postal sector fighting to stay relevant
• The role of management has changed– Leadership and innovation with commercial targets
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Governance
Trend
•Liberalisation
•Ownership and access to capital based on market funding options: cannot assume ongoing government role
•Changing expectations for universal service
Strategy
•Should not rely on traditional areas of protection
•Business success and brand trust essential to win access to capital and business diversification from shareholders
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Universal service
• Still a strong concept in political (and therefore in regulator) minds
• This cannot last in the longer term – frequency, next day service, rural connections, post office networks – E.g. USPS – Does weakening the USO make mail volumes decline faster?
• The new universal service is “universal access to information” – mobile, hi speed data
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Agenda
PURPOSE &
STAKEHOLDERS
PRINCIPLES &
MEASUREMENT
STRATEGY &
STRUCTURE
BUSINESS
TRENDS
PEOPLE &
MANAGEMENT
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Industry business sectors
Company
Mails
Courier Express Parcels
Logistics
Retail
Finance
Information
Logistics
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Long term scenarios
Letter volume decline (15 years)
% reduction
Fre
qu
en
cy
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Core mails sector stressed
Transactional mail• Increasing e-substitution• Broken link to economic growth• By-passed in developing economies
Business communications mail• Linked to economic performance • Increasing competition from online advertising• Increasing direct competition in delivery
Publications• Printed media under threat
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The traditional route to increasing profits - growth
EBIT F
Y 200
9
Volum
es
Cost I
nflat
ion
Prices
Produ
ctivi
ty
EBIT F
Y 201
00
2
4
6
8
10
12
14
24
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Volume decline creates stress
EBIT F
Y 200
9
Volum
es
Cost I
nflat
ion
Prices
Produ
ctivi
ty
EBIT F
Y 201
00
2
4
6
8
10
12
14
25
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Preparing today for bad case scenario
2008 2009 2010 2011 2012 2013 2014 2015480
490
500
510
520
530
540
Expected Profit Gap
Year
Underlying Rev-enue
Underlying costs
profit gap to be bridged
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Not everything is equal
• Volume trends appear related to the intensiveness of the industry
• Will lesser developed markets catch up?
Mr Busy Mr Lonely
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Letter volumes per capita
€0 €10,000 €20,000 €30,000 €40,000 €50,000 €60,000 €70,0000
100
200
300
400
500
600
700
800
GDP per capita (€)
Let
ter
per
cap
ita
IS
UKCA
GR
NEFR
AUDE
PT
HU
IE
BEJP
IT
ES
CHUS
DKAT
FILU
NO
mean
mean
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Implications for business strategy
Scope
•Business diversification to reduce reliance on traditional business areas
•Ensure e-Commerce capabilities are strong (packet and parcel delivery)
•Ensure well-placed in the new USO “universal access to information”
Price
•Find ways to pay for delivery infrastructure
•Justify higher prices through quality of service
• Retain competitive pricing through best practice productivity or reduction in service standards
Scenarios
•What combination of pricing, volume loss, and productivity growth allows the existing business postal operating model to continue?
•Some Posts are planning for volume reductions of 60-80 % in next 10-15 years – this will force fundamental change to postal operations
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Response to tough times
Variable and lower costs• Wage cuts; all post offices are agencies• Looking to expand casual/part time delivery
Technology investment for service and productivity • Access to state funding• Diversification to support USO in letter mail
Cost control• Looking for market support (e.g. industry sector pay scales)• Aggressive overhead cost containment
Congressional (government) relief• 5 day week debated• Suspend health benefit funding
TNT
La Poste
Deutsche Post
USPS
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Response to tough times
Marketing & merger• Unaddressed innovation; better targeting for DM• Posten merger to assist diversification
Transformation of core operations• Rapid pace of change• Looking at a different labour model
Business diversification and cost control• Core operations review• Retail network rationalisation
Business diversification and variable costs• Flexible labour contracts• Price increases
Post Danmark
Post Belgium
Austria Post
N Z Post
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CEP - Courier Express Parcels
Trend
•Suffering with economic downturn but expected to re-bound, but with highly competitive markets
•Trade down from time certain (express) to ‘next day’ (parcels)
•eCommerce (home shopping) a major growth driver
Strategy
•Customer service: “I want my eShopping NOW and FREE”
•Operational excellence – the postal operator must win this
•Margins may not replace Letter mail losses
•Different markets: B2B, B2C, small and home business
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Logistics
Trend
•Objective is seamless integration from product origination, freight handling, storage and final delivery
•An appropriate diversification from CEP
•One-stop shop selling concept; cross-border, regional and global
Strategy
•Entry strategy – acquisition; management skills
•Scale and confidence in ‘one stop shop’ sales strategy
• Capital needs – avoid assets; link to freight; geographies
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Retail (post offices and agencies)
Trend
•Operated as a strategic business unit, with ownership of the household and small business segments
•Pressure on transaction costs in competition with new media (cheap and growing in availability)
•Financial services and higher value selling
Strategy
•Strategies depend on national post office obligations
•Adding banking or more advanced financial or payments services: “clicks and mortar”
• Infrastructure for government services
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Financial Services
Trend
•Growth of banking, insurance, foreign exchange, gift cards, telecommunications, bill payment and social welfare and pension transfers services, based on technology and the ‘bricks and mortar’ network
•Service provision via joint ventures, with Post acting as agent for badged services OR full ownership
Strategy
•Understanding how this links with Retail and Digital strategies
•Market opportunity very specific to local conditions
• Strong opposition (including political) from established finance houses
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Information Logistics
Trend
•Mails: document management, multimedia intermediary, data
•Logistics: eCommerce (supporting logistics with IT)
•Household: eGovernment, eShopping, ePayments
Strategy
•Ownership of mail production (hybrid mail) completed
•Search for security services – trusted third party?
• Control of the delivery function: delivery options and information
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Information Logistics strategies
Williams Lea; E3• Globalisation of value-added mail management services• E3: digital marketing, secure e-services, e-commerce
eBoks joint venture• National co-ordination for eGovernment and eBusiness• Significant take-up - unique or template?
Earth Class Mail technology and global market• Mailroom management options• Delivery options
Target for 50% postage sales online• Have seen no European similar targeting
Post Danmark
Swiss Post
Korea Post
Deutsche Post
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Stralfors market leader• Information logistics based on print and hybrid mail• Expansion into broader delivery options
ERGO Group• IT operations and outsourcing, with Government, corporate,
medium business clients; consulting and systems development• Information logistics JV with Itella
Innovapost• IT outsourcing JV – services to Canada Post• ePost (bill presentment and payment)
No significant investment• Ensuring online ‘postage’ presence• No hybrid mail services
Norway Post
Canada Post
Royal Mail
Posten
Information Logistics strategies
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A new strategy for the digital age
• Online sales channel: postage, services
• Technology in operations: taking a leadership position in all aspects of core operations and especially in delivery
• Participation in the ‘universal information obligation’
• Finding the right profile for today’s digital (young) consumer
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Earth Class Mail
• A physical mail solution!• Mail shipped to:
– (a) a facility for envelope scanning and storage– (b) a company mail room, for envelope
scanning
• Receiver decides action: open mail, re-direct, shred, …
• Licence to Swiss Post
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Zumbox
• US start-up (private equity)• Assigns a unique email address to every physical
address• Targets senders of mail: send physical mail AND
identical image to email-box• Aim to convert small % of physical mail to electronic
format, saving sender costs and providing receiver convenience.
• Negotiating with non-US postal operators with a licensing model
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Summary of postal strategy
Expect a scenario with steep mail volume loss, requiring new operating models, challenge to existing employment conditions, and a weakening USO mandate
A successful postal heritage gives great strength to a diversification strategy – resources, confidence and trust, broad geographic presence, access to capital and all customer sets
The logistics sector is a natural evolution that can use these strengths to win in a highly competitive sector
The clever use of information technology and a strong digital presence will ensure relevance to future customers and provide competitive advantage, but retaining belief in Direct Mail
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Agenda
PURPOSE &
STAKEHOLDERS
PRINCIPLES &
MEASUREMENT
STRATEGY &
STRUCTURE
BUSINESS
TRENDS
PEOPLE &
MANAGEMENT
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• TEAM• Clarity of roles• Business Unit vs Functional organisation• Support services• Blend fresh thinking, operational
knowledge, respect differences• Performance review• Succession planning
Building the top team
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A [Kantian] theory of leadership
• People are autonomous and rational beings – they have a right to choose for themselves and they are inherently sensible in their choices.
• People are entitled to be treated with dignity and respect.• You cannot use people as a means to an end.• Business relationships are always subject to moral laws. • You do not have to be charismatic to be a good leader. • A leader is not superior to his or her followers. Leadership is not simply based
on the power or authority of one’s position.• A leader should not merely be a servant of his or her people.• Leadership is about educating ‘followers’ to be leaders and driving leadership
down through the organisation.• Consensus in organisations is not possible. • Organisations do need ‘guiding principles’ that govern how they function and
people should participate in deciding them.• The leader must get buy-in, based on the merits of the proposal.• It is not the task of the leader to resolve all disputes.
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Transformation Programs
Management Capability
• Front Line Management
• Middle Management
Productivity Culture
• Measurement
• Workplace organisation
• Internal communications
Industrial Relations
• Unions
• Terms & conditions
Benchmarks • Measure progress
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Labour
COREPERM. P/T
CASUALCONTRACT
PARTNER
CORE F/T Career employee
PERMANENT P/T Peak hour
CASUAL Relief; peak loads
CONTRACT E.g. owner-driver
PARTNER E.g. franchise; agent
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Front Line Management
• The performance of front-line management is at the heart of any transformation program
Issues
• Lacking tools & information for the job• Overworked and stressed• Promoted by seniority
–Identification with workforce–Authoritarian–Under skilled/trained
• Burdened with overheads, memos, information demands, paperwork
• Lack of a principles framework for decision-making
• Decisions overturned • Targets inconsistent with overall company goals
• Not vested with appropriate authority• Inadequate coaching and mentoring
Goals
• Transformation of existing frontline
managers
• Business process discipline
• Freedom to act in interests of
customers and employees
• Demonstrable and ongoing productivity
improvement
• Leadership behaviours
• Supported by their own leaders
• Create an attractive local work
environment
• Meaningful measurement culture
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The role of Middle Management
• Operations: middle management should be tasked with overseeing the transformation at the front-line.
• Functional centre: middle management should be subject to process disciplines to get buy-in from operations
Operations Centre
Fro
nt
line
man
ager
s
Business Targets are held here
Fu
nct
ion
man
ager
s
Coaching
Manager
Process discipline and
coaching manager
Fro
nt
line
man
ager
s
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Internal Communications
• Good internal communications programs allow the company to seize the high ground with employees
Issues
• Unions seem able to communicate more effectively: they have speed and trust
• Front line managers find it difficult to communicate centrally originating messages, and employees find them irrelevant
• Traditional methods (magazines, memos, team briefs) do not persuade or sell the message well enough
• Inconsistent both within the organisation (vertically and horizontally) and outside
• Bottom-up messages don’t get through
Goals
• Targeted and consistent messages
• Well-informed workforce through effective team brief processes, with mix of local and central news
• Company messages are trusted and believed
• Front line managers know before the unions and unions do not have information that workforce does not have
• External communications (eg media reports) consistent with internal messages, or quickly repudiated or explained if not
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Productivity and Measurement
• Quantitative management removes subjectivity and sets the groundwork for a productivity improvement culture
Issues• Seat-of-the-pants day by day management
• Lack of discipline in meeting pipeline objectives: lack of regard and feedback to preceding and next steps in pipeline
• Subjective view of how standards are being met are frequently incorrect
• Lack of language to translate business goals into actionable local behaviour
• Success needs to be measured in an acceptable way
Targets• Improvement projects add a welcome dimension to operational jobs
• Productivity measures created for each operational unit
• These measures are easy to compute and understand
• Unit cost is the basic driver (not merely reducing costs)
• Improvement can be benchmarked across different units and over time in each unit
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Industrial Relations Management
• Create the environment and seize the high moral ground
– Is there a ‘burning platform’?
– “Growth and Productivity”
– Consistency of message (stakeholder alignment)
• Decide the high level strategy:
Confront
By-pass
Collaborate
OP
TIO
NS
mix ‘n match
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Benchmarking Labour Transformation
0
1
2
3
4
5Frontline Management
Middle Management
Productivity
Workplace organisationInternal Comms.
Industrial Relations
Terms & Conditions
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Agenda
PURPOSE &
STAKEHOLDERS
PRINCIPLES &
MEASUREMENT
STRATEGY &
STRUCTURE
BUSINESS
TRENDS
PEOPLE &
MANAGEMENT
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Discussion
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Networking
Elmar Toime
London
+44 7958 010 009