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THE IMPACT OF CORPORATIZATION ON SERVICE QUALITY & CUSTOMER SATISFACTION: A CASE
STUDY ON SOLOMON ISLANDS POSTAL CORPORATION
By
Naolah Pitia
A thesis submitted in fulfillment of the requirements for the degree of Master of Arts in Management & Public Administration
Copyright © 2011 by Naolah Pitia
School of Management & Public Administration Faculty of Business and Economics The University of the South Pacific
January 2011
i
Acknowledgement
I am heartily thankful to my supervisors, Dr. Narendra Reddy and Dr. Gurmeet Singh
whose encouragement, guidance and support from the initial to the final stage of this
study enabled me to develop an understanding of the subject.
I also like to gratefully acknowledge the management team of Solomon Islands Postal
Corporation, particularly to make mention of Mr. Moses Alitoni (Manager – Corporate
Division), Mr. Volia Ale (Manager – Operations) and John Finau (Manager – Finance)
who have assisted towards the project by providing valuable information and data that
enable me to complete this thesis successfully.
My sincere thanks also go in particular to Mr. Douglas Ete and Ms. Rafia Naz. I am
indebted to Mr. Douglas Ete for his valuable assistance in collecting raw data and
information from Solomon Islands government and assisting in administering the
manual filling-in of the survey questionnaires in Solomon Islands. To Ms. Rafia Naz,
for her guidance and advice on how to use SPSS Analyses program and the
interpretation bit of it. I just want you to know that I am so grateful in every possible
way and hope to keep up our collaboration in future.
Finally, I wish to extend my gratitude to all those who have responded to the opinion
survey questionnaire on service quality and customer satisfaction, whether it be online
or by means of manually filling in of questionnaire. Your participation has contributed
a lot to the successful completion of this study.
Thank you all
Naolah Pitia
ii
Abstract This study investigates the impact of corporatization reform process on service quality
and level of customer satisfaction. To that purpose, this study uses information on
Solomon Islands Postal Corporation, which experienced change of governance when it
became a statutory organization in 1997.
Corporatization is a component of the public sector wide reform which has gained
global significance in the 1980s and 1990s. Governments in many countries have
implemented regulatory reforms that allow for changes aimed at improving the
efficiency and productivity of government machineries; including corporatization of
public utilities and other public service departments. However, these reforms have
largely bypassed postal sector which continues to remain dominated by states through
their postal service administrations, and largely protected from competition.
The changing environment of the postal sector over the last decade has increased the
urgency for governments worldwide to re-examine regulations governing how their
public postal administrations operate business; and to enact appropriate changes aimed
at enhancing public postal operators’ capabilities to perform business in competitive
environment without undermining their universal service obligation. Many countries
in the Pacific Islands region, including Solomon Islands, have undertaken to
modernize their public postal administration through the process of corporatization in
order to improve the efficiency of their services, and remain viable and competitive in
the market.
The need to increase service efficiency and quality is a critical strategic focus, given
the increasing technological competition, rising operational costs and changing
customer’s needs and expectations. There are many success stories, particularly from
developed countries, highlighting improved service quality following corporatization
of their public postal administration. This particular study revealed that corporatization
of Solomon Islands postal service has made some positive impact on service quality
and level of customer satisfaction.
iii
Acronyms
ABC Australian Broadcasting Corporation
ADB Asian Development Bank
BOD Board of Directors
CBSI Central Bank of Solomon Islands
CES Currency Exchange Service
CPC Canadian Postal Corporation
DPWN Deutsche Post World Net
EMS Express Mail Service
ERU Enterprise Restructuring Unit
GCNURP Government of Coalition of National Unity, Reconciliation and Peace
GNRU Government of National Unity and Reconciliation
GPPOL Guadalcanal Plains Palm Oil Limited
ICSI Investment Corporation of Solomon Islands
ICT Information and Communication Technology
ILO International Labor Organization
IMF International Monetary Fund
IPU International Postal Union
IPUN International Postal Union Network
KFPL Kolombangara Forest Products Limited
LDC Less Developed Countries
MTS Money Transfer Service
NCP National Coalition Party
iv
NERRDP National Economy Recovery, Reform and Development Plan
OAG Office of Auditor-General
PPO Public Postal Operators
RAMSI Regional Assistant Mission to Solomon Islands
SAP Structural Adjustment Program
SFPL Soltai Fishing and Processing Limited
SI Solomon Islands
SIAC Solomon Islands Alliance for Change
SIDPS Solomon Islands Department of Postal Service
SIPC Solomon Islands Postal Corporation
SIPL Solomon Islands Plantation Limited
SOE State-Owned Enterprise
SOEASP State Owned Enterprise Accounts Strengthening Project
SPSS Statistical Package for the Social Sciences
TEC Telecommunication Evaluation Committee
TPC Tanzania Postal Corporation
TPG TNT Post Group
UPU Universal Postal Union
USO Universal Service Obligation
USP University of the South Pacific
WB World Bank
v
List of Tables
Table 2.1 Different stages of reform of the public postal operators
Table 2.2 Links showing relatively improved service quality
Table 2.3 Postal service links from industrialized countries (IC) to Asia and
Pacific (AP); and Asia Pacific countries to IC and AP respectively
Table 5.1 Respondents profile
Table 5.2 Problems in postal service
Table 5.3 Statements on service quality and customer satisfaction
Table 5.4 Descriptive statistics on service quality (before and after
corporatization)
Table 5.5 Descriptive statistics on customer satisfaction (before and after
corporatization)
Table 5.6 Reliability statistics for service quality and customer satisfaction
(before and after corporatization)
Table 5.7 Item – total statistics for service quality (before and after
corporatization)
Table 5.8 Item-total statistics for customer satisfaction (before and after
corporatization)
Table 5.9(a) Inter-item correlation matrix table for service quality (before
corporatization)
Table 5.9(b) Inter-item correlation matrix table for service quality (after
corporatization)
Table 5.10(a) KMO and Bartlett’s test of sphericity on service quality before
corporatization
Table 5.10 (b) KMO and Bartlett’s test of sphericity on service quality of service after
corporatization
Table 5.11(a) Communalities on service quality before corporatization
Table 5.11(b) Communalities on service quality after corporatization
Table 5.12(a) Total variance explained for service quality before corporatization
Table 5.12(b) Total variance explained for service quality after corporatization
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Table 5.13(a) Factor analysis: Rotated component matrix on service quality before
corporatization
Table 5.13(b) Factor analysis: Rotated component matrix for service quality after
corporatization
Table 5.14(a) Inter-item correlation matrix table on customer satisfaction before
corporatization
Table 5.14(b) Inter-item correlation matrix on customer satisfaction after
corporatization
Table 5.15(a) KMO and Bartlett’s test of sphericity on customer satisfaction before
corporatization
Table 5.15(b) KMO and Bartlett’s test of sphericity on customer satisfaction after
corporatization
Table 5.16(a) Communalities on customer satisfaction before corporatization
Table 5.16(b) Communalities on customer satisfaction after corporatization
Table 5.17(a) Total variance explained on customer satisfaction before
corporatization
Table 5.17(b) Total variance explained on customer satisfaction after corporatization
Table 5.18(a) Component matrix for customer satisfaction before corporatization
Table 5.18(b) Component matrix for customer satisfaction after corporatization
Table 5.19 Rotated component matrix for customer satisfaction (after
corporatization)
Table 5.20 H1: Correlation test outputs (before and after corporatization)
Table 5.21 H2: Chi-square test outputs (before and after corporatization)
Table 5.22 H3: Paired samples t-test output on customer satisfaction
Table 5.23 H4: Paired samples t-test output on service quality
Table 5.24 Challenges and barriers to reform
List of Figures
Figure 2.1 Letter post – domestic service – estimate by region: 2005
Figure 2.2 Letter post – international service- estimate by region: 2005
Figure 2.3 Letter post volume – world estimate: 2005
vii
Figure 2.4 Global postal revenue break down by product – world estimate: 2005
Figure 2.5 Postal revenue by product – estimate by region: 2005
Figure 2.6 The vicious circle
Figure 2.7 PT Pos Indonesia “Wasantaranet”
Figure 4.1 Map of Solomon Islands
Figure 4.2 McKinsey 7S framework
Figure 4.3 Organization chart of Solomon Islands Postal Corporation
List of Appendices
Appendix A: Opinion survey questionnaire on service quality and customer
satisfaction
Appendix B: Definitions on McKinsey’s 7S model
viii
Table of Contents
Page no.
Acknowledgement i
Abstract ii
Acronyms iii
List of Tables v
List of Figures vi
List of Appendices vii
Table of Content viii
1.0 Chapter 1: Introduction 1
1.1 Background to research 1
1.2 Solomon Islands postal system 4
1.3 Purpose and importance of this study 6
1.4 Methodology 8
1.5 Organization of thesis 9
1.6 Definitional issues on corporatization, service quality and
customer satisfaction system 12
1.7 Delimitation of scope and assumptions 16
2.0 Chapter 2: Literature review 19
2.1 Introduction 19
2.2 A historical overview of postal system 20
2.3 Global outlook on postal developments 23
2.4 General performance outlook on postal services in developing countries 29
2.5 The Changing nature of postal sector environment 31
2.6 Postal regulatory reform 34
2.7 Global perspective on postal sector reform 37
2.8 Reform and benefits 43
2.9 Service quality and customer satisfaction 50
2.10 Solomon Islands postal corporation 55
2.11 Aims and objectives of study 56
2.11.1 Aims of study 56
ix
2.11.2 Key investigative questions 57
2.11.3 Objectives of study 57
2.11.4 Hypothesis 58
2.12 Conclusion 59
3.0 Chapter 3: Methodology 61
3.1 Introduction 61
3.2 Research process 61
3.2.1 Qualitative research 61
3.2.2 Quantitative research 62
3.2.3 Reasons for employing quantitative and qualitative research
approach 63
3.3 Research methods and techniques employed in the study 63
3.3.1 Case study 63
3.3.2 Review of literatures 64
3.3.3 Face to face interview (semi-structured) 66
3.3.4 Discussions 66
3.3.5 Personal observations 67
3.3.6 Questionnaire survey 68
3.4 Criteria 69
3.5 Quantitative data analysis 71
3.6 Problems and limitations 72
3.7 Conclusion 74
4.0 Chapter 4: Public enterprise sector and postal reforms in Solomon
Islands 75
4.1 Introduction 75
4.2 An overview of Solomon Islands 76
4.2.1 Government 77
4.2.2 Economy 77
4.3 Pressure for reform 81
4.4 Government reform initiatives – the structural adjustment
program (SAP) 82
x
4.5 An overview of state-owned enterprise reform 87
4.5.1 Corporatization and privatization program 88
4.5.2 Strengthening of management and financial capacities 88
4.6 Solomon Islands postal reform 92
4.6.1 Background overview of Solomon Islands postal system 92
4.6.2 Corporatization of Solomon Islands Postal Service 94
4.7 Postal services and products 98
4.8 Analysis on the effects of change on management variables 101
4.9 Other issues 108
4.10 Barriers to state-owned enterprise reform 109
4.11 Conclusion 115
5.0 Chapter 5: Data analysis and result interpretation 117
5.1 Introduction 117
5.2 Demographic profile of the sample 118
5.3 Problems associated with postal services in Solomon Islands 119
5.4 State of postal service quality and level of customer satisfaction before
and after reform 121
5.4.1 Descriptive analysis on the state of postal service quality 122
5.4.2 Descriptive analysis on the level of customer satisfaction before
and after corporatization 126
5.5 The impact of corporatization on service quality and level of customer
satisfaction 129
5.5.1 Impact of corporatization on service quality 129
5.5.2 Impact of corporatization on the level of customer satisfaction 133
5.6 Reliability and construct validity (factor analysis) test outputs 135
5.6.1 Reliability test outputs 135
5.6.2 Construct validity (factor analysis) 136
5.7 Hypotheses testing and outputs 147
5.7.1 Hypothesis one test output 147
5.7.2 Hypothesis two test output 148
5.7.3 Hypothesis three test output 149
xi
5.7.4 Hypothesis four test output 149
5.8 Discussion on the findings 150
5.9 Success factors 151
5.10 Challenges and barriers to the efficiency of postal service delivery
in Solomon Islands 153
5.11 Conclusion 158
6.0 Chapter 6: Summary and conclusion 161
6.1 Introduction 161
6.2 Summary of discussions 161
6.3 Aims, objectives and hypotheses of the study 167
6.4 Summary of the empirical findings 169
6.4.1 Rationale for postal sector reform in Solomon Islands 169
6.4.2 Problems 170
6.4.3 Impact of reform on postal service quality 171
6.4.4 Impact of reform on customer satisfaction 172
6.4.5 Relationship between service quality and customer satisfaction 175
6.5 Major success factors, challenges and barriers to sustainable reform 176
6.5.1 Success factors 176
6.5.2 Major challenges and barriers 178
6.6 Major policy implications and recommendations 183
6.6.1 Policy implication 183
6.6.2 Recommendations 184
6.7 Lessons learned from this study 186
6.8 Major areas for future research 188
7.0 Bibliography and references 190
8.0 Appendices 206
8.1 Appendix A: Opinion survey questionnaire on service quality
and customer satisfaction 206
8.2 Appendix B: Definitions on McKinsey’s 7S model 211
1
Chapter 1
Introduction
1.1 Background to the research
The restructuring of state-owned enterprises (SOE) and public-regulated services is
known to have gained global perspective over the last three decades. The global
phenomenon, which began in Europe in 1960 and 1970, has gained momentum as it
spread to the developing countries in the 1980s introducing organization changes
within government machinery through regulatory reforms that resulted in
autonomization and changed in governance structure through the process of
corporatization and privatization of public-regulated service
organizations/departments and public companies respectively.
Reforms of this genre are components of a wider spectrum of reforms, consolidated
under government’s structural reform of public sector, and are commonly applied to
infrastructure, telecommunication, public utilities, transportation and health sectors,
with specific focus on right-sizing the public sector and improving performance of
these service providers. Such reforms are not only appropriate, but critical in view of
the increasing environmental pressures and challenges faced by the public-regulated
service organizations, changing public demands and expectations on service providers
for better quality services, changing political influences in management of public
organizations, and the increasing demand by state in ensuring accountability (Harding,
A and Preker, A: 2000). In addition, modification of the incentive regime that SOE
managers were exposed to, including change in the funding arrangements, and the
competitive pressures have all imposed greater demand on management of the
transformed SOEs and service organizations to formulate strategies that would drive
public organizations towards achieving their mission and goals.
A major strategic focus for the transformed state-owned enterprises is to make profit
and contribute to the economic growth and sustainability of the enterprises. For
transformed public service organizations to accomplish this end, provision of service
2
quality is of paramount importance as it assumingly leads to increase customer
satisfaction that in turn translates into positive public image, customer retention, newly
attracted customers, and increase sales and profit margin.
In view of this, it is important that organization reforms must be sufficiently effective
to put pressure on service providers to deliver service quality that matches or
supersedes customer’s expectations, and moreover holding them accountable for their
service performance. Managerial autonomy as provided for under corporatization act
gives management virtual control over the inputs and provision of services, and the
power to formulate goals and decisions that are viable for economic growth. Such
goals and decisions must take into consideration the capability of the service provider
to implement such decisions vis a vis the needs and expectations of the customers.
Findings of various reports by researchers like Eboli, L and Mazzulla, G (2007)1 and
Harding, A and Preker, A (2000), revealed successes and/or mixed successes in the
improvement of services and customer satisfaction following corporatization of
public-regulated service organizations. For example, Eboli, L and Mazzulla, G (2007)
report on organization changes implemented in Bus Transit, in the urban area of
Cosenza in Southern Italy, to improve service quality attributes indicated successful
result whereby quality of bus transit service has improved leading to high customer
satisfaction. Similar result was also highlighted by Ross Hinds (IPC, 13 June 2007) on
end-to-end postal service quality in the European countries’ postal services following
the performance measurement by IPC over a period of thirteen years (1994 – 2006).
The findings show that ‘early delivery (J+1)2 has improved from 44 percent in 1994 to
82% in 2006, on time (J+3) from 69 percent to 95 percent and later than J+4 from 16
percent to 2% respectively.
1 These reports include UPU reports, World Bank and UPU reports, Charles Kelly (2004), Eboli, L and Mazzulla, G ( 2007); Researches and reports include “Service quality attributes affecting customer satisfaction for bus transit”. 2 According to UPU international mail delivery standard J - represents the day of posting + (x) represents the days. Therefore J+1 represent early delivery (mail posted and delivered on the same day).
3
Haggarty, L, Shirley, M and Wallsten, S (2002), on the other hand, highlighted mixed
successes following telecommunication reform in Ghana. While there was an
impressive success in increasing service accessibility3, which basically attributed to
expansion and growth in fixed lines and telephones, congestion in the network became
a problem thus affecting the quality of service. Moreover such expansion was only
concentrated in greater Accra area, and failed to provide access to underserved areas.
Most of the targets agreed to in principle with the state and the regulator, National
Communication Advisory (NCA) board, were also not achieved. This was partly
attributed to weak institutional setting resulting in weaknesses on the part of the
regulator to oversee the effective implementation of reform process and compliance to
the agreed terms in achieving the specified target within the specified time frame.
Similarly, Harding, A and Preker, A (2000)4 report on the corporatization of Hong
Kong health sector, highlighted that although the hospital had indicated successes on a
number of fronts, there is a mixed success in terms of providing quality health services
and customer satisfaction. Not only does consumer responsiveness and dealing with
long queues remain major issues of concern, there is also concern with regards to
charges imposed on customers by the service providers. It was mentioned in the report
that service providers either charged higher rate for quality services, or on contrary,
reduced quality of services in order to imposed lower charges that are affordable to
patients. This exemplifies some issues that state needs to deal with in order to strike a
balance, so that customers are charged rates that are affordable without service
providers compromising the quality of services they render.
The discussion so far highlighted the basic assumption that forms the essence of this
study. Transformation of public-regulated service organization implies making a
difference in the performance; from the present state to an improved state of
performance. Customer is the lifeblood of business enterprise therefore, to maintain
and expand a loyal customer base; transformed public regulated service organizations
3 There is a rapid growth in fixed lines due to donor funding, threat of penalty for non-performance and direct competition from rapidly growing mobile services. 4 Understanding Organizational Reforms: The corporatization of Public Hospitals by April Harding and Alexander S. Preker, September 2000.
4
must utilize the powers invested in them to formulate and implement strategic
decisions that would empower and enhance their capabilities to provide services that
are affordable and fulfill customer’s needs and expectations.
It is in this context that this study intends to explore into postal sector reform, with
specific focus on corporatization of public postal administration, as a strategy
undertaken by government to enhance public postal administration’s capability to
improve service quality that will provide satisfaction to consumers. In general, this
study intends to assess whether transformation of public postal administration to
public corporation has contributed towards achieving an efficient service delivery
network that is characterized by high service quality and, that which fulfils customer
satisfaction. Such analysis will be exemplified through the case study of Solomon
Islands Postal Corporation (SIPC).
1.2 Solomon Islands postal system
Prior to corporatization, the provision of postal services in the Solomon Islands was
monopolized by state through the Solomon Islands Department of Postal Service
(SIDPS), which came under the Ministry of Post and Communication (Post Office
Act, 1978). The provision of postal services by the SIDPS was extended to all islands
in the provinces of Solomon Islands, which scattered approximately over a distance of
1600 km from the East to West and 900 km from North to South. The total population
as in 2006 was about 552, 4385, and of this about 93, 914 people lived in major sub-
urban areas including the capital city of Honiara , which alone was accounted for 54,
600 inhabitants6.
The national postal service through the SIDPS had operated ten (10) post offices,
including the general office in Honiara, and 108 postal agencies throughout the
country. The post offices, which were mainly located in the provincial capitals, have
provided comprehensive facilities such as sale of stamps and aerogram, acceptance
5 Background Note: Solomon Islands; Bureau of East Asian and Pacific Affairs, March 2008 accessed 31/03/08 on website: http://www. http://www.state.gov/r/pa/ei/bgn/2799.htm. 6 City population is based on the 1999 statistics; retrieved on 20/2/07 on website: http://www.citypopulation.de/Solomon.html.
5
and delivery of mails including registered mails, business reply post (BRP) and bulk
postings. Mail order service was also provided to facilitate transfer of money overseas
and likewise locally through postal order service.
Unlike postal offices, postal agencies were limited only to the sale of stamps and
handling of mails including registered articles. Most postal agencies7 were operated by
churches, cooperative societies, hotels, provincial governments, schools and individual
businesses, and were paid an annual fee, based on the weight of mails handled, and
commission on stamps sold. Operating through such agencies was the most
economical way government, through its postal division, was able to extend its basic
postal services to remote areas.
All letter mails and parcels handled by the postal administration to and from the post
offices in the provincial capitals and few sub-urban centers, which are serviced by the
National Solomon Airlines, were carried by air. Outward mails to remote areas which
were located beyond post offices and postal agencies were delivered by the provincial
shipping services during their regular schedule, or depending on the availability of the
shipping service. Moreover, the international mails and parcels were carried by the
international carriers that operated into Honiara once or twice weekly from Port
Moresby in Papua New Guinea, Brisbane (Australia), Port Vila (Vanuatu), Nadi (Fiji),
and Auckland in New Zealand.
In spite of the important role it plays in the economy, SIDPS had manifested a lot of
weaknesses which include poor facilities, poor quality services, low mail volume, low
revenue and lack of investment. Furthermore, various reports and documents8 have
attributed such general poor performance to a combination of factors, some of which
were geographical-related; others were public-ownership-related, including poor and
inadequate national infrastructures, inadequate postal facilities and space that
subsequently resulted in considerable delay in processing, sorting and deliveries of
mails.
7 Most of the postal service agencies were licensed to sell stamps as well. 8 Reports including Smyth, M.D.S. 5 – 7 August, 2004; Smyth, D.S. 23 June 1995; Vasumitra, 1999.
6
These factors does not only affect the efficiency of the delivery process, but have also
significantly affected postal administration’s ability to establish new services and/or to
improve upon the existing ones.
In view of the changing nature of the postal environment which led to gradual
invasion of the postal market by new entrants, and their use of advanced information
and communication technology (ICT) to provide fast and quality services, state is
challenged to respond with appropriate measures that would enhance the capacity of
its national postal incumbent to improve its postal services quality so that it continues
to retain and expand its customer base.
Although the national postal incumbent still monopolizes letter mail services,
increasing preference over the usage of emails and internet services by scholars and
business sectors alike is threatening its business. In view of this, corporatization of
SIDPS is seen as the desirable strategy through which the management, under the
provisions of its legal framework, given the autonomy to make commercial-oriented
decisions that will provide directions towards corporation’s successful performance.
Hence, the corporatization of Solomon Islands Department of Postal Service (SIDPS)
in 1997, which is a component of the public sector reform that attempts to improve
management and quality of public service delivery, is an effort geared towards
addressing emerging issues and challenges in the postal sector.
1.3 Purpose and importance of this study
The prevailing general assumption is that transformation of public-regulated service
organizations through the process of corporatization will enhance the capability of
public-regulated service providers to improve service quality, efficiency and
productivity, leading to increase customer satisfaction that subsequently will lead to
customer retention, increase sales and profits, new investments that eventually will
boost their operational developments and sustainability. While this assumption
provides a broad spectrum of analysis, this study will basically focus its analysis on
the assumption that ‘corporatization of public-regulated service organization leads to
improved service quality that gives satisfaction to consumers’.
7
More specifically, the study intends to assess whether corporatization of public postal
administrations lead to improved service quality that satisfies its customers.
While many literatures and deliberations on the transformation of public service
organizations, as highlighted in section 1.1, have proven the assumption correct, or
true in some fronts, the question this study intends to investigate and answer is
‘whether the assumption is true in the case of Solomon Islands Postal Corporation’.
The key investigative question is “does corporatization of Solomon Islands Postal
Service enhances the capability of Solomon Islands Postal Corporation to achieve an
efficient postal service delivery network that is characterized by high service quality
that satisfies its customers?” This key question lays the basis for the purpose of this
study in seeking answers to the following related questions.
1. Has the corporatization of SIDPS improved postal service quality?
2. Has the corporatization of SIDPS enhanced the level of customer satisfaction?
3. How effective is corporatization of SIDPS in improving service quality and
customer satisfaction?
4. Is there a relationship between service quality and customer satisfaction in the
case of Solomon Islands Postal Corporation?
5. What are the key problems pertaining to postal service delivery in Solomon
Islands?
6. What are major challenges/barriers to the success of Solomon Islands Postal
Corporation?
7. What are the major success factors of corporatization in Solomon Islands?
8. What future directions should be considered for future reform undertakings?
These research questions are translated to form the aims and objectives of this study as
given in chapter 2; sub-sections 2.11.1 and 2.11.3 respectively.
Following the corporatization of SIDPS in 1997, there are limited or no empirical
studies undertaken that critically analyze the effectiveness of such changes to effect
improvement on the quality of Solomon Islands postal service delivery and the level of
customer satisfaction.
8
Hence there is a general need to assess whether transformation of SIDPS is successful
in enabling the corporatized Solomon Islands postal entity, which is now known as
Solomon Islands Postal Corporation (SIPC), to improve and provide service quality
that fulfils its customer’s satisfaction. It is to fulfill this need that this study is initiated
and undertaken.
This study is deemed important, particularly for the national government and
stakeholders in making good decisions, which will enhance performance and
sustainability of public enterprises, in any similar future undertakings. On a broader
perspective, this study would be more appropriately seen as an additional contribution
to a number of studies that have already been undertaken by various international
organizations (e.g. IPU, UPU, World Bank (WB) and International Monetary Fund
(IMF), including academics and researchers, world over, towards a body of knowledge
on the issues pertaining to the process of postal sector reform and the impact of such
reform on service quality. Finally, it is hoped that the findings of this study would also
provide additional insight into the difficulties and challenges faced by small and weak
economies, like Solomon Islands in view of the challenges brought about by the global
changes, and their capability to respond appropriately to these challenges.
1.4 Methodology
Both quantitative and qualitative research methods were used in this study to collect
information and data required to establish the effectiveness of corporatization in
improving service quality and customer satisfaction. The research strategies used
include literature review, consultation of reports, survey questionnaires, discussions,
structured interviews and personal observations.
The questionnaire survey on service quality and customer satisfaction, from which raw
data was collected and analyzed to answer some of these question, was administered
to postal users from the provinces of Solomon Islands who are basically residing in the
urban and sub-urban areas throughout the country. Due to time and financial
constraints, consumers representing those in the rural and remote communities were
not included in the survey.
9
The assessment methods include general descriptive and comparative analyses on the
state of postal service quality and level of customer satisfaction, both prior and after
reform. SPSS Paired Sampled T-test was performed to establish whether there has
been any improvement following reform. Other tests including correlation test and
chi-square were also used to determine the relationship between service quality and
customer satisfaction and the dependency of customer satisfaction on service quality
respectively. More on the research methodologies used in the study will be discussed
in chapter 3.
1.5 Organization of thesis
Most of the information and data collected during the course of this study by way of
literature review, questionnaire surveys, interviews, discussions and personal
observations, are analyzed and discussed in six chapters.
Chapter 1 provides the introductory background to this study. It includes a brief
discussion on the restructuring of public regulated service organizations, drivers for
change and the pressure for reforms, and the importance of reforms that effect
improvement on service quality that satisfies customers, particularly in the context of
service organization. This draws to focus the general assumption that reform (due to
competition) leads to improvement in service quality and customer satisfaction. These
general discussions set the basis and purpose for this study, and why this study is
important. Specifically, this study dwells on the corporatization of public postal
service and the impact of such reform on service quality and customer satisfaction, as
exemplified through the case study of Solomon Islands Postal Corporation. The key
investigative question is highlighted, including related questions from which the aims
and objectives of this study are drawn. Later sections of this chapter include a brief
introduction to research methods used, chapter organization, definitional issues on
terms ‘corporatization’, ‘service quality’ and ‘customer satisfaction; and the
delimitations pertaining to the scope and assumptions of this study.
10
Chapter 2 provides an historical overview of the postal system, followed by a global
perspective on postal sector developments; and a general overview on postal sector
performance in the developing countries.
This led to discussions on the changing nature of postal environment and how it
influence postal business, postal regulatory reforms with specific focus on the
corporatization of public postal operators; and postal reform developments in various
regions globally, including benefits gained from successful implementation of such
reforms. The importance of service quality and customer satisfaction to the economic
success of transformed postal corporation, including UPU’s efforts that geared
towards assisting its member countries to improve postal service quality, are also
highlighted in this discourse.
Later section of the chapter briefly introduces Solomon Islands Postal Corporation;
and its adopted strategic mission, and quality/customer-related goals and objectives
that highlighted its intention to provide quality service that satisfies its customers. This
led to key assumption and research questions being revisited and principal aims,
objectives and hypotheses of this study spelled out.
Chapter 3 discusses the research process and methods used in this study to obtain
information and data. It also justifies the usage of both the quantity and the quality
methods employed, and how data collected through these methods would be used in
the study. The indicators used to measure service quality and customer satisfaction are
also listed and explained in this chapter. Finally, the problems and difficulties
experienced in the course of this study are also highlighted.
Chapter 4 provides a general overview on Solomon Islands government, its role in the
economy, and the pressure on the government to implement a public sector-wide
reform program. Some discussions are made on reform initiatives undertaken by
successive government since 1980; however, the main focus of this chapter is the
component of the public sector-wide reform program that dwells on public enterprise
reform as articulated in its corporatization and privatization policies.
11
A section of this chapter dwells on the reform initiatives undertaken within state-
owned enterprises (SOE) to improve their institutional capacity and subsequently
performance, and later part of the chapter dwells on the Solomon Islands postal
system, and its transformation through corporatization process.
The later forms the main focus of this study and the basis on which principal
objectives of this research, pertaining to the effectiveness of reform to improve quality
of postal service delivery and customer satisfaction, are established and investigated.
Chapter 5 presents the quantitative data (which are acquired through the use of
structured questionnaire) and its analysis outputs on the level of Solomon Islands
postal service quality and customer satisfaction prior to, and after corporatization of
Solomon Islands Department of Postal Service (SIDPS). The quantitative data are
statistically analyzed using SPSS program. The hypotheses test outputs are used to
confirm the descriptive analysis outputs on the data pertaining to service quality and
customer satisfaction. Based on the statistical analysis outputs, the discussion moves
on to look at the impact of reform on postal service quality and level of customer
satisfaction.
Qualitative data which are acquired through the field work study are also used, where
appropriate, to give insight into the quantitative findings and the barriers and
challenges that have significant bearing on the capability of the incumbent operator in
providing a sustainable quality service that fulfils customer’s demands and
expectations.
Chapter 6 forms the conclusion of this study. It begins by providing the summary of
major discussions in the preceding chapters, and findings of this study. In the
discourse, key objectives and hypothetical assumptions of this study are revisited to
establish whether they have been successfully fulfilled or not. Major policy
implications and recommendations for future consideration by both the government
and SIPC management are highlighted. Finally important lessons drawn from this
study and major areas for future research are also highlighted and discussed.
12
1.6 Definitional issues on corporatization; service quality and
customer satisfaction
1.6.1 Corporatization The term ‘corporatization’ is defined as the process whereby a public department or a
public agency is transformed into a public corporation through an enactment of
parliament. It is usually taken as a first step towards the process known as
privatization9 whereby former public assets or public functions are sold or given to
corporate entities. As a public corporation, the entity is subjected to corporate
requirements such as commercial and tax laws, accounting criteria and labor laws.
While the process enhances managerial autonomy (which gives organization some
freedom to make commercial oriented decisions, detailed planning and
implementation of services) the functions of setting sectoral policies continues to be
the function of the government as owner of the corporation. This implies that the
enterprise is not free from being subjected to regulatory oversight. Most postal reform
programs share the same goals. Hence the aims for corporatizing postal service
include;
- improving quality of service
- providing an efficient universal service
- ensuring autonomy and financial viability for the public operator
- regulating the postal market place to ensure fair competition; and
- stimulating the entire postal sector to better performance and greater economic
contribution.
It is hoped that by corporatizing the postal services, the new corporations will be able
to reconcile the need for efficiency and profitability, and in compliance with customer
oriented universal service obligations, the corporations would be capable of
guaranteeing quality services that meets customer’s needs and expectations at
9 Privatization is a process whereby former public assets or public functions are sold or given to corporate entities (http://www.en.wikipedia.org/wiki/Corporatization) accesses on 2nd May 2007.
13
reasonable price. A most recent statement of the UPU’s basic Mission10 calls for
reform of postal administrations and to ensure universal postal service, and
improvement of service quality.
Many researchers have defined definitions of service quality and customer satisfaction
in different ways to establish the positions they have approach the two constructs. This
section attempts to highlight some of these definitions and establish a working
definition that is adopted for this study.
1.6.2 Service quality
The work of early researchers like Crosby (1979), Deming (1986), Juran (1983; 1988)
Gronroos (1982; 1984) and Parasuraman et al (1985; 1988; 1991) have raised
considerable interest among the academics and researchers on the subject of service
quality. The reason for such an interest in the subject is the belief that there is a strong
relationship between service quality and business performance (Juran, 1988; Capon et
al, 1990; Christopher, 1998, Slack et al, 2003).
Literatures on service quality have highlighted two main conceptions of service
quality. The first is the disconfirmation model which was developed by Olivers in
1980s (cited in Santos, 2003), and on which many earlier writers have based their
models on. The disconfirmation model conceptualizes service quality as a measure of
how well the level of service delivered is matched with customer's expectation. The
predominant notion based on these works is that “service quality is the difference
between customer’s expectations and perceptions on all factors that matters to
customers” (Santos, 2003). Gronroos’ (cited in Caruana, 2000) assessment of the
notion suggests that the gap between customer’s expectation of service and perceived
level of service received is influenced by two dimensions which he coined as
“technical quality – the actual service received by customers” and “functional quality
– how a service is provided”.
10 Beijing Postal Strategy, 2005 and also cited in “The postal industry in an internet age’, 2004
14
Parasuraman et al (1988) developed SERVQUAL, an instrument that claims to
measure the gap between expected service and perceived service, and identified five
generic dimensions of service quality which include tangibles, reliability, responsive,
assurance and empathy (also cited in Li et al, 2006). Boronico (1997) concurred that
service quality is measured by its reliability and is defined as the probability that a pre-
determined service standard is met.
The second conception is the performance-only model. Many writers like Santos
(2003); Page and Spreng, (2002); Dabholkar et al, (2000); and Zeithmal et al (1985),
have argued that, although perception-only measure is a sufficient indicator of service
quality, performance-only model (or direct-effect model) is a more superior measure
than the disconfirmation model in the sense that it is more reliable and is a stronger
indicator of service quality than perception-only model. Moreover, it enhances
understanding of service quality evaluation at a factor level through cross sectional
design (Santos, 2003).
Based on these arguments Page and Spreng (2002) defined service quality as “the
overall evaluation of service performance”. This is similar to the definition provided
by Zeithmal et al (1985) which stated that quality is judged in terms of excellence and
superiority.
In the context of this study, performance-only notion as discussed by writers like
Parasuraman et al (1988), Cronin et al (2000), Brady and Cronin (2001) and
Dabholkar et al (2000) as cited by Dean (2004) and Page and Spreng (2002) will be
adopted. The reason being that the raw data used in the analysis to determined whether
there has been any improvement in service quality following the corporatization of
SIPC, largely reflected respondent’s overall evaluation of service performance11
measured against his or her expectation of the service; and perception of the actual
service received. Hence, for the purpose of this study, service quality is defined as
11 Customers’ perception is very much influence by their experience on how the services are delivered to them and their expected level of service quality compared with the perceived level of service they are receiving.
15
“customers’ overall judgement of service performance in terms of excellence and
superiority, measured against their expectations”.
The five generic dimensions as proposed by Parasuraman et al (1985; 1988) and Li et
al (2006) will be applied in this study to examine both the level of service quality and
customer satisfaction in the context of postal service delivery in Solomon Islands
following the corporatization of SIDPS in 1997. These dimensions are also identified
by an UPU report (February, 2003)12 as being crucial for the provision of postal
service.
These dimensions include:
(a) Availability of service – the degree to which customers can access delivery
service and contact customer service.
(b) Responsiveness of service – the willingness and readiness of staffs to provide
services and degree to which staffs react promptly to customers.
(c) Reliability of service – consistency of performance and dependability. Parcels
are delivered to right receivers without damage within the promised time
scheduled.
(d) The Completeness of service – the degree to which the total job is finished.
(e) Professionalism of service – the degree to which the provider uses suitable
professional behaviours, while working with customers such as politeness,
respect, consideration, and friendliness of the contact personnel. (Definition adopted from Li et al, 2006).
1.6.3 Customer satisfaction
Customer satisfaction is also defined in number of different ways. Researchers like
Oliver (1981) and Brady and Robertson, (2001) defined satisfaction as “consumer’s
feeling of pleasure or disappointment resulting from comparing a product’s perceived
performance in relation to his or her expectation”, while others like Boulding et al
(2003); Yi and La (2004); Boronico’s (1997), and Jones and Suh (cited by Gilbert and
12 UPU, Quality management structure – a model for developing countries, February 2003
16
Veloutsou, 2006) discussed two distinct concepts of satisfaction, which are
transaction-specific satisfaction; and cumulative satisfaction.
The transaction-specific relates to specific encounter with the organization and its
service/product (Boshoff and Gray, 2004); while overall satisfaction refers to an
accumulation of experiences that customer has with various facets of the organization
(Johnson, Anderson and Fornell, 1995). Based on these cumulative experiences,
customers established personal standards and expectations on which they use to
measure the quality of service. Bleul (2005) various definitions of satisfaction
highlighted two key concepts. These are sacrifice and expectation. While the value of
money spent as payment for a service can be observed as perceptual rather than
absolute, customers view this as a sacrifice for which the expected level of service
received in return is already predetermined. Although all the definitions of customer
satisfaction given above are defined in different ways, they are all similar in meaning
and context.
For the purpose of this study, customer satisfaction is defined as “consumer’s feeling
of pleasure or disappointment resulting from comparing a product’s perceived
outcome in relation to his or her expectation” (Brady and Robertson (2001); and his or
her accumulative experiences with various facets of the service organization”
(Johnson, Anderson and Fornell, 1995)
The reasons for choosing this definition is, firstly, it embraces the notion that customer
satisfaction derives from both specific encounter with the service organization and its
services/products; as well as from customer’s accumulative experience with all facets
of the organization. To simply use specific encounter as an indicator for satisfaction
maybe sufficient, but too simplistic and could be biased without bringing into focus
cumulative experiences of customers with all facets of the organization and the service
providers.
1.7 Delimitation of scope and assumptions
This study primarily focuses on the corporatization of SIDPS and the effectiveness of
such reform in improving the performance of the Solomon Islands Postal Corporation.
17
Moreover, the performance analysis used to assess the effectiveness of corporatization
reform in improving performance is limited only to service quality and customer
satisfaction pertaining to mail service delivery, using data collected through a service
quality opinion survey that was conducted in the urban and suburban areas in the
provinces of Solomon Islands. Because of time and economical constraints, postal
users in the rural and remote areas within Solomon Islands are not included in the
survey.
In view of these delimitations, the findings and conclusions of this study into the key
assumptions highlighted in the discussion are debatable. The reasons are, firstly, while
the conclusion of this study may be reflectively true for SIPC, the same may not be
conclusive for other corporatized public-regulated service organizations. Furthermore,
the restrictedness of the performance analysis to only service quality and customer
satisfaction provides room for more debates on whether the findings are conclusive for
the overall performance of SIPC.
Finally, the conclusion drawn from this study on the effectiveness of reform in
improving the quality of postal service delivery in Solomon Islands and level of
customer satisfaction may be biased and open to debate, since it is largely based on the
perceptions and experiences of urban and suburban customers only.
Additional insights into the effectiveness of corporatization on improving SIPC
performance would have been obtained if this study has been extended to include:
a. perceptions of service customers in rural and remote communities,
b. other performance indicators such as profitability, product
development, sustainability of the corporatized entity; and
c. an analysis on the performance pertaining to other services such as
retailing, financial services which include postal banking and money
transfer services.
Finally, a comprehensive study into the effectiveness of corporatization on
performance using a comparative analysis on three or more corporatized entities
would have given a conclusive assessment, and profound insights into all aspects
18
which are in one way or the other contributed to the general level of performance
exhibited by the corporatized entities.
19
Chapter 2
Literature review
2.1 Introduction
This chapter presents the literature review component of this study, and it begins by
providing an historical overview of postal system and the important role it plays in the
socio-economic developments. A global perspective on the postal developments is
also provided, including an overview on the general performance of postal sectors in
the developing countries. The discussion on the latter highlighted some general
weaknesses that typify the postal system in many developing countries, and that have
subsequently contributed to their overall low performance output.
The changing nature of the postal sector environment and the emerging challenges and
opportunities that pressured governments world over to reform their postal sectors are
also deliberated on, leading to discussions on postal regulatory reform which was
undertaken by many developing countries to facilitate postal sector reforms, which
include corporatization and modernization of their postal structure and processes. A
global perspective on postal sector reform developments has also formed part of this
discussion, with particular focus on reform efforts in various regions around the world
including member countries of European Union, Caribbean region, African-Sahara
region and the Asia Pacific region. Exampled cases of successful implementation of
postal reforms and subsequent benefits gained from such undertakings are also
highlighted.
The benefits reaped from successful implementation of reforms justify the assumption
that transformed public postal organizations can thrive successfully in competitively
dynamic environment given the effective and adequate institutional support to
facilitate successful reform process. However, crucial to the economic growth and
sustainability of transformed postal service organizations is the provision of service
quality that satisfies customers.
20
This lead to further discussions that recapped on service quality and customer
satisfaction as discussed in chapter 1; and the relationship between competition13,
service quality and customer satisfaction, and the assumption that transformation of
postal administrations will increase capability of the transformed postal corporation in
improving and providing postal service at a level of quality that is deemed acceptable
to customers satisfaction. The importance of service quality is reflected in UPU’s
efforts in providing training for public postal corporations and administrations in its
member countries. Some successful cases, particularly from countries in Asia Pacific
region whereby postal service quality were indicated to have improved following their
implementation of reforms, are highlighted in the discussion.
Later section of this chapter briefly introduces Solomon Islands Postal Corporation
and its adopted strategic mission and quality/customer-oriented goals and objectives
which highlight its intention to provide quality service that satisfies its customers.
These provide basis for an in-depth deliberation on postal reform in Solomon Islands
which will be dwelled on in chapter 4, and discussion on the empirical findings on the
impact of such reform on service quality and customer satisfaction in chapter 5
respectively. Finally, the key assumption that forms the basis of this study, and the
research questions as highlighted in chapter 1, will be revisited; and the principal aims
and objectives of the study and the hypotheses this study seeks to test are also listed
and discussed.
2.2 A historical overview of postal system
The term ‘postal sector’ broadly encompassed any activities and services that related
to letter mails and parcels. These include pick-ups, clearance, sorting, transport and
delivery of postal items (letter and parcels)14, post office counter services related to
13 The transformation of public service organizations through regulatory reforms allows postal corporation to do business in competitive environment. 14 Posted items include including letters, newspapers, journals, periodicals, brochures, leaflets and similar printed matters whether for domestic or foreign destinations (as defined under the in the Services Sectoral Classification List (MTN.GNS/W/120), subsector 2A on postal services item 7511 in the provisional United Nations Central Product Classification (UNCPC) (Series M. No. 77, 1991).
21
letter and parcels and other related services pertaining to letter and parcels such as
mail box rentals (World Bank, 2004 p7).15
Although history has noted the existence of post services more than two thousand
years ago, postal system only became nationalized following the emergence of modern
states. Since then, the provision of core postal services has always been predominated
by state through its national postal enterprise or a department of a line ministry, which
in most case includes telecommunication and utilities.
The postal system in many countries is characterized by two main features. These are
government-owned monopoly16 and the Universal Service Obligation (USO), which
entails the delivery of letters and parcels ubiquitously. As a public monopoly, its
postal activities are driven by national political objectives that supported national
development in communication activities, including regional developments,
employment generation and national cohesion (Finger et al, 2006); and are largely
protected from competition.
Over the years, postal services have played important role in the socio-economic
developments in many countries17. Through their large distribution network of post
offices nation-wide, posts provide citizens accessibility to a range of services, which
include core postal services of letters and parcels; retailing and financial services
which include bill payments, pension payments, money transfer and post banking.
Furthermore, it has also strongly supported the national economy by facilitating
exchange of information and goods at affordable prices.
Minimal changes were seen in the postal sector until 1970s when private operators
were established and began competing with designated postal operators, particularly in
the provision of express and courier services, and to a lesser extent, parcel services.
15 Guislain, P. The postal sector in developing and transition countries: Contributions to a reform agenda; The World Bank Group, Global Information and Communication Technologies Department, Policy Division, September 2004 16 In some countries the public postal system monopolizes a defined portion of the letter mail market. 17 UPU, Postal regulation: Principles and Orientation, Berne 2004 p 7.
22
The competition from private operators became more intensive and challenging in the
face of dramatic changes that are shaping the sector’s environment into a highly
competitive one today.
The emergence of globalization and introduction of advanced information and
communication technologies (ICT) have not only brought new opportunities for public
postal administrations, but also impose challenges that posed threats to traditional
postal products. The influx of new entrants into the market does not only increase the
level of competition, but their use of advanced ICT to provide fast and quality services
has also posed serious challenges that require traditional postal incumbents to respond
to appropriately. More on the changing nature of the postal environment are discussed
in section 2.5.
Declining mail volume and changes in mail-mix resulting in decline volume for high-
margin products such as First Class Mail and increase volume for low-margin
products (e.g. some types of standard mail), which subsequently resulted in reduced
revenues to cover the operational costs and decline in capital investment, are examples
of some challenges that postal incumbents have to deal with as a result of high
competition and increase preferential use of internet services by major customers.
The emerging opportunities and challenges imposed by these changes, together with
the need to improve and/or produce postal service quality that satisfy customers,
compelled governments in many developing countries to undertake regulatory reforms
that allow public postal authority to gain control over the ever changing sector and to
ensure that they continue to fulfil their service obligation. Although transformation of
SOEs and public service organizations has gained global perspective over the last
three decades, such reforms have largely bypassed postal sector which remained a
state monopoly largely protected from competition, until two decades ago when
transformation of the sector gradually gained a global significance.
In the Pacific region, the influx of competitors, especially in the freight and parcel
segment markets, and the introduction of advanced ICT have intensified the pressure
on regional island states to re-look at regulations that governed their national
23
communication services, which in most cases, include both the postal and
telecommunication services18.
In spite of this, efforts to reform of postal sector in the region are lagging behind. Only
few countries including Papua New Guinea, which has corporatized its postal service
in 198219, Fiji, Samoa, Tonga, Vanuatu and Solomon Islands, have taken initiatives to
implement regulatory reform, with partnership support from donor agencies such as
ADB, World Bank and AUSAID, which led to the corporatization of their national
postal incumbents. The corporatization process involved modernization of the postal
system structure and processes to increase incumbents’ capabilities to enhance their
performance.
2.3 Global outlook on postal development
The discussion in section 2.2 above provides an historical overview on the
development of postal system and the important role it plays in an economy’s social
and economic developments. Now in the 21st century, the global perspective on postal
sector’s developments continue to highlight sector’s important role, particularly in
breaking down communication barriers, providing employment, contribution to the
national economies, and other developments in letter mail and parcel segments.
The discussion in this section intends to draw some focus on these developments,
particularly in terms of service accessibility, employment, letter volume, and parcel
segment, and market share over the period beginning 2000 to 2007.
(a) Accessibility
In this era of technology posts, as major players in the global paper-based industry,
play an important role in breaking communication barriers between people in both
physical and electronic worlds. Their large physical distribution network continues to
provide essential infrastructures through which they carry out their obligation to
18 Prior to corporatization, the postal service functions in most PICs were regulated under the public department of the post and telecommunication. 19 Deklin, T and Gupta, D (1997) The post and telecommunication corporation of Papua New Guinea: A commentary on the operations of its Board; Asian Journal of Public Administration, Vol.19 No.1 (June 1997): pp 55-70.
24
provide universal service at affordable prices, and facilitate access to knowledge
society for those in areas where other major players in the communication industry
cannot reach20. This is true in some regions in the developing countries where post
represents the only communication link that serves the entire population, and in many
cases, the sole presence of state in the rural and remote areas.
According to 2005 world estimate (UPU data, October 2006)21, 97 percent of the
world population have had access to postal services. Of this, it is estimated that 82
percent have benefited from home deliveries while 15 percent collect mail from post
offices or postal agencies.
(b) Employment
Although posts remain one of the largest employers in many countries, a declining
trend in the workforce was observed over the last decade at an annual rate of 2.1
percent. In early 1990s the total number of postal employees, globally, had risen to
almost 6.2 million but by 2003 the total number of postal employees has dropped to 5
million (UPU, 2004). Significant decline during this period was recorded in Africa and
Asia & Pacific regions at an annual average of 3 percent, and much recently as 2004 a
sharp drop of about 3.5 percent was seen in the industrialized countries (UPU, 2006).
In 2005, there were about 5.5 million postal employees in the UPU member countries,
working in approximately 700,000 outlets worldwide (UPU, 2006). This figure,
according to the average across country data22, represented 0.2 percent of the total
global labour force. The evolvement in the composition of the global postal workforce
has witnessed an increase of the number of part time employees from less than 15
percent in the early 1990s, rising to 21 percent in 2003 and 34 percent in 2005. Of the
total of 5.5 million postal employees in 2005, 4.1 millions were full time staff while
1.4 million were part-time employees.
20 Leavey, T. E, Universal service facilities access to information; 5/15/2004; The Postal Project Volume 1, Pushing the Envelope, MRI research, retrieved on 1/8/2007 on website: http://www.postalproject.com/documents.asp?d_ID=2444. 21 Development of postal services in 2005, UPU, Berne, October 2006 22 Cited in the World Bank Policy Research Working Paper 3627, June 2005 by Charles Kenny; Reforming the posts: Abandoning the monopoly-supported postal universal service obligation in developing countries.
25
(c) Letter volume
The total number of posted items processed and delivered by posts in UPU member
countries in 2005 was estimated to be around 437.1 billion 23(UPU, 2006). Of this
total, the domestic mail service had accounted for 98.7 percent (431.5 billion items)
and the international mail service 1.3 percent. Region-by-region estimate indicated
considerable variation in evolving postal traffic.
Figure 2.1 Letter post – domestic service (estimate by region, 2005)
Source: UPU, Berne, October 2006.
Illustrations in figure 2.1 and figure 2.2 show that the industrialized countries have
accounted for more than half of the domestic (82.7%) and international (72.9%) mail
services, followed by Asia and Pacific (domestic 10.2% and international 10.1%) and
Europe & Commonwealth of Independent State (CIS) (domestic 4.0% and
international 6.3%). Arab and African countries have accounted for 0.3 percent and
0.5 percent, respectively, in the domestic service, while Africa and Latin America &
Caribbean just over 2% respectively in the international mail service for the 2005
period.
According to an UPU press release (9 October 2006), Latin America and Caribbean
region (5.8%) and the Arab region (3%) were the only regions that experienced a
global increase in domestic letter-post items in 2005, while a greatest decline from one
23 Dayan, E. Mission Statement – UPU: A global forum for cooperation and development, UPU, UN Chronicle online edition, June – August 2005.
26
year to the other in letter volumes was witnessed in Arab countries (8.8%), Asia &
Pacific (5.5%) and Africa (1.9%).
Figure 2.2 Letter post – international service (estimate by region 2005)
Source: UPU, Berne, October 2006.
In spite of this, the overall annual growth rate in the global letter traffic appeared to be
taking a downward trend over the last decade as illustrated in figure 2.3, although in
2005 an average growth of 0.4 percent was indicated. While domestic mail service had
indicated an overall average growth of 0.4 percent in 2005, the international mail
service traffic continuously declined by -2.5 percent.
Figure 2.3 Letter post volume (world estimate 2005)
Source: UPU, Berne, October 2006.
27
Growth variations as per regions show that there was a decline in both domestic and
international service in regions of Africa and the Asia & Pacific, while Latin America
and Caribbean have shown an increase by 5.8 percent in the domestic mail and 0.4
percent in the international mail (UPU data, October 2006).
(d) Parcel segment
In parcel segment, around 5,961 million parcel items have been processed and
distributed in 2005. This figure represented an overall increase in growth by 3.4
percent in the international volume and 10.9 percent in the domestic volume, setting a
global record as far as parcel volume is concerned. Such increase is thought to be
attributed to the promotional efforts by posts to enhance its parcel services and the
growing popularity of e-commerce.
The highest domestic growth was indicated in the Latin America and Caribbean
(12.9%) followed by Industrialized Countries (12.4%), and the highest international
growth was indicated in the Asia and Pacific (9.9%) and Europe and CIS (9.9%),
followed by Arab countries at a growth rate of 5.6 percent.
(e) Market share
Although more private postal operators are coming into business, largest portions of
the market share in both letter and parcel segments are still maintained by the
designated operators.
Figure 2.4 Global postal revenue breaks down by product (world estimates 2005)
Source: UPU, Berne, October 2006.
28
UPU data (2006) showed that designated operators have acquired 94 percent and 75
percent of the letter market share in domestic and international service respectively.
Similarly, the domestic and international parcel market share is also dominated by the
designated operators who hold 71 percent and 82 percent respectively.
(f) Revenue
Despite a fairly marked trend towards product diversification, letter mail still remains
the principal postal activity and the largest revenue source for most public postal
operators. According to 2003 and 2005 estimates, global postal operating revenue
continued to rise, reaching 166.4 billion SDR24 in 2002, 174.6 billion SDR (a growth
of 5% over the previous year) in 2003, and 180 billion SDR (a growth of 3.3%) in
2005 (UPU, 2004; UPU, 2005). In 2005, 60 percent of the world postal revenues were
generated by the letter post, 21 percent by parcels and logistic services, 14 percent by
postal financial services and 5 percent by other services. This reflected the
proportionate market size of these product segments (see figure 2.4).
Figure 2.5 Postal revenue by product (estimates by region, 2005). Source: UPU, Berne, October 2006.
24 The SDR (special drawing right) is the unit of account of the International Monetary Fund. 1 SDR = 1.56586 USD (17 December 2007 rate).
29
Region-by-region observation, as illustrated in figure 2.5, show letter post service as
the single largest postal revenue earner in countries of Africa (66%), Latin America &
Caribbean (66%) and Industrialized Countries (62%) with more than 60 percent of the
total revenue being generated.
In contrast, the largest portion of postal revenue in the Asia and Pacific region came
from the financial services which garnered in almost half (45%) of the total postal
revenues than letter post services.
2.4 General performance outlook of postal services in developing countries
Although principal activities of the public postal administrations have always been
protected from competition, and have contributed significantly to the social and
economic developments of a nation, various reports (including those compiled by
World Bank)25 and Universal Postal Union (UPU; 2004), revealed that posts in the
developing countries are characterized by poor service quality, high costs, low volume
of mail, lack of finance and low investments.26 Charles Kelly27, similarly, highlighted
that postal performance have been portrayed as being poor and not fulfilling the
expectations of the stakeholders. Lack or poor access of services to rural communities,
high costs and time involved to access services, lack of responsiveness to customer
grievances, poor postal security, and long delivery time span are common to public
postal administrations across developing countries, thus made postal incumbent
operators unpopular.
According to Charles Kelly (World Bank, 2004), such poor services were attributed to
a number of weaknesses pertaining to the nature of postal sector and the incumbent
operators. For public postal administrations, many of such weaknesses are primarily 25 Reports on studies including “Postal policy and regulatory reform”, “What drives postal reform” and “Questioning monopoly”; contributions to reform agenda, The World Bank Group, Global Information and Technologies Department, Policy Division. 26 Postal policy and regulatory reform suggests accumulated losses of incumbents can run as high as 2 percent of GDP, and that three-quarter of African public postal operators report negative net financial position. 27 Studies by Charles Kelly include; “What drives postal performance” and “Questioning the monopoly-supported postal USO in developing countries” compiled and edited by Guislain in World Bank report, 2004.
30
public-ownership related, for instance conflicting objectives, absence of proper
accounting procedure, poorly equipped and under-utilized post offices, poor
management and accountability, overstaffing and/or unqualified and unmotivated
staff, inefficient operation system, insufficient marketing and customer focus,
prevalence of culture that is non-conducive to good performance, political interference
and lack of innovation (UPU, Bucharest 2004; World Bank & UPU:2000, 2004,
2006).
Figure 2.6: The vicious circle. Source: Redirecting Mail [cited in the World Bank and UPU report, 2001.
Moreover, a study by the African Union Commission (AUC) on the postal project of
the African Union28 confirmed that poor performances of postal sectors in Africa are
attributed to low level of penetration of postal offices and outdated infrastructure,
unclear sector development policy, ill defined universal postal service, lack of capital
for expansion and modernization, lack of professional staff and adequate structure, and
lack of adapted training.
From business perspective, Redirecting Mail29 findings (a study of the postal reform
movement in the 1990s) revealed that such weaknesses are manifestations of
inadequate regulations and weak business strategy. Falling volume in mails and poor 28 African Union Commission study recommendations and 2008 Cairo Declarations endorsed by AU Executive Council; 28th Ordinary Session of PAPU Administrative Council; Cairo 6-7 June, 2009. 29 The postal industry in internet age: Case studies in postal reform; World Bank and UPU, p 9.
31
brand image are attributed to lack of emphasis on marketing and customer focus,
leading to poor financial performance, low investment in technology and training, and
poor service quality. These performance problems created what it termed as “vicious
circle” (see figure 2.6), which, if not addressed by the government, could lead to
greater postal crises.
Hence, for this vicious circle to be rectified, immediate intervention by government in
addressing these issues is imperative. Without such intervention, postal sector and
operators in the developing countries will continue to experience low mail volume,
poor financial returns, low investments and poor quality of services, which
subsequently will lead to low customer satisfaction and lack of public trust in the
postal system and legal universal service obligation (delivery of letter to all citizens at
a given time).
2.5 The changing nature of postal sector environment
In spite of its long history and the important role it plays in the socio-economic
developments of a nation, the traditional postal system is becoming anachronistic and
inconsistent in the light of profound changes that the industry is presently undergoing.
A combination of factors including advancement in ICT, market liberalization,
evolving customer expectations30, increasing competition and internationalization of
businesses31 have created an invigorating postal environment that presents significant
challenges and threats to the traditional postal system, and how it is regulated and does
business today.
The increasing need for cross border trades (and removal of trade barriers within
and/or between countries through trade liberalization policies), and faster and easier
transmission of information and goods facilitated by rapid advancements in
30 The capability of advanced technology to improve quality of services has greater influence on the changing needs and perceptions of customers with regard to the quality of service delivery. 31 Adapted from UPU Report “The postal sector: Looking into the future; Bucharest World Postal Strategy 2005 – 2008; UPU 23 Congress, Bucharest 2004”.
32
technologies, have provided new opportunities for growth and foreign investment that
prompted private operators to expand their services to transnational level32.
The introduction of internet, electronic mail, mobile phone, telefax and other cross-
related telecommunication services that enabled electronic transmission of
information, does not only posed threat to the traditional postal core products
(domestically as well as cross-border and beyond), but has also significantly redefined
consumers’ behavior by raising their expectations for faster and more efficient service
delivery (UPU, 2002; SAP 2006; UPU, 2004).
Furthermore, the new entrants have attested to be strong competitors, and set new
standards that forced traditional postal operators to quickly react to customers'
demands and expectation.
Finger et al (SAP, 2006)33 pointed out that although the use of Information and
Communication Technologies (ICT) has proven to be a threat to letter mail services, it
also offers new opportunities for traditional postal operators to improve their
production processes, gain efficiencies, diversify and globalize their services and
products. While UPU report (August, 2002) concurred that there are still opportunities
for physical letter mails and other paper-borne communications to thrive in the market,
it also emphasizes that such opportunities will only be achieved, partly, through
diversification of services beyond postal sector (Guislain, WB report, 2004)34, and by
fulfilling customer’s expectation through the provision of quality services,
introduction of competitive commercial pricing and other systems that make
communication easy and convenient for their clients. Hence, to optimize on these
opportunities, governments as regulators of postal policies, must lay down rules for
competition, and ensure that incumbent operators are capable to provide quality postal
32 Christian Aid, (2003) Trade For Life: Glossary; accessed on website: http://www.christian-aid.org.uk/campaign/trade/glossary.htm; accessed 27/3/05. 33 http://www.sap.com/industries/postalservices/pdf/BWP_Postal_Sector_Overview_and_Dynamics.pdf retrieved on 19 April, 2007. 34 Guislain, P. The postal sector in developing and transition countries: Contributions to a reform agenda, The WB Group; Global Information and Technologies department, Policy Division, September 2004.
33
services for all citizens and sectors of the economy (UPU, Berne 2004, p2)35. In its
evolving mission statement, since the 1994 Seoul Congress, UPU constantly
highlights the elements of free circulation of postal items, the existence of a single
postal network made up of interconnected and efficient networks, efficient technical
cooperation, and the satisfaction of customer needs worldwide (UPU, 2004).36
The changing nature of the postal environment, and other impediments inhibiting
postal sector performance in many developing countries, highlight the widespread
urgency for governments to reinvent their postal sectors and incumbent operators
through adjustment of their sectoral regulations and policies.
This is imperative to allow public postal authorities gained control over the ever
changing sector, fulfilled their universal service obligation, and enhanced their
competitiveness and viability in highly dynamic environment through provision of
quality services, and their capability to optimize the opportunities to balance tradeoffs.
To achieve these, Guislain (World Bank report, 2004)37 suggested that developing
countries need to undertake a broader approach to reform38, which should involve a
reduction in monopoly to allow for greater competition, improvement of regulations
and a redefinition of the universal service obligation.
In view of this, corporatization of the postal sector has become a desirable approach
for many countries including Australia, New Zealand and the Pacific Island states, that
have been over the last three decades implementing structural reform to their public
postal administrations through the process of corporatization and privatization. These
processes broadly focus on major indicators which include profitability, efficiency of
service delivery, product development, customer demand, and productivity. Integrated
in the efforts to achieve these targets are ideals that emphases service quality and
customer satisfaction. The concept is to redesign the processes to enhance usage of
minimum input as much as possible while imparting maximum value to output.
35 UPU International Bureau; Postal Regulation: Principles and Orientation, Berne 2004. 36 UPU, 23rd Congress Bucharest 2004; The postal sector: Looking to the future; Bucharest World Postal Strategy 2005 – 2008. 37 Postal sector in developing and transition countries, World Bank report, 2004 38 Reform should be from policy level, through regulation and corporate restructuring.
34
This entails efficiency of the process, as a driving force, to improve and maintain
quality of service that increases customer satisfaction.
2.6 Postal regulatory reform
The pressing need to increase service quality that satisfies stakeholders has become a
critical strategy for both public and private postal operators given the increasing
technological competition, rising costs and changing customer’s demands and
expectations. Achieving this, however, entails moving away from the status quo and
adopting corporate objectives and practices, and reducing and/or eliminating
legislations that protects postal monopoly (Iacobucci et al, 2007). This view is widely
accepted as the best desirable strategy by many governments, both in developed and
developing countries.
However, given varying strengths and weaknesses of respective postal operators and
the different level of intensity (and nature)39 of competition across all markets and
regions, governments world over are exploring and adopting various reform models
that are appropriate to their postal contexts. These include market-based approach
which involves abolition of monopoly and promotion of competition, public model
which gives priority to social objectives, and hybrid or transitional model where
initiatives are taken to modernize postal processes in the areas of postal corporation,
corporate alliance and internationalization of business, liberalization and deregulation
(Bucharest World Post Strategy; SAP). According to Iacobucci et al (2007), whatever
strategy pursued, it is imperative that postal enterprises must be adaptive and flexible
to changes if they are to remain competitive and financially viable in the competitive
39 Although pressure for reform is uniform for all countries, the drivers of reform vary from country to country and thus determined the type of reform strategies taken by respective governments. In the European member states, for instance, the postal reform is a response to the European Union-wider economic agenda for modernization of states which emerges as a driving force behind liberalization, and the emergence of global competitors (e.g. partially privatized Deutsche Post World Net, the Netherlands TPG, FedEx and UPS). In the US such reform is driven more by the need to improve the efficiency and profitability of its postal services, while in other countries it is motivated by the need to tap into niche markets and to maintain financial sustainability (Finger et al, 2006) Canada postal reform in 1981 was a response to specific problematic issues pertaining to postal service itself (Campbell 2002 cited in Iacobucci et al, 2007) while reform elsewhere is driven by broader economic policy of commercialization of state enterprise sector as in the case of New Zealand, modernization of postal sector (e.g. Australia) and major economic agenda as in Tanzania, Morocco and other developing countries.
35
markets, whether it be national, regional or global. This study centrally focuses on
reforms undertaken through the process of corporatization, and the impact on service
quality and subsequently the level of customer satisfaction.
The significance of changes in the postal environment and the challenges faced by the
postal sector globally is reflected in the growing interest of the international
organizations (e.g. World Bank, UPU, IPUN, and ILO) and regional organizations
such as the European Commission on the performance of the sector and how it
responds to these challenges. Hence, with the support and initiatives spearheaded, or at
least moulded, by these international organizations and particularly the Universal
Postal Union (UPU)40, many countries world over have undertaken to reform their
postal sectors (and public postal incumbents) through regulatory reform process which
led to corporatization and/or privatization of postal services. Regulations that
governed postal business are revisited, and appropriate changes are enacted to allow
for competition; and to enhance postal operators’ capabilities to do business
competitively; and at relatively competitive prices without undermining their universal
service obligation (USO).
As highlighted in the Bucharest World Postal Strategy (UPU, 2004), postal reform is
not a one-time objective but rather an ongoing process, and therefore, should be
implemented in an orderly manner, starting with the definition of sectoral policy and
regulatory reform, through to restructuring of the business, before it is converted into a
commercial company with the integration of core activities based on new innovative
services.
Postal reform in most countries have adopted the four-stages model of change process,
as illustrated in Table 2.1, whereby re-organization begins with the separation of
postal and telecommunication functions under respective legislations that regulated
them as separate autonomous entities. This reform process is made possible through
the enactment of new postal law that regulates the postal services.
40 UPU plays a pivotal role in the postal sector reform processes including modernization of postal delivery processes and systems in most of the regions and countries world wide.
36
Table 2.1 Different stages of reform of the public postal operators.
Stage 1 Stage 2 Stage 3 Stage 4 Description of the
stage
Separation of posts
from
telecommunication,
thus making it an
autonomous public
entity with an
autonomous budget.
Conversion of posts
from a mere civil
service department to
a public corporation.
Conversion from
public corporation
to a limited
company with state
as a minority
shareholder (Partial
privatization)
Full privatization.
This is where the
postal business is
sold to private
operators
Regulatory
framework
Generally
accompanied by new
postal law
Generally
accompanied by an
initial regulatory
framework
Presence of an
independent
national regulator
and a fully-fledged
regulatory
framework
Source: Adapted from UPU, Postal regulation: Principles and orientation; Berne 2004.
Stage two (2) of the reform process involved the conversion of public postal operators
into public corporation through the process of corporatization made possible through
an enactment of parliament, which gives the entity an independent legal status as a
corporation, thus subjecting it to corporate requirements and objectives.
The transformation includes the internal adjustments whereby postal activities are split
into different business units such as logistics, financial services, letter mail and parcels
and express service. The corporatization process is normally seen as the first step
towards privatization. As such, it is seen as a tool for speeding up change and
enhancing public postal corporation’s capability to be profitably viable and self-
sustaining before it is privatized.
The third stage is characterized by partial privatization whereby government still holds
some shares in the public company. Normally the decision to partially privatized stems
from government’s decision to fully privatize once the postal operator is restructured
and able to improve its profits and service quality so as to attract potential buyers.
Finally the fourth stage involves full privatization whereby government divests itself
of all its shareholdings in the public postal company.
37
While many countries, particularly in the developed world, have gone a step further to
liberalize their postal sectors, many developing countries focused on corporatization
and modernization of their postal system structure and processes in order to deal with
competitive dynamics, which are largely attributed to globalization and introduction of
advanced information and communication technology (ICT).
2.7 Global perspective on postal sector reform
Literatures on postal reform have indicated that reorganization of public postal
services was first pioneered by the United Kingdom41 and Brazil42 who had
corporatized their public postal services in 1969. Other countries including Australia
(1975)43, Canada (1981)44 and New Zealand (1987)45 have followed suit and
converted their public postal services to public corporations in the 1970s and 1980s.
The central focus of postal reform then, however, was on modernization of public
postal operators rather than the structure of the sector itself. Needless to say, this
continues to be the primary focus of postal reform efforts in many countries to day,
simply because governments are more concerned of its public functions, and role it
plays in the social and economic developments.
In the 1990s most countries, including those in Europe, Latin America, Caribbean,
Africa and Asia Pacific regions, have undertaken to convert their public postal service
from a mere public department to public corporation. The World Bank and other
regional development banks (especially in Latin America, Africa and the Asia
Pacific), have played a major role in postal sector reform process in these developing
countries. Unlike European Commission, whose ultimate goal is to liberalize postal
sectors of its member countries, World Bank approach to postal reform is aimed at
41 Royal Mail, from Wikipedia, the free encyclopaedia accessed on 6 December 2007 on website: http://en.wikipedia.org/wiki/Royal_Mail. 42 UPU, Quality service program: Brazil’s experience by Mr Fabio Peroni, Berne, April 2003; and also mentioned in “Pivotal Thoughts, Pitney Bowes; “New markets, new customer, new rules”; issue six. 43 Batra et al, 2001; and also indicated in the “Australia Post Annual Report 2004/2005”. 44 Iacobucci et al, 2007, and also indicated by Campbell, 2002; C.D Howe Institute Commentary. 45 Batra et al 2001, ESRI, 2005, Iacobucci et al, 2007.
38
modernizing the traditional postal operators in order to improve their operations and
services.
In developing countries, such reform is a component of a wider spectrum of reforms
that is consolidated under the Public Sector Reform (PSR) process which they have
adopted. The need for regulatory reform of postal operators and the sector is vital in
view of general poor performance of the sector and, moreover, the profound changes
that are transforming sector’s environment into a highly competitive one today.
Discussions in the following sub-sections provide a global view on the postal reform
efforts, with particular focus on the European Union (EU) countries, and countries in
the Caribbean region, African-Sahara region, and the Asia Pacific region.
2.7.1 Countries in the European Union
Member countries of the European Union have effected considerable changes, under
the legal framework (Directive 97/97/EC, and later amended in Directive 2002/39/EC)
established by the European Commission to guide and support postal reform in all
member states.
The primary aim of postal reform in Europe as stipulated in Directive 97/96/EC is to
liberalize the postal market in gradual and control manner, while ensuring a universal
postal service provision46. In view of this, many European countries have effected
considerable changes in their posts to ensure they achieve or remain competitive in the
market. Unlike private postal incumbents whose main indicator of change is
acquisition (e.g. TNT and DHL taken over by Dutch and Deutsche Posts respectively);
the significant indicator of change in the European public postal operators (PPO) in
the 1990s is the transformation of their status from mere public departments to public
corporate companies. Of the 25 public postal operators across Europe, 18 of them have
been made corporatized (Finger et al, 2006; Wik-Consult 2006). The extensive
participation in the transformation of PPO by member states is essential in speeding up
change, especially for those PPOs that have been chronically inefficient and
46 AMCHAM EU, American Chamber of Commerce to the European Union; a position paper on the postal reform, July 11, 2006 retrieved on 4 January 2008 on website: http://www.eucommitte.be/pops/2006/postalreform_110706.pdf.
39
unprofitable (e.g. Scandavinian post and Post Italiane)47, towards liberalization of the
European postal markets.
Furthermore, common rules established by the EU under Directive 97/97/EC and
Directive 2002/39/EC ensure that quality universal postal services (UPS) are provided
at the community level. These include setting criteria for defining services which
maybe reserved for universal service providers and conditions governing the provision
of non-reserved services, defining tariff principles and fixing common rules for
transparency of accounts for universal service provision, setting quality standards
applicable to universal service provision and establishing a system to ensure
compliance (Europa report; SCADPlus). In their report, Iacobucci et al (2007)
highlighted that the accompanied competitive forces have driven major improvements
in “on-time or next day” delivery and other measures of service quality.
However, in spite extensive efforts being exerted towards preparation for
liberalization, the initial intention to achieve a fully operating internal market by
January 2009 (AMCHAM EU, 2006), has now been extended to 2011, after 512
members of European Parliament (MEP) had voted in favour of the extension in their
meeting in July, 200748, allowing competition for letters weighing less than 50 grams
from 1 January 2011.
2.7.2 Caribbean Region
In the Caribbean region, the advocacy for postal reform has gained momentum over
the last decade, with the focus directly related to the Bucharest World Postal Strategy
(BWPS) Objective No. 1, that links to the development of Integrated Postal Reform
and Development Plans (IPDP) initiatives49 which are fundamental elements of postal
reform projects; and Objective No. 4 which sets out the main bases of the activities50.
47 Recent developments in the postal sector in Europe. 48 Supply Management News, by Helen Gilbert, August 2, 2007; ABI/INFORM Global p10. 49 E.g. a clear definition of the level and extent of intervention, formulation of general action frameworks, the development of IPDP and the systematic application of a series of actions in areas of postal reform and development. 50 These include regulatory reform of postal sector, regulation, the granting of greater independence to postal operators and institutional strengthening of the public postal operator, human resource development and sourcing of external funds to finance reform.
40
However, in spite of strong political will for postal service reform in majority of the
Caribbean countries, an UPU report (2007)51 highlighted that only six (6) of the 21
public postal administrations in the region were converted into public corporation,
while the rest continues to maintain the status quo. A minority of those maintaining
the status quo are in view that operating as a monopoly would offer them best
conditions for postal developments and resources given the number of challenges,
mostly geographically-related, which serve to impede their competitiveness and
economic development.
2.7.3 African Sub-Sahara region
Most countries in the African Sub-Saharan region have engaged in serious postal
reform initiatives since 1990 and well into 2000s. While evidences of reform are
significant in some states (e.g. South Africa, Tanzania, Malawi, Ghana and Mauritius),
postal reform in other states (e.g. Nigeria, Togo and Sierra Leone) are pretty much
lagging behind (Maritala, A; 2007).52
Generally across the region, the sectoral change initiatives include creation of a
shareholding company and development of networks and services (as in the case of
Eritrea), modernization of infrastructures (e.g. Lesotho, Namibia and Nigeria), and
commercialization and streamlining of operations (as in the case of Malawi Postal
Corporation). Postal reforms in Kenya, Senegal and Botswana have introduced new
management system and programs that sought to reduce government’s excessive
interference in the operational issues and enhance efficiency and service quality
respectively, while Gambia and Algeria have focused on counter refurbishment and
restructuring which include regulatory reform.
2.7.4 Asia Pacific Region
The Asia Pacific region includes 36 countries, three of which are industrialized
countries (IC), 19 are developing countries and 14 are classified as least developed
51 Development plan for the postal sector and postal services in the Caribbean (2006/2007), Sept., 2007. 52 Maritala, A. (2007) The challenges of postal reform in Nigeria, 12 September, 2007, Lagos; available on website: http://allafrica.com/stories/200709130460.html; retrieved on 22/2/08.
41
countries (LDCs). According to Gamalath, a representative of the Sri Lankan post53,
the pressure on the Asian state authorities to undertake regulatory and structural
reforms that allow for changes in the postal service provision is generally attributed to
the emergence of competitors in the region’s postal markets (ILO-UPU; 2000). Such
reform, as highlighted by Ms. Mariah of Malaysian Post in the same report, is
necessary to enable the public postal operators (PPO) in the region to become more
effective, not only in seeking ways to capitalize on the world wide postal network and
administration, but also to expand its business opportunities and provide services that
fulfils customer’s needs and expectations.
Batra et al (2001)54, reported that most Asian countries which include Indonesia,
Malaysia, Sri Lanka, and India have begun organizing their postal services in the
1990s by converting their public postal services into public corporations, under the
regulations developed by their respective regulatory authorities, for instance
Directorate General of Posts and Telecommunications (DG Postel) as in the case of
Indonesia, who is in most cases also responsible for setting overall postal sector policy
and ensuring the maintenance of the national postal system.
Changes implemented through the postal reform process include provision of
autonomous power to the new entity in the day to day managerial and decision making
process, and redesigning of organization structure along the commercial lines with
greater emphasis on business development to meet the changing needs of more
sophisticated customer base. This commitment is highlighted in their continuous
efforts to embrace policies that are customer oriented.
In the Pacific region, Australian government began reorganizing it postal service in
1975 when the Federal government separated the functions of the Australian
Telecommunication and Australian Post under the Australian Telecommunication
Commission (now Telstra) and Australian Postal Commission respectively, with the
53 Social dialogue in postal services in Asia and Pacific, ILO-UPU joint regional seminar; Bangkok, May 23-2, 2000. 54 A report on the Indian Postal System: Policy initiatives, submitted by Batra. G, Singh. H. P, Pingle. N, Raj. S; August, 2001; Indian Institute of Management, Ahmedabad.
42
later trading as the Australia Post. Later in 1989 the Australian post was corporatized
(under the Australian Postal Corporation Act 1989) and became known as the
Australian Postal Corporation although it continues to trade as Australian post.
Following its corporatization, Australia post has been implementing changes in its
customer service, business process, and work culture, which are seen as important
catalysts for business transformation leading to high performance (Batra et al, 2001;
Australia Post Annual Report 2004/200555).
Like its neighbor, Australia, New Zealand post was corporatized in 1987 when its core
business was split into three separate companies, namely, Telecom, Post Bank and
New Zealand Post, each of which was set up as a state-owned enterprise (SOE). Under
the new SOE Act 1986, NZ post is anticipated to operate as a commercial entity with
the aim of becoming profitable and efficient just like any other business enterprises,
and being a good employer with a strong sense of social responsibility towards the
interests of the communities within which it operates. A decade after it was
corporatized New Zealand post was deregulated, marking a milestone in its postal
services when it fully liberalized its postal market.56 57
The winds of change have not bypassed shores of other neighboring island states in
the Pacific Island region, whose postal markets have also faced greater challenges
brought upon them by the environmental changes. Considering the small size and
isolation of the island states, communication infrastructures which include postal
service has always been monopolized by the states through the postal departments of
their respective government ministry. However, given the changes in the postal
environment and the emerging challenges, the pressure on small island states to reform
the way their postal businesses operate gets intensified.
In spite of this, postal reforms in the Pacific Island states are lagging behind. Except
for Papua New Guinea which has corporatized its postal function in 1982 (Deklin, T 55 Retrieved on 6 January, 2008 on website: http://www.auspost.com.au/annualreport 2005/pdf/017_ar_cover.pdf. 56 A report on the Indian Postal System: Policy initiatives, submitted by Batra. G, Singh. H. P, Pingle. N, Raj. S; August, 2001; Indian Institute of Management, Ahmedabad. Batra et al (2001). 57 New Zealand Post; available on http://en.wikipedia.org/wiki/New_Zealand_Post retrieved on 27/01/08.
43
and Gupta, D; 1997)58, only few small island states were able to go ahead and
implement structural and regulatory reforms that led to the corporatization of their
respective postal services. These include Fiji, Samoa, and Solomon Islands which
have corporatized their postal services in the 1990s; Vanuatu which corporatized its
PPO in 2000, and Tonga whose PPO was corporatized in 2005. Such reforms were
made possible through the partnership support from UPU and World Bank; and other
donor agencies such as ADB and AUSAID59.
2.8 Reform and benefits
The transformation of traditional postal incumbent, which include modernization of
system’s structure and processes, aim to foster and enhance the quality of postal
service and delivery, and to increase the opportunity for transformed PPOs to leverage
their assets and experiences to expand their product and service offerings. The
ultimate goal of the state authorities is to see that transformed postal corporations
eventually become self-reliant and be able to contribute to the national economy; as
well as effectively fulfilling state’s social obligation to provide better communication
services to the nation. To achieve these goals, reforms undertaken must be adequate to
support the transformed postal corporations to build a strong customer base, through
the provision of service quality that meets customer’s changing needs and
expectations. Without this, transformed corporation’s profitability and, subsequently,
its sustainability are precarious.
Reports60 on various cases from developed countries (e.g. Australia and New Zealand)
and developing countries (e.g. Morocco, Tanzania and Indonesia) have revealed that
58 Deklin, T and Gupta, D (1997) The post and telecommunication corporation of Papua New Guinea: A commentary on the operation of its Board, Asian Journal of Public Administration, VOL. 19, No.1 (June 1997) pp 55-70. 59 Information on postal reforms in the Pacific Island states were extracted from various reports and articles from the following web links: http://www.adb.org/Documents/Books/Reforms_Pacific/chap6.pdf> <http://www.postfiji.com.fj/index.cfm?si=main.resources&cmd=forumview&uid=about&cid=6#contentset> and < http://www.vanuatupost.vu> retrieved on 8/01/08. 60 Various reports including those from UPU, ILO-UPU, World Bank and individual Country Reports by Donor agencies e.g. ADB and individual post’s Annual Reports provides many information on the performance of respective postal corporations.
44
corporatization of postal service has classically led to improvements in product design,
productivity and efficiency, volume of mail, profitability, and quality of services for
which customers prepare to pay for in spite of high prices. The achievement of such
benefits is significantly attributed to the introduction of competition that is made
possible through reforms (World Bank report, 2000; UPU, Bucharest report 2004).
Furthermore, other factors that have been identified to have contributed to success of
transformed postal corporations in achieving such benefits include strong management
and performance accountability, adoption of commercial culture, strong marketing and
customer-focus, product development and innovation, diversification of services,
partnership with private sector, price regulation, strong leadership and capacity
building, and facilitation of competition in the sector through liberalization policies.
Some successful cases are highlighted herewith:
(a) Deutsche Post A.G – Following its corporatization in 1994, German’s state-
owned Postal Corporation now owned 42 percent of shares through German’s
Development Bank, KfW Bankengruppe (Wik-Consult 2006 cited in Iaccobbi, 2007
p.14). This success is attributed to corporation’s adoption of aggressive growth
strategy, and diversification and internationalization of business, thus making it one of
the world’s preeminent postal and communication operators today. According to
Fortune Global 500, 2007 (July 23, 2007 issue)61, Deutsche Post was ranked 57 out of
the 500 top postal companies in the world, with total employment of 463, 350, making
a total revenue of USD$79,502.2m and a profit of USD$2,403.9m in 2007. For the
same period, its total asset was worth USD$287,067.5m and the shareholders’ equity
of USD$14,795.3m.
(b) Brazil Post – Since its inception in 1969, Brazil Post emphasized efforts that
guaranteed consistent postal service quality that fulfill customer’s needs in terms of its
delivery service network. This commitment was illustrated through the creation of an
overnight air transport network in 1974, which has made possible a one-day delivery
61 Accessed on website: http://money.cnn.com/magazines/fortune/global500/2007/snapshots/10343.html accessed on 17/01/08.
45
standard for all urgent items transported between all major cities, which at present
account for nearly 80 percent of almost 10 billion items delivered in the country
annually. The increase in mail volume demonstrated the level of customer satisfaction
achieved by the post through its efficient delivery service (UPU, 2003)62.
(c) Canada Post - Canada’s Post was corporatized in 1981, and according to its
2006 Annual Report63, the corporation was indicated as one of the top 100 employers
in Canada for year 2007 (citing MacLean’s magazine), and ranked third out of 150
most admired businesses in Quebec, according to a Commerce-Ledger Marketing
survey. Furthermore, revenues generated from post segment increased from $5.587m
in 2005 to $5.831m in 2006.
This represented about 80 percent of the corporation’s consolidated revenues. Letter
mail ‘on time service’ was indicated to have also improved at the score of 96.4
percent, exceeding its target of 96 percent for the same period.
(d) United Kingdom General Post - General Post Office (UK) became a state-
owned public company in 200064 and is responsible for the universal mail collection
and delivery. Since its inception it has been successful in increasing the rate of service
accessibility65 through its network of 14, 376 post offices throughout the country66.
The deliveries are made at least once every day at a uniform rate for all destinations
within UK. According to its annual report for the year ending March 2006, General
62 UPU, “Quality service program: Brazil’s experience” by Mr. Fabio Peroni, Berne, April 2003, and also mentioned in Pivotal Thought, Pitney Bowes; “New markets, new customer, new rules”, issue six. 63 Canada Post Annual Report: Highlights of the 2006 Annual Report; accessed on web link: http://www.canadapost.ca/personal/corporate/about/annual_report/highlight2006-e.asp on 17/1/2008. 64 The name initially registered with the Companies House was Consignia public limited company. The reason for using this name is to end the confusion that existed between the terms “The post office” (refer to whole organization) and the “Post offices” (refer to the customer accessible counters). However, Consignia plc was unpopular with employees, the unions and the general public, Consignia plc became known as “Royal Mail Group Public Limited Company in 2002 (quoted from website: http://en.wikipedia.opostrg/wiki/Royal_Mail). 65 Each week Royal Mail serves about 28 million customers through their network of post offices throughout the country and deliver some 337 million parcels a year through Parcelforce Worldwide and General Logistics Systems, its domestic and European parcels businesses; accessed on website: http://www.royalmailgroup.com/portal/rmg/content1;jsessionid=H1REBCKFYYCLSFB2I retrieved on 1/17/2008. 66 Royal Mail, from Wikipedia, the free encyclopaedia, retrieved on 6/12/07 on website: http://en.wikipedia.org/wiki/Royal_Mail.
46
Post (UK)67 has delivered 84 million items every working day, and has made total
revenue estimated to be around 9 billion pounds and profit before tax of about 312
million pounds. It was also reported in one of the company’s reports68 that since its
inception in 2001, Royal Mail has been able to turn its losses of more than 1 million
pounds a day into a profit of 537 million in the year 2004-2005, and is delivering its
best quality service on record with world-class performance.
According to FORTUNE Global 500, 2007 (July 23, 2007 issue) Royal Mail has
earned a total profit of USD$704 millions in 2007 with a total asset worth USD $9167
million and stakeholders’ equity of USD $5798.6 million.
(e) Tanzania Postal Corporation (TPC) – Tanzania Post is an example of how
elements of reforms are successfully implemented in one of the poorest countries in
the world resulting in a successful transformation of a weak postal system into a
profitable commercial entity. Benefits gained include speed in the delivery service,
security, profitability, business growth and customer satisfaction. Such benefits are
attributed to various factors which include introduction of competition in the sector
and clear definition of responsibility between the state, the regulator69 and TPC.
Moreover, another significant success factor is the signing of the performance contract
(revised every three years) between the TPC and the state, in which TPC and its
managers are held accountable for the achievement of performance targets. Financial
incentives are attached to successful achievement of the targets, and likewise penalties
are imposed for under-achievements. Dismissal of the Post General applies when
targets are not met by more than 50 percent.
(f) PT Pos Indonesia (Indonesia) – PT Pos Indonesia, which was established in
1995, is a fully state-owned company employing about 26,000 workers. According to
67 General Post (UK) is also known as the “Royal Mail”. 68 This is cited in; “Royal Mail, from Wikipedia, the free encyclopedia” on weblink; http://en.wikipedia.org/wiki/Royal_Mail; retrieved on 6/12/07. 69 The postal regulator is Tanzania Communication Commission (TCC) and is responsible for regulating postal tariffs, competition, monitoring service quality and to safeguard network coverage and access as established by 1994 legislation (Walsh, 2001).
47
a “News and Research” report (CPC; 2010)70 Pos Indonesia is showing some very
positive performance results. Most significant of which is provision of service
accessibility through its network of 20,000 post offices that served 17,000 islands
throughout the country. The report also revealed that Pos Indonesia’s growth generally
paralleled that of the national economy. It was able to recover its volume of mail from
3.38 pieces per capita in late 1990s, during the Asian economic crisis, to 3.989 per
capita by 2007 (an increase by 18 percent); and reportedly having a total of US$715
million in assets in November 2009.
From its traditional core businesses of letter post and financial services, the
corporation has diversified its business to participate in the development of
Indonesia’s information infrastructure. More recently, it has established the electronic
“Wasantara Network” (refer to figure 2.7) to address the challenges posed by its vast
coverage area.
Figure 2.7 PT Pos Indonesia “Wasantaranet”.
Source: Postal service in the internet age (World Bank and UPU: 2004).
The network serves as ‘intranet’ for operational purposes and as support for
commercial activities in the field. Additionally, it also provides an information
platform for consultation between PT Pos Indonesia and the Ministry of
70 Consumer Postal Council (CPC); Index of Postal Freedom: Indonesia – Pos Indonesia; News and Research, January 25, 2010.
48
Communication, and local consumers may access the network from their own
computers or from internet access points which are located at the post offices or other
designated places throughout the country.
(g) Australian Post – Following its corporatization in 1989, the corporation has
been implementing changes in customer service, business process and work culture.
Furthermore, it has also diversified into a range of services and products and invested
in major techno-infrastructure programs (Batra et al, 2001; Australia Post Annual
Report 2004/200571).
In spite of stiff competition from private competitors, Australian Post remains the
dominant postal operator in Australia; and has monopolize basic letters carrying up to
250 grams, and continues to maintain a basic postage rate of 50 cents making it one of
the lowest in the world.
Presently Australia post operates in three broad areas72 and owns a number of
subsidiaries and joint ventures73. Furthermore, it has expanded its capacity and
expertise in courier and logistics services as it acquired additional two new companies
(i.e. SnapX and SWADS), making it one of the biggest logistics businesses, retailers,
and most advanced companies in Australia (also cited in Business Review Weekly, 5
May 2005).
The performance highlights for 2004/2005 period have indicated that the corporation
had processed 5.36 billion mail items and served an average of 1.1 million customers
in its postal outlets every business day, achieved a revenue base of AUD$4.32 billion;
and a record net profit of AUD$374.9 million, as compared to AUD$371.1 m for the
previous period. Furthermore, the corporation had also achieved a return on average
operating assets of 17.1 percent and a return on equity of 24 percent for the same
period.
71 Retrieved on 6 January, 2008 on website: http://www.auspost.com.au/annualreport2005/pdf/017_ar_cover.pdf. 72 Letters, retail and agency services, and parcel and logistics services. 73 For examples Sai Cheng Logistics International which was established with China Post.
49
(h) The New Zealand Post - New Zealand Post was corporatized in 1987, and its
core business was split into three separate companies, namely, Telecom, Post Bank
and New Zealand Post; each of which was set up as a state-owned enterprises. Decade
after its corporatization, New Zealand postal market was liberalized. Various reports
and articles from various organization (including Indian Institute of Management;
UPU and ESRI) have all highlighted the success of NZ postal reform, apart from
significant price reduction74 in the basic letter a decade after its corporatization (Batra
2001) 75.
Some of the benefits highlighted in these reports include significant improvement in
productivity76, profitability and service quality. The latter is exemplified in the
performance improvement of its basic letter service delivery (ESRI, 2005; Iacobucci et
al, 2007). According to ESRI report (2005), New Zealand post is internationally
recognized for its provision of an efficient and most inexpensive postal service in the
world.
(i) Fiji Post – Fiji Postal reform is a one success story in the Pacific region. Unlike
many of its Pacific Island neighbors, Fiji Post has reaped successful benefits following
its corporatization in 1996, when it was formally became a separate legal entity from
Telecom Fiji.77 In spite facing stiff competition from other competitors78, Fiji Post has
been able to expand its revenue streams by diversifying into other service products79,
and continues to maintain a wider customer base, while at the same time continues
looking for new opportunities and introducing new strategies to offset the effect of
competition on its core business.
74 The price for the basic letter remained at the same nominal level of 40 cents even after a decade following the corporatization of NZ postal service. 75 A report on “The Indian postal System: Policy initiatives” submitted to the IDF Instructors by Gaurav Batra Harinder, Hitendra Pratap Singh, Nikhil Pingle and Shefali Raj (Section A Group 2); 24 August 2001; Indian Institute of Management p18. 76 E.g. 40% fewer staff since 1987 handled 20% more business as highlighted in Batra report, 2001 77 Post Fiji; retrieved on 13 June, 2010 on website: http://www.postfiji.com.fj/pages.cfm/about-us/history.html. 78 Other competitors include Electronic Communication firms and Courier Services. 79 Apart from its core business of letter services, Fiji Post is also providing other services include retailing, financial services, EMS, Fastfone, telecard, Philathelic business, Billpay service, Smartmail, V-Retrieve, Post Fiji stadium and IQ Active.
50
According to its 2005 Annual Report, Fiji Post has realized profits from its business
operations over the years since it began operating as a public corporation. For year,
2005, Fiji Post has made a total financial turnover of FJD$40.11m compared to
FJD$37.58m in the previous year, and a profit after tax of FJD$0.194m. Its total asset
for the same year stood at FJD$30.768m. At the end of 2005, Fiji Post was able to pay
a dividend of FJD$457,148 to the national government.
2.9 Service quality and customer satisfaction
The discussion in the previous section highlights examples of successful postal
reforms that reaped benefits in terms of increased productivity, profitability, market
base, accessibility, service efficiency, service products, strong financial position and
service quality.
These successful transformed postal corporations have demonstrated that postal
businesses could thrive successfully in any competitive and dynamic environment
given effective and adequate legal framework, strong institutional support from state
and major stakeholders, adequate resources and capabilities, and implementation of
appropriate strategies.
The introduction of competition through the process of reform has led to increase in
volume of mail, profits and a higher quality of service which customers prepare to pay
for, in spite of high prices (World Bank report, 2000). The success of these postal
corporations is largely attributed to strong leadership and management, performance
accountability, adoption of commercial culture, strong marketing and customer-focus,
product development, diversification of services, partnership with private sector, price
regulation, strong leadership and capacity building, and facilitation of competition in
the sector through liberalization policies.
Integrated in this process is management’s ability to identify customer’s needs and
preferences; and the ability to formulate and pursue strategies that lead to the
provision of services that fulfill customer’s needs and expectations, at an acceptable
level of quality that satisfies them. The general assumption is that there is a strong
linkage between competition, quality of service and customer satisfaction. As
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competition intensifies and customer expectation increases, the pressure for higher
quality of services (and products) also increases (UPU; Bucharest, 2004).
According to a collaborative study by the World Bank and UPU (2004), poor quality
service and dissatisfied customers are indicators of weakness in the efficiency of
postal sector and incumbent administrations. The findings of the study further revealed
that many businesses today have opted to provide their own postal service (for
example delivering of bills etc.) partly because the traditional postal incumbent failed
to provide them with quality services, and/or it is cheaper for the businesses to provide
their own service. The former implied lack of trust on the public postal service, and if
this is not rectified could lead to stagnancy and loss of market, low mail volume,
reduction in sales and profits, which subsequently will result in low or no new
investment and development, and poor quality services.
On the contrary, increasing market and customer loyalty are manifestations of
customer satisfaction. Hence, the provision of quality service is imperative, not only in
being responsive to customer’s demands and expectations, but also in maintaining
competitiveness in the market, particularly in the face of high competition that is
driven by advanced information technologies.
According to UPU report (2004), the intense competitiveness of the postal sector
environment places customers in a comfortable position to set the course of postal
industry and companies. Their demands and expectations dictate what should be
produced, how quickly and according to what specifications. Hence, quality has
become an essential value added factor in postal products and services. In view of this,
it is apparent that quality and customer satisfaction supportedly constitutes the driving
force in the postal sector development.
The significance of service quality and its relationship to customer satisfaction has led
UPU to establish a benchmark against which the participating countries continuously,
over period of time, test the effectiveness of their PPOs on whether they are successful
in providing the expected service quality. A consolidated service quality test for
52
transformed postal operators in the European Union Countries showed a dramatic
increase in their ‘end to end’ delivery service in 2006 compared to that of 2004.
Table 2.2 Links showing relatively improved service quality for period of 2007/2008
From
To
2007
2008
Australia (AU) Thailand (TH) 97.0% 85.8%
Germany (DE) Singapore (SG) 94.8% 93.7%
Fiji (FJ) New Zealand (NZ) 94.5% 88.2%
United States of America (US) Singapore (SG) 90.8% 78.9%
China (People’s Rep) (CN) Japan (JP) 90.6% 91.4%
Japan (JP) Bhutan (BT) 89.3% 89.0%
Australia (AU) Malaysia (MY) 89.0% 75.7%
New Zealand (NZ) Fiji (FJ) 86.% 81.8%
Source: UPU Postal Development Plan for Asia Pacific (2009-2012) p12.
For instance ‘early delivery (J+2)80’ had increased from 44% in 2004 to 82% in 2006;
‘on time delivery (J+3) from 69% to 95%; and ‘Later than J+4’ from 16% to 2% (IPC,
2007)81.
In contrast, UPU report on the Postal Development Plan for Asia-Pacific (2009-2012)
revealed marked disparities82 in certain areas of postal sectors between countries in the
Asia Pacific region, in spite of significant progress in the implementation and
improvement of services.
According to the 2007-2008 regional development plan assessment, the quality of
service objective was to achieve the world standard of J+5 for 65% of letter-post items
in most of the region’s countries by 2008. The outcome results for year 2007/2008,
however, revealed that out of 64 countries participated in this project; only 5 countries 80 J+2 represent early delivery of mail within 1 to 2 days after it is being posted. ‘J’ represented the day of posting + the number represents the delivery time span which usually stated in terms of ‘early delivery, on time delivery or Later than…delivery (based on UPU International mail delivery standard) 81 IPC; “13 years of quality improvement” by Ross Hinds (Director of Operations & Technology); Berne, 13 June 2007 82 Some of such disparities include, below global average postal coverage in certain countries, non existence of financial services in some countries, or where such service is offered, it has fallen below customer’s expectation; unreliable and inefficient electronic payment services to enable money transfers; and lack of capabilities to track and trace domestic and international mail by some of the countries.
53
were noted to have improved their service quality by 10 percent; while 17 countries
have indicated deterioration by at least 10 percent. Overall quality of service in the
region, however, remains relatively the same, except for links as shown in Table 2.2
that indicated excellent results.
Table 2.3 Postal service links from industrialized countries (IC) to Asia and Pacific (AP); and Asia Pacific countries to IC and AP respectively for period between 2006-2008
From T0 Industrial
Countries (IC) Asia and Pacific
Industrialized Countries
2006
43.3% (6.5)
2007 40.5% (7.8) 2008 32.9% (7.9)
Asia and Pacific 2006 58.2% (5.9) 73.1% (4.9) 2007 52.9% (6.2) 68.7% (5.9) 2008 49.4% (6.5) 63.7% (5.7)
Source: UPU Postal Development Plan for Asia-Pacific (2009-2012) p13.
The overall results for year 2006 – 2008 as illustrated in Table 2.3 revealed a
continuing deterioration of inward quality over links with industrial countries and vice
versa, as well as the results for links between Asia-Pacific regional countries, with
only 20 percent of items were delivered within J+5.
As part of its objectives for 2007-2008 to help Asia Pacific regional countries to
improve their postal service quality, UPU has engaged a number of Asia Pacific
countries in projects that focused on a number of areas, some of which are highlighted
below.
(a) Introducing new approach to field support for postal operators e.g.
commitment- based approach and efforts to close digital divide through the
support of strong electronic network. PT Pos Indonesia is a classic example of
a postal operator that has greatly benefitted through improvement of its service
quality by taking advantage of available ICT, which in this case is the
“Wasantara Net”.
(b) Effective tracking of all products and services at each stage of production
process and continuous evaluation of quality results, and improvements in
54
areas needed as identified by the evaluation results. According to the same
report, 25 countries in the Asia Pacific region that had introduced postcode
systems have indicated significant improvements in their postal service quality
in terms of speed and reliability of mail processing; and 10 countries are
currently taking part in a pilot project to improve service quality under a
cooperation agreement signed between UPU and Asia Pacific Postal Union
(APPU).
(c) Other areas that UPU supported projects are focusing on include:
I. promotion of postal addressing, in which 21 countries are currently
involved in, using the addressing system that is based on UPU Addressing
Guide.
II. installation and/or improvement of effective International Postal System
(IPS) / IPS Light and quality of service monitoring. Tuvalu and Tonga
posts are two examples in the Pacific region that are successfully using IPS
Light to exchange electronic data interchange (EDI)83 messenges for all
mail catagories, following a seminar/workshop on improving universal
postal service quality in Pacific Island countries. Report also revealed that
75 percent of Asia Pacific countries have installed IPS Light
III. improvement of postal security through organized workshops that aimed to
enhanced the skills and knowledge of designated operators; and provide
training on how to deal with unforseen circumstances. Such trainings
include management crisis and formulation and/or review of contingency
plans.
Source: UPU Postal Development Plan for Asia-Pacific (2009-2012).
83 EDI is the structured transmission of data, by agreed message standards, between organizations by electronic means. It is used to transfer electronic documents from one computer system to another without human intervention. It is more than mere email; for instance, an organization might replace ‘bills of lading’ with appropriate EDI message.
55
2.10 Solomon Island Postal Corporation
The Solomon Islands Department of Postal Service (SIDPS) was corporatized in 1997
as provided for under the Solomon Islands Postal Corporation Act (1996). The
corporatization of the SIDPS is part of the public sector-wide Structural Adjustment
Program (SAP) which include a wide range of initiatives through which state intended
to improve the performance of its government machineries in the light of the major
changes in the economic and technological environment and the challenges imposed
on its ability to provide efficient services to the public (more discussion on this in
chapter 4).
The corporate mission adopted by the Solomon Islands Postal Corporation (SolPost)84
is “to be recognized as the best customer service organization in the world”
(Vasumitra Report: 1-12 April, 1999). While it seemed too ambitious a mission for a
newly corporatized postal entity that is faced with challenges pertaining to
geographical distance and weak economy, the management of the newly transformed
postal corporation has adopted goals and strategies that intended to facilitate the
achievement of the mission. Three service-related corporate aims adopted as strategies
towards achieving the corporate mission are; (a) “to provide best (quality) customer
service; (b) to meet customer’s changing needs through innovations, and continuing
development and improvement in business; and (c) achieving excellence in all
processes, operations and practices”. Moreover, under corporate goals the new
corporation aims (a) “to be responsive to the needs and expectations of customers”;
and (b) “to provide a quality customer service” (ibid).
The mission statement and corporate aims/goals mentioned above indicated the
corporation’s intention of improving and providing service quality which will fulfill
customer’s needs and expectations. As highlighted in the preceding discussions in
both chapters 1 and 2, various reform efforts85 implemented in public service
84 SOLPOST and SIPC (Solomon Islands Postal Corporation) are used interchangeably in this report. 85 Reforms may include modernization of service processes, corporatization or privatization of public service organizations.
56
organizations are part of the strategies that state has undertaken to facilitate and
empower public service organizations to improve their service performances.
This study focuses on the transformation of public postal incumbent. Discussion in
section 2.6 of this chapter have focused on postal sector reforms in both developed and
developing countries, whereby many of these countries have opted to implement
reforms which include corporatization of public postal administration and
modernization of service structure and processes. Moreover, sections 2.7 and 2.8 have
focused on successful postal reforms and benefits gained, as well as mixed successes
as demonstrated by the disparities exist between Asia Pacific countries in terms of
improvement in postal service quality respectively. The later section also draws focus
to the UPU efforts that geared towards the improvement of postal service quality as
exemplified through specific cases involving countries within the Asia Pacific region.
These successful examples have somewhat proven the assumption that successful
implementation of reforms can lead to improvements in service quality that satisfy
target customers.
It is in this view that this study intends to carry out an empirical study on whether
transformation of SIDPS has made any positive impact on the capability of the
Solomon Islands Postal Corporation to improve and provide service quality that
satisfies its customers. Detailed discussions on public sector reform in Solomon
Islands, leading to the corporatization of SIDPS is given in chapter 4, and the
empirical findings pertaining to the impact of reform on Solomon Islands postal
service quality and customer satisfaction are discussed in chapter 5 respectively.
2.11 Aims and objectives of this study
2.11.1 Aims of study
The principal intention of this study is to examine whether the assumption that
corporatization, as a performance improvement strategy, has led to improvement in
service quality and customer satisfaction as exemplified through the case study of
Solomon Islands Postal Corporation.
57
Hence the general aims of this study are as follow:
1. To examine the impact of corporatization of Solomon Islands’ postal service
on the service quality and level of customer satisfaction
2. To assess whether there is a positive relationship between the Solomon
Islands’ postal service quality and level of customer satisfaction before reform,
and after reform.
2.11.2 Key investigative question
The key investigative question (as initially stated in chapter 1, section 1.2) that sets the
foundation for this study is; “does corporatization of SIDPS enhance the capability of
Solomon Islands Postal Corporation to achieve an efficient delivery network that is
characterized by high service quality that satisfies its customers?”
Listed below are other related questions from which the objectives of this study (also
refer to chapter 1, section 1.3) are drawn.
1. Has corporatization of Solomon Islands Department of Postal Services (SIDPS)
led to improvement in Solomon Islands’ postal service quality?
2. Has corporatization of SIDPS enhanced the level of customer satisfaction?
3. How effective is corporatization of SIDPS in improving service quality and
customer satisfaction?
4. Is there a relationship between service quality and customer satisfaction in the
case of Solomon Islands Postal Corporation?
5. What are key problems pertaining to postal service delivery in Solomon Islands?
6. What are major challenges/barriers to the success of Solomon Islands Postal
Corporation?
7. What are the major success factors of corporatization in Solomon Islands?
8. What future directions should be considered for future reform undertakings?
2.11.3 Objectives of study
The key objectives of this study are listed as follow:
1. Discuss the rationale for postal reform in Solomon Islands
58
2. Identify key problems of the postal service delivery in Solomon Islands
3. Determine whether corporatization of Solomon Islands postal service has led
to improvement in service quality
4. Determine whether the outcome of service quality improvement process has
led to customer satisfaction
5. Examine whether service quality and customer satisfaction have improved
after corporatization in contrast to before corporatization
6. Explain the relationship between service quality and customer satisfaction; and
dependency of customer satisfaction on service quality
7. Identify and explain factors that led to successful postal reform in Solomon
Islands
8. Establish major challenges and barriers to successful implementation of postal
reform in Solomon Islands and the efficiency of postal delivery service
9. Highlight major policy implications drawn from the findings of this study, and
provide recommendations for future considerations
10. Discuss lessons learned from this study
11. Identify major areas for future research
2.11.4 Hypotheses
The empirical component of this study intends to find out whether corporatization of
Solomon Islands postal services has led to improvement in Solomon Islands postal
service quality and subsequently enhanced level of customer satisfaction. Secondly,
the empirical findings will be used to test the following hypotheses that relate to
Solomon Islands postal service quality and customer satisfaction:
Hyp 1: That customer satisfaction is positively related to Solomon Islands’
postal service quality
Hyp 2: That customer satisfaction is dependent on Solomon Islands’ postal
service quality after corporatization.
Hyp 3: That level of customer satisfaction in Solomon Islands’ postal service
differs before corporatization; and after corporatization.
59
Hyp 4: That quality of Solomon Islands’ postal service differs before
corporatization; and after corporatization.
The outcome results from the hypothetical testings will be used to confirm the
statistical findings on whether Solomon Islands service quality and the level of
customer satisfaction have improved following the corporatization of Solomon Islands
postal service.
2.12 Conclusion
Postal sector plays an important role in the socio-economic developments of the
nations. For strategic reasons, which include universal service obligation that entails
the delivery of postal service ubiquitously, postal system in many countries has always
been monopolized by state, and largely protected from competition. Because of its
large distribution network of post offices that are located throughout the country,
postal sector does not only become one of the largest employer, but it also through its
postal network strongly supported the national economy by facilitating exchange of
goods and information at affordable prices.
In spite of its important role in the economy, studies have revealed that postal sectors
in many developing countries are not performing up to the standard expected of them.
With moderate facilities they have, most postal sectors barely making a breakeven,
and services are rather poor or moderate to say the least. Such performance is
exacerbated by the influx of other competitors into the market who take advantage of
the use of advanced information and communication technology (ICT).
Subsequently, globalization of markets and the introduction of advanced ICT have
significantly influence the way postal business is done; as well as contributed to
customer’s changing needs and expectations.
The dramatic changes in the postal environment have pressured states to revisit
regulations that governed their postal sectors and make appropriate amendments that
facilitate reforms that are appropriate to their postal context to ensure that designated
postal operators continue to provide quality services that satisfies customers; and
60
achieve competitiveness in the market. This process begins with the separation of
regulations and powers that governed post and telecommunication activities resulting
in the establishment of a separate postal entity through the process of corporatization.
The basic assumption is that successful transformation of postal service incumbent
could lead to efficiency of service delivery that satisfies customers. Studies have
proven that transformed postal corporation can thrive successfully in a competitive
market given adequate legal framework and strong institutional and managerial
support. While there are examples of success cases, there are also examples of mixed
successes (i.e. success may be indicated in one front, but not very successful in
another) as indicated in some countries like those in the Asia Pacific region.
In spite of this, many regional and international organizations continue to provide
support to ensure postal operators fulfill their USO. UPU has involved in a number of
projects that geared towards helping postal operators all over the world to improve
their postal service quality. Upon its corporatization in 1997, Solomon Islands Postal
Corporation has visualized itself to become the “best customer service organization in
the world”. Its intention to provide and improve service quality that satisfies its
customers is reflected in its strategic goals and objectives whereby it aims to provide
best customer service; meet customer needs through innovation, continuous
developments and improvements in business; and achieving excellence in all
processes, operations and practices. This discussion sets forth the objectives and
propositions which will be pursued in this study and which will be discussed in the
later chapters.
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Chapter 3
Methodology
3.1 Introduction
This chapter discusses the research process and methodologies employed to acquire
information and data that are used in this report. The discussion includes type of
information sought, research methods used and reasons for using such research
methods. The discussion also focuses on variables and indicators used as measuring
tools to establish the impact of change on performance. Problems and limitations
experienced in the course of this study will also be highlighted and discussed.
3.2 Research process
This study employs both quantitative and qualitative research approaches to obtain
information and data from primary and secondary sources. These information and data
are used in the discourse of this report to verify issues pertaining to the key research
question and to test the hypothetical assumptions as defined in chapter two. The
following subsections briefly discuss the distinctions between qualitative and
quantitative research approach and why they are used in this study.
3.2.1 Qualitative research
Given the diverse issues that can be studied and multiple theoretical frameworks,
epistemological positions and methodological approaches to qualitative research, it is
not simple to find a generic definition for qualitative research that is accepted by
majority of qualitative research approaches and researchers. Regardless of this, all
approaches have demonstrated some distinctive features that characterize qualitative
research86 from quantitative research. Unlike quantitative research, qualitative
research relies on reasons behind various aspects of behavior. It explores social issues
or problems using various qualitative tools to access and interpret data which help
researchers to understand, describe, and explain social behaviors/problems and/or
86 Gibbs, G. R, (2007) Analysing qualitative data; SAGE Publication Ltd., London ECIY ISP.
62
reasons for such behaviors (Flick, U 200787, Grinnell & Unrau, 2005). Researchers
often used qualitative data to gain a general sense of the phenomenon and to form
theories that can be tested using further quantitative research.
Furthermore, qualitative data are non-numerical and usually obtained through a
number of different qualitative research methods which include action research, case
study and ethnography. In order to obtain qualitative data through these methods,
qualitative researcher employs various qualitative techniques which can either be
structured or unstructured in approach. Qualitative techniques which are commonly
used by researchers are in-depth interviews (structured or semi-structured) and open-
ended questions, direct observations, participation in setting (fieldwork), analysis of
documents and materials and researchers’ impressions and reactions (Hesse-Biber,
2004). Some of these techniques have been employed in this study and will be further
detailed in section 3.3 of this chapter.
3.2.2 Quantitative research
This is an investigative approach that uses scientific methods such as mathematical
models, theories and hypotheses to interpret and understand a phenomenon and/or
quantify relationships using quantitative data88. Other quantitative research model
includes experimental control and manipulation of variables, collection of empirical
data, modeling and analysis of data, and evaluation of results.
The analysis of quantitative data usually begins with collection of data based on a
theory or hypothesis. These data are then analyzed using descriptive or inferential
statistical methods to study causal relationships by manipulating factors thought to
influence the phenomenon. Quantitative data often provides a broader view of the
issue under study, and are very useful when there is a need to provide precise and
accurate data, which can also be produced as a proof to an issue.
87 Flick, U 2007, Managing quality in qualitative research, SAGE Publications Ltd., London, ECIY ISP 88 http://www.answers.com/topic/quantitative-research?cat=biz-fin.
63
3.2.3 Reasons for employing quantitative and qualitative research
approach
The decision to employ both qualitative and quantitative research approaches in this
study is solely based on the exploratory and evaluative nature of this study. Moreover,
the qualitative and quantitative research techniques used to obtain data are determined
by the type of data and information needed to fulfill the objectives of this study.
The use of both qualitative and quantitative data in this study is important because
they provide a complete, as well as complementary assessment on the key research
questions. For instance, the statistical analysis of the quantitative data is used to
interpret the relationships between variables in the quantitative data sets, while the
qualitative data is used to facilitate such interpretation. Without the latter, the
assessment is incomplete. Simply put, the qualitative data provides a connection
between empirical observation and mathematical expression of quantitative
relationships.
3.3 Research methods and techniques employed in the study
To facilitate discussions on issues pertaining to the key research intent, various
research methods which are qualitative and quantitative in approach are employed to
obtain information and data that are interpreted to understand, discuss and verify
issues of interest to this study, and to test causal relationships between change and
service quality; and change and customer satisfaction. The key research techniques
used to obtain qualitative and quantitative data in this study are discussed below.
3.3.1 Case study
According to Barr (2004)89 case study is a comprehensive in depth investigation of a
situation. This study, therefore, has undertaken to dwell on the key research intent in a
case study approach. In this respect, Solomon Islands Postal Corporation (SIPC) has
been chosen as the case study in which the research intent will be thoroughly
investigated.
89 Barr, K.J (2004), Doing research: Introduction to the basics of research, ECREA, Suva, Fiji.
64
The reasons for using case study approach are, firstly, SIPC is one of the five
government departments that were successfully corporatized in the 1990s by the
Solomon Islands government. Secondly, it provides the basis for an empirical analysis
on the relationship between corporatization reform and service quality, and likewise,
service quality and the level of customer satisfaction. Thirdly, it provides information
to verify findings and facilitate discussions on issues pertaining to the research
questions as specified in both chapter one and chapter two.
In the process of determining what information and data should be sought,
considerations of postal services performance output prior to reform, changes
undertaken by the Solomon Islands (SI) government through the corporatization
process, reasons for such reform, and the impact of these changes on the new entity’s
performance pertaining to service quality and customer satisfaction are taken into
account. The process of acquiring relevant information involved consultation of both
primary and secondary sources through the use of various research strategies as
discussed in sub-sections 3.3.2 to 3.3.6 below.
3.3.2 Review of literatures
Most of the secondary data used in this study are obtained through consultation of
literatures and documents including books, journal articles, government reports, SIPC
reports and documentations, reports from various organizations90 and other related
documents including Parliament Acts on the Public Enterprise Reform in Solomon
Islands. Books, journal articles and documents by various authors and organizations
are widely consulted for the purpose of eliciting important qualitative data on issues
pertaining to postal sector, drivers of reform and the reform process. The information
obtained is important in facilitating discussions in this report.
Most of the literatures and articles consulted are accessed through the University of
the South Pacific (USP) library in Laucala Campus, Suva, Fiji. In addition, with the
use of advanced technology installed and provided for by the University, accessibility
90 CBSI, ADB, IMF, World Bank, OECD, UPU reports and press reports.
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to other valuable information and data on the topic of study is also made possible
through University online resource links with various recognized International
Journals and organizations.
Apart from books and journals, relevant documents on Solomon Island (SI) public
enterprise sector, SI government’s program of actions and its restructuring programs,
and Solomon Islands Postal Corporation (SIPC) are also consulted. These documents
are accessed through the SI Ministry of Public Service office, SI National Parliament
library, SIPC management office, and Central Bank of Solomon Islands (CBSI).
Furthermore, other supplementary information used in the discussion of this study are
obtained from the internet links through the process of internet surfing.
Various reports pertaining to Solomon Islands economy, SI government’s economic
reform policy and initiatives and assistance from its development partners are
consulted during the course of this study. These reports are published by various
organizations and donors like the World Bank, International Monetary Fund (IMF),
Asian Development Bank (ADB), CBSI, Organization for Economic Cooperation and
Development (OECD), Australia Broadcasting Corporation (ABC), Asia Pacific News
media, and the locally published newspaper, ‘Solomon Star’.
Reports from the development partners are mostly accessed through internet links,
while those pertaining to SOE performance and SIPC are accessed through SIPC
headquarter in Honiara, USP libraries in Suva, and the Solomon Islands National
Parliament library.
Apart from the ABC and Asia Pacific News reports on Solomon Islands reform
programs, certain information on the subject is also obtained through Solomon Islands
local news reports published on various issues of Solomon Star Newspaper, lifhaus
website and peoplefirst network website. The information collected through these
sources proved useful in facilitating discussions on the topic of study and in backing
up findings of this research.
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3.3.3 Face to face interview (semi-structured)
Face to face interview is one of the strategies used to collect data for this research. The
kind of information sought through the interview process include policies and processes
of reform, the role of the reformed organization, impact of reform and the barriers to
reform process. Face to face interview was held with the senior personnels from the
public service office, SIPC, and the Director of the Solomon Islands Monitoring and
Privatization Unit. The approach used involves contacting the concerned officers by
telephone, explaining the purpose for the interview, and negotiating for a convenient
time when the interview would actually take place.
3.3.4 Discussions
Personal observations and discussions with the operational and managerial personnels
and the public (clients) are part of the fact-finding strategies used. Two types of
discussion were involved—face to face discussions and online discussion forums91.
The information sought and collected through these discussions are supplementary,
and basically used to establish the reliability or consistency of the information and
opinions collected through questionnaire surveys, formal interviews and researcher’s
personal observations.
(a) Face to face discussion (with Solomon Post personnels)
Face to face discussions were held with Solomon Post personnels. The main issues
that form the topic of discussion include personnel’s opinion on the types and quality
of the services/products the organization is providing, what they believe are
achievements of the corporation, challenges they have encountered, how they deal
with such challenges and strategies they have put in place to address such challenges
in the long run. The main aim for such discussion is to find supplementary information
that might not have been picked up during the interview or may not be found in the
written format.
91 A question focused on the quality of the Solomon Islands postal services, and how the services could be improved was posted on websites: http://www.peoplefirst.net.sb and http://www.lifhaus.com discussion forums.
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(b) Face to face discussion (with service users)
Informal discussions were held with members of the public, particularly regular users
of postal services. Such discussions focus mainly on participants' views and opinion of
what they perceived as Solomon Post’s achievements, their level of satisfaction with
the type and quality of services provided by Solomon Post, and ways they think postal
services could be improved.
(c) Online forum discussion
Views are also drawn through online discussions from service users who live in
different parts of the country as well as abroad, and are accessible to internet. This is
done by posting the question of intention on the 'Discussion Forum' found on website,
http://www.lifhaus.com/ and 'Message Board' found on website,
http://peoplefirst.net.sb. These avenues provide the opportunities that facilitate a lot of
discussion on important issues affecting Solomon Islands postal services.
On May 2007 and again October 2008, the question; “how effective is SIPC in its
provision of services?” was posted on these forum boards. This posting had generated
a lot of discussions from a total of thirty online participants who indicated their views
and opinions on postal services provided by the Solomon Post, and how these services
could be improved. Individual experiences registered on these online discussion
forums provide examples that are used to substantiate discussions relating to the
intention of this study.
3.3.5 Personal observations
Personal observation on the actual performance of the organization, clients' reactions
and expression of appreciation or vice versa to the services and their quality,
improvements and achievements of the organization, limitations and challenges
experienced by both the clients and the service provider and so forth is part of the
research strategies applied. Rather than taking verbal and written reports for all its
worth, it seemed crucially important as well to actually see and experience the process,
as it provides valuable insights into the magnitude of the issues when analysis of the
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service quality and customer satisfaction is discussed. Personal observation was
involved throughout the duration of field research.
3.3.6 Questionnaire survey
The administration of the survey focuses only on postal service users who are based in
urban and suburban centers in Solomon Islands, where availability and accessibility of
postal service is guaranteed. However, due to time constraint, the participants were
randomly picked from different suburban centers including Honiara.
The purpose of this survey is to (i) assess client’s views on postal service quality, and
(ii) establish clients' level of satisfaction with the postal service they are receiving,
before and after corporatization. A set of structured statements were formulated for the
purpose (see Appendix A). The responses to these statements require respondents to
indicate whether they strongly agree (SA), agree (A), not sure (NS), Disagree (D) or
strongly disagree (SD) as in section 2 of the questionnaire; or very satisfied (VS),
Satisfied (S), not sure (NS), dissatisfied (D) and very dissatisfied (VD) as in section 3
and 4 of the survey questionnaire (refer to Appendix A). Section 5 and section 6 focus
on the barriers to reform and success factors of reform respectively.
The administration of the survey questionnaire was done in two ways. First, some
questionnaires were administered personally to individual participants by the
researcher, with some help from an assistant researcher who traveled from Fiji to
Solomon Islands during mid 2008. Secondly, through the use of email in which the
researcher has contacted participants through their email contacts, explained the
purpose for contacting them and requested their kind assistance by filling in the survey
questionnaire attached. Of the total of 150 who have responded, 100 were received
through personal delivery while 50 responses were received through email. The
invitation to participate is open and it was made clear to those contacted that they are
not obliged to participate if they do not wish to do so.
One of the major issues taken into consideration when administering this survey is the
difficulty of survey respondents to remember the quality of postal service 11 years
ago. To deal with this issue, participants were randomly, but carefully, selected based
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on their age, intellectual maturity and capability to provide a reliable assessment of the
service quality prior to, and after corporatization.
In order to avoid any biasness in public views regarding service qualities, SIPC
management’s views were also obtained through the use of formal discussions and
interviews.
3.4 Criteria
The intention of this study, as stated in chapter 1 and 2 is to examine and establish
whether corporatization of postal services has any positive impact on service
performance. Two key variables this study has used to measure the impact of reform
on service performance of the Solomon Islands Postal Corporation (SIPC) are service
quality and level of customer satisfaction.
This study acknowledges that it is not simple to determine the efficiency and
effectiveness of service quality as they involve complex set of issues. Time is seen as
a significant factor in regard to the provision of adequate information on the services,
and the organization systems for redress in the event of unacceptable quality. While
the use of survey provides insights into users' opinion of service quality and assist in
assessing and determining level of customer satisfaction, there are certain issues that
matters which cannot be monitored by the recipients. Given the complexity of
measuring quality, this study has undertaken the approach that draws together both the
client and service provider’s opinions pertaining to service quality through means of
survey, discussions and interview as discussed under section 3.3 above.
The responses obtained through these information-seeking strategies are used to gauge
both parties’ opinions on the quality of services respectively.
(a) Service quality
The service quality will be measured in terms of effectiveness and efficiency of the
services. Indicators that are used to assess the level of service quality are derived from
the five generic dimensions proposed by Parasuraman et al (1988) and identified by
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UPU report on “quality management structure” (February, 2003) and Li et al (2006) as
discussed and listed in chapter 1, section 1.6.2.
The indicators that would be used in this study are:
(i) Accessibility to service (service accessibility to rural areas)
(ii) Availability of service (and service products such as stamps, phone cards
and aerogram at all time)
(iii) Security (mails and parcels are delivered on expected time scheduled, and
without being damaged or lost)
(iv) Promptness (staff promptness in responding to customer’s grievances and
queries)
(v) Time (time involved in accessing service)
(vi) Cost (cost involved in accessing service)
The survey questionnaires are formulated based on these five dimensions.
(b) Customer satisfaction
A key objective of any good service provider is to ensure that its clients receive the
best customer service possible. Hence, achieving customer satisfaction is always a
priority for service providers, and SIPC is no different. The discussion in chapter 1
and chapter 2 noted that there is a relationship between service quality and customer
satisfaction. In other words, customer satisfaction depends on how a customer
perceives and measures the quality92 of services he or she receives. In view of this the
indicators used to gauge customer satisfaction before and after corporatization are
derived from the five dimensions (see above) used to measure service quality. The
questions which are put into statement form (see appendix A, and also Table 5.3) are
designed in such a way in which responses elicited would indicate how customers
perceived the services they received in terms of whether they strongly agree (SA),
agree (A), not sure (NS), Disagree (D) and strongly disagree (SD). These responses
are collated and statistically analyzed to measure the overall level of customer
satisfaction pertaining to postal service provided by SIPC.
92 More basically related to the efficiency and reliability of services.
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3.5 Quantitative data analysis
The quantitative data collected through the questionnaire survey are statistically
analyzed using the SPSS program, through the application of various analysis tests as
deemed appropriate for the purpose of testing the hypotheses. The tests and analyses
used and reasons for using them are explained below.
(a) Reliability test
The purpose of carrying out a reliability analysis is to estimate the consistency of
measurements used in the analysis. Thus prior to testing on the hypotheses of this
study, an internal consistency test was conducted using the Cronbach’s alpha model of
testing, which is based on average correlation of items that measure the same concept.
The reliability estimate (internal consistency) of the measurements is higher if the
generated alpha coefficient value is nearer to 1.00 and greater than 0.5
(b) Correlation analysis
Correlation test is used to test H1 which assumed that customer satisfaction is
positively related to quality of service. The correlation test is applied to determine
whether there is a positive correlation between customer satisfaction and quality of
service.
(c) Chi-square analysis
Chi square test is used to test H2 which assumed that customer satisfaction is
dependent on quality of service before and after corporatization. The application of
chi square test is to prove if customer satisfaction is dependent on the quality of
service before and after corporatization of postal service.
(d) Paired Sample T-test
The application of Paired Samples T-test was used to test H3 and H4. H3 assumed that
the level of customer satisfaction in postal service differs before corporatization and
after corporatization, and H4 assumed that the quality of postal service differs before
corporatization and after corporatization.
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The purpose for using Pair Samples T-test was to establish whether there is a
difference in the level of customer satisfaction (H3) and quality of service (H4) before
and after corporatization respectively. This is done by running the test to see if there is
any difference in the mean, before and after corporatization reform on postal services,
which might indicate improvement.
(e) Factor analysis
A factor analysis is a data reduction technique that attempts to identify underlying
factors or reduce a large number of variables to a smaller set of underlying factors that
may explain a pattern of correlations (or most of the variance) within a large set of
observed variables. In this analysis, the basic purpose of conducting a factor analysis,
using the Principal Axis Factor (PAF) is to confirm the validity of the construct and if
the items are tapping into the same construct. Furthermore, it seeks to identify which
items under both service quality and customer satisfaction are conceptually significant.
The findings from these analyses are used to discuss in depth the key research
question on whether corporatization of Solomon Islands postal services has improved
the quality of postal service and level of customer satisfaction.
3.6 Problems and limitations
This study includes a case study which requires field research work to be done in the
Solomon Islands. This implies traveling; hence, a lot of planning is involved to ensure
that the project is completed within a given time frame. In spite of this, difficulties and
limitations are encountered. These difficulties, which very much influence the
progress of this study, are mostly related to the availability and accessibility of
relevant information pertaining to postal services in Solomon Islands. Major
difficulties experienced during the course of this study are listed below.
(a) Complacency attitude of officers responsible vs. Time schedule
One of the main problems experienced during the field work is the complacent attitude
of management and officers responsible to make avail information and data required
for this study. While they have showed interest on intent of this study and agreed to
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provide requested data, the time taken to produce and make these data available was
not impressive as they took their time to do things at their own pace. Such attitude
resulted in some important information and data not readily made available within the
initial time frame, and as such they have to be posted over after researcher had
returned to the location of study.
(b) No proper record keeping
Relevant information and data are not easily available due to poor record keeping, or
in other words, records are merely kept on ad hoc basis. It took officers a while going
through various files in the office to locate requested documents or reports. Otherwise
most information or data obtained are acquired through accessing concerned officers'
'copy files'.
(c) Unavailability of information
Attempts to access updated financial reports of the SIPC have proven futile because
the corporation has not had its financial reports audited over the last decade. The last
audited financial report was done in 1998, a year after its inception. Hence, for this
reason the researcher has switched from the initial idea of focusing on assessing the
impact of corporatization based on financial management and profitability, to service
quality and customer satisfaction. Furthermore, it is not possible to obtain an update
record on the incoming and outgoing volume of mails, nor the list of prices and rates
imposed on various postal services offered. No annual report was also put together
since the inception of the organization.
(d) Distance Distance is seen as a major factor that slows down the receipt of feedback on
'customer opinion' survey administered to participants. While time taken to administer
the survey is taken into consideration, the feedback that was sent through mail did not
arrived in time as expected.
It was basically because of this problem that the option of administering the survey
through the use of email was considered and utilized. While this process might not as
effective as personal administering of questionnaire, the response is somewhat
encouraging with a good number of those contacted have positively responded.
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3.7 Conclusion
The use of appropriate types of research strategy in a research is important as they
may determine the type and quality of information and data collected. This study,
which focuses on establishing the impact of reform on service quality and customer
satisfaction, as exemplified through the corporatization of Solomon Islands postal
services, had used a combination of different types of research methods to acquire
information and data from both primary and secondary sources.
These include consultation of various literatures, documents and reports pertaining to
the topic of study and the use of survey questionnaires, formal interview, face to face
and online discussions and personal observations.
Two principal variables used to measure the effectiveness of corporatization reform on
improving SIPC performance are quality of service and customer satisfaction. Survey
questionnaires are formulated under each of these variables based on important aspects
which are used as indicators. All information collected during the course of this study
are compiled and organized systematically for the benefit of this report. The
quantitative data obtained through the questionnaire survey are tabulated using SPSS
program and appropriate statistical tests are identified and run to test the hypothesis
generated by this study.
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Chapter 4
Public enterprise sector and postal reforms in Solomon Islands
4.1 Introduction
The extensive involvement of Solomon Islands government in commercial activities
through its state-owned enterprises and public regulated utilities over the years
signifies the crucial role that state-owned enterprises play in promoting and enhancing
socio-economic developments of the nation. Nevertheless, many of these state-owned
commercial undertakings have faced a number of challenges that undermine their
productivity and efficiency. Such challenges are imposed by a combination of external
and internal factors, intensifying the pressure on government to respond appropriately.
Hence over the last two decades, Solomon Islands has witnessed its traditional state-
owned enterprises and public-regulated service organizations being transformed
through the process of corporatization and privatization. One of the core services
which were transformed through the process of corporatization in the 1990s is the
Solomon Islands postal service.
This chapter intends to draw to focus the corporatization of SI postal service, its legal
framework and operations. In order to provide a better insight into the issues and
events leading up the corporatization of postal service, the preceding discussions on
this chapter will provide a general background on Solomon Islands including its
economic performance, the pressure and rationale for a public sector-wide reform, and
successive government’s reform initiatives. The chapter will also provide some insight
into the public enterprise sector and its reform as a basis towards understanding where
and how it links to the corporatization of postal service. Challenges and barriers to
successful reform will also be highlighted. The impact of reform on the service quality
and customer satisfaction, however, will be analysed and deliberated on in the next
chapter.
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4.2 An overview of Solomon Islands
Solomon Island is an archipelagic state located in the Southwest Pacific about 2000km
northeast of Australia. It consists of six main islands and over 900 smaller ones, which
include some low-lying atolls that all together make up a total landmass of 28, 400
square kilometres. The islands stretch about 1600 km southeast from Papua New
Guinea across the Coral seas and South-easterly towards Vanuatu (see figure 4.1), and
have been subdivided into nine provinces. The largest island, Guadalcanal, hosts the
national capital, Honiara, whose population according to 2006 estimates is 54, 60093.
The country’s total population of about 552, 438 is predominantly Melanesians (93%)
although there are other minority ethnic groups including Polynesians, Micronesians,
Chinese and Europeans.
Figure 4.1: Map of Solomon Islands Source: Bureau of East Asians and Pacific Affairs, 2008.
93 Background Note: Solomon Islands; Bureau of East Asian and Pacific Affairs, March 2008 accessed 31/03/08 on website: http://www. http://www.state.gov/r/pa/ei/bgn/2799.htm.
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Most of the populace reside in rural communities which are widely dispersed along the
coasts, with about 67 percent live in communities with less than 200 people and 17
percent lives in urban areas. There are about 120 vernaculars spoken in Solomon
Islands. While Solomon Islands pidgin is the lingua franca for majority of the
population, English has always been the official language.
4.2.1 Government
Following its independence in 1978, Solomon Islands joined the Commonwealth and
adopted the unicameral Parliament and ministerial system of government. Its National
Parliament has 50 members who represented 50 constituencies nation wide, and are
elected for every four-year terms under a “first past the post” voting system. In the
local government setting, there are nine provincial assemblies representing nine
provinces in the country and the tenth is Honiara which is administered by the Honiara
Town Council.
The national government is headed by the prime minister elected by simple majority
of the members of the parliament and likewise the provincial assemblies headed by a
premier elected by a simple majority of the members of the provincial assemblies. The
political party structure in the Solomon Islands is fluid and it is common for a member
of one party crossing the floor to support another. Presenting and passing a “motion of
no confidence” against the ruling government is a common feature that tends to
characterize the political structure of the nation. The government has established
bilateral and multilateral relationship with several development partners who have
contributed much to the social and economic development of the nation.
4.2.2 Economy 4.2.2.1 An overview of the economy The basis of the Solomon Islands economy was first established by the British
Colonial Government in the early twentieth century through the establishment of large
foreign-owned plantations with key focus on expanding the economy.
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The government’s active participation in initiating economic development, then, was
more appropriate due to the geographical nature of the country and the so
'underdeveloped' state of the newly colonized territory. These economic activities
made way for the evolution of Solomon Islands public enterprise sector which has
been a major part of Solomon Islands political and economic fabric for many years.
Over the years, government's commercial activities have extended to diverse sectors
such as banking and finance, manufacturing, natural resource development,
transportation and utilities. Most of these projects were either directly or indirectly
financed by government or through shareholding arrangements. State’s dominance in
the economic developments is related more to lack of entrepreneurial skills in the
private sector coupled with lack of critical minimum infrastructures in terms of power,
roads and inter-island marine transport facilities. The later severely constrains
profitable opportunities for private sector investments, and prevents diversification
and structural changes. These left state no options but to assume major responsibility
in investing in such infrastructures and economic developments.
Up until early 1990s most of the social services and utilities continued to be
established, either as a department of a government ministry, or a statutory authority
while government continues to maintain the joint-ventured agreements through its
investment arm, the Investment Corporation of Solomon Islands (ICSI)94. However,
because of country’s weak economic structure government continues to rely heavily
on overseas borrowing to finance projects that generate revenues for the country.
Presently, the government has directly involved in the economy through several of its
commercial ventures (17 altogether), which include six (6) statutory authorities, two
(2) public corporations and nine (9) public companies (or portfolio companies as they
are known).
94 ICSI is the investment arm of the government enacted in the parliament (ICSI ACT 1988; No. 6 of 1988) and is charged with responsibility for managing government's investments portfolio independent of government shareholding agencies (ACT of 1977); and to deal with other matters connected therewith or material thereto.
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All statutory authorities and public corporations are wholly state-owned and are
administered through relevant government ministries, while portfolio companies are
either wholly or partially government-owned, and are held in trust by the Investment
Corporation of Solomon Islands (ICSI). The wholly state-owned companies include
Solomon Airlines, National Shipping Services, Sasape Marina Limited, and Solomon
Islands Printers Limited, while partially state-owned enterprises include
Kolombangara Forest Products Limited (KFPL)95, Solomon Telekom Limited96, Soltai
Fishing and Processing Limited (SFPL)97 and Guadalcanal Plains Palm Oil Limited
(GPPOL)98 which takes over former Solomon Islands Plantation Limited99 following
its closure during the period of ethnic tension in early 2000. Government also holds
other potential trading assets that are not corporatized which include several forest
plantations, for instance Russell Islands Plantation Estate Limited which is a
subsidiary of Commodity Export Marketing Authority, and state-owned Alu
Plantation in the western province of Solomon Islands.
4.2.2.2 Performance outlook
The economic performance of Solomon Islands over the last two decades has not been
very impressive. With its per capita GDP of $474 (2005 est.), Solomon Island has
been ranked as a lesser developed nation. More than 75 percent of its labour force is
engaged in subsistence farming and fishing. Little progress was seen in government’s
effort to meet its development needs. Signs of distress were evident in all sectors,
particularly in the public sector. Successive governments coming into power had faced
significant fiscal and economic challenges. Inadequate fiscal policies, economic
mismanagement and economy’s continuous dependency on limited range of primary
95 KFPL has a variable share holding whereby government and CDC are also included. 96 A joint-venture between Cable and Wireless (49%), Solomon Islands Provident Fund (43.9%) and state through ICSI holds 7.1% shares. 97 SFPL was successfully incorporated in 2001 to succeed former Solomon Taiyo Limited. SFPL is a joint venture between Investment Corporation of Solomon Islands (ICSI), which hold 51% share on behalf of the state, and the western provincial government who holds 49%. 98 GPPOL is a joint venture between the state and Kulim (Malaysia) Bhd, via its Papua New Guinea (PNG)-based subsidiary New Britain Palm Oil Ltd., and owns 80% of the holdings (SS issue of 19 September 2005). 99 A joint-venture between Commonwealth Development Corporation (60%) and state (40%).
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commodities have been highlighted in various studies and reports as being major
barriers to sustainable economic growth.
While some growth in GDP was recorded between 1980 and 1990, the economy had
contracted by 14 percent at the turn of the 21st century and by about 9 percent in
2001100—a further decline by 5.0%101 (Pacific Economic Report, Solomon Islands
Pacific Report, Sept, 1998; CBSI report, 2002). Such severe economic contraction
during the period between 1999-2001 and economic stagnation in 2002 was attributed
significantly to ethnic tensions that had driven the economy of the country to its knees.
However, some indications of growth were recorded following the arrival of Regional
Assistant Mission to Solomon Islands (RAMSI)102 in 2003. For instance the economy
had recorded a growth by 3.8 percent in 2003 (CBSI Annual Report, 2004), 8 percent
in 2004, 5 percent in 2005, 6.2 percent in 2006103 and 10 percent in 2007104. This
growth recovery was attributed to return of business investment and increase in export
receipts (mainly from timber), favorable terms of trade for other export commodities
following RAMSI interventions, and strong aid flows. In spite of this, the economy
continues to face a number of issues that undermine sustainability of growth. In view
of this, the commitment of servicing external debts becomes a significant fiscal
burden, taking into account the heavy dependency of the economy on limited primary
export commodities, and just about less than a quarter of the population are involved
in formal employment while the majority involved in subsistence farming or cash crop
agriculture.
100 Solomon Islands Country Brief, Department of Foreign Affairs and Trade, Australian Government, August, 2003. 101 ADB Annual Report, 2001: Solomon Islands Economic performance, adb.org. 102 A joint effort led by Australia and New Zealand and other Pacific Islands’ military and police personnel to oversee the restoration of law and order in the country and to assist in rebuilding of the economy. 103 Australian Government: Department of Foreign Affairs and Trade, March 2008. 104 ADB Report on “Small Pacific countries”; retrieved 23 March 2008 on website: http://www.adb.org/Documents/Books/ADO/2008/SMALLPAC.pdf.
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4.3 Pressure for reform
The pressure for reform is apparent in view of the economic and social difficulties that
government faced over the last three decades. It is evident that government's
traditional role in regulating the economy and masterminding developments has
extended to include development functions. Such extended tendencies are manifested
in:
(i) Government’s domination of commercial activities that include
statutory corporations, air transport services, telecommunications,
resource-based enterprises in forestry, fishing and agricultural
production, and service providers in ship repair, printing, tourism
promotion and export marketing
(ii) Big public sector resulting from unnecessary deviation and expansion
of public service functions which inevitably creates rudimentary
structures within the core legal establishment of government, and
corresponding increase in manpower intake and excessive public
expenditure
(iii) Over-stretching of government’s meager resources resulting in its
ineffectiveness to meet its commitments. Adapted from ADB report, 2004 and ADB report, March 2007.
Although SOEs have contributed much to the economic growth and provision of much
needed services in the country, they also create numerous fiscal problems and
increased consumer dissatisfaction. For instance, state’s domination of commercial
sector has not only crowded out private sector, but the poor performance of its SOEs
has also created high costs of inputs to private enterprises. Furthermore, weak
management and ineffective regulated monopolies have led to unnecessary high costs
of production, and inconsistent and unreliable service delivery and quality.
Inappropriate mixing of regulatory and commercial functions has also given room for
mismanagement and poor governance, exacerbated by the fact that most politically
appointed boards to these SOEs are usually ineffective. Even the Investment
Corporation of Solomon Islands (ICSI) has not been able to fulfill its mandate
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effectively due to various setbacks discussed above. All these, together, had
contributed to the deterioration of technical, management and economic performance
of SOEs and general public sector (ADB Country Strategy and Program Update 2005
– 2006 Solomon Islands; August 2004).
In view of this, the urgency to rectify the situation is one that government cannot
ignore. External pressures for reform also came from financial donors who advocated
larger private sector participation and small, but efficient, public sector. In the 1994
South Pacific Forum held in Brisbane, Australian government pressured Pacific Island
states to adopt economic rationalist policies, and called for “public sector reform and
private sector development”105. Major monetary institutions have also incorporated
'public sector reform, with the focus on increasing private sector development, and
small but efficient public sector' as one of the considered criterion for loan approval to
island states.
4.4 Government reform initiatives – the Structural Adjustment
Program (SAP)
The pressure to reform public sector has led government since 1980s106 to execute and
adopted a number of review and policy papers107 pertaining to public sector structural
adjustment in late 1989 and early 1990s.
These policy papers have provided a framework for each successive government’s
Structural Adjustment Program (SAP) that covered a wide range of initiatives, and
through which government intends to revert its machinery to its proper role. One of
the main components of Structural Adjustment Program (SAP) is the improvement of
economic and financial sector under which comes the intention to effect structural
adjustments in accordance with its policies on commercialization and privatization.
The intended outcomes from this policy adjustment include;
105 Quoting correspondences by Vikki Jone on “Solomon Islands”. 25 June 2003; accessed on website: http://lists.indymedia.org/pipermail/imc-uk-radio/2003-June/000444/html). 106 Government in power from 1989 to 2000: Government of National Reconciliation and Unity ( March 1989 – June 1993; November 1994 – August 1997); National Coalition Party ( June 1993 - November 1994); Solomon Islands Alliance for Change Government (September 1997 – December 2001). 107“The policy for Structure of Public Service" which was adopted by the Parliament in 1979 (Parliamentary Paper No. 42/79).
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(i) Commercialization of certain government functions, which involved
corporatization of certain revenue-generating departments within
government ministries. It is of the view that through corporatization,
certain powers would be vested on the management of the entities to
operate and make commercial-oriented decisions in the hope that they
will increase their ability to increase revenues and subsequently attain
sustainability.
(ii) Streamlining of government services - pertaining to those services
provided by state-owned enterprises.
The intention is to enhance performance through projects that would
strengthen management, financial and technical capacities of state-owned
enterprises.
(iii) Privatization of portfolio companies - this include liquidating SOEs that
are operating without making profits, and a 'drain' to government's
budget; and privatization of those that are operating profitably. Through
its privatization program government intends to gradually reduce its
direct role in the economic developments and enhance greater private
sector participation.
Although governments in 1990s had gone ahead and translated these reform policies
into action plans, the implementation was lagging behind. This was attributed to
financial difficulties exacerbated by weak economic situation and political instability
which had, to some greater extent, influence government’s ability and commitment to
consistently pursue reform intentions. Hence, not much improvement was evident in
the SOEs' performances, and the intended privatization of portfolio companies had
been slow to materialize.
When Solomon Islands Alliance for Change (SIAC) government, led by Bartholomew
Ulufa’alu, came into power in 1997, it was faced with major financial crisis in the
public sector. Government through its public offices and statutory bodies had incurred
huge debts, which burdened the domestic financial system and resulting in
government not being able to service its debts. The situation had once again brought to
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focus the intensifying need for a broad structural reform. The ambitious SIAC
government proceeded to undertake the challenge and committed itself through a
series of policy statements under its “Policy and Structural Reform Program (PSRP)”
108 which was initiated in late 1997 with the support of Asian Development Bank
(ADB) under its public sector reform program loan109 and Phase I of Strengthening of
Public Sector Management110. Government’s reform initiatives are defined under five
main components of its Policy and Structural Reform Programme.
These include;
(i) Finance and budgetary reform – the objective of finance and budgetary
reform was to stabilize public finances and to ensure its long-term
structural stability. The SIAC government had intended to do this by
reducing and controlling public expenditures, increasing and expanding
domestic revenue base and collection, rearranging and managing public
debt, and improving financial management.
(ii) Public service reform – the intention was to create a public service
organization that is efficient, effective, and responsive in its operations.
The reform therefore looked at downsizing the public service and
improving its efficiency and effectiveness.
(iii) Public enterprise reform – under its public enterprise reform policies,
SIAC government had intended to improve the efficiency and effectiveness
of the SOEs and to implement its privatization program, a process that
entailed a further reduction in the overall size of the public service
organization.
(iv) Financial sector reform – the principal intention under this initiative was
to restore macroeconomic stability by restoring domestic securities market,
improving the structure of the financial sector by promoting competition,
and efficiency of financial services in the rural areas.
108 PSRP of SIAC government 1997-2000 SI Government, accessed on website: http://www.commerce.govsb/Gov/siac.htm. 109 Loan 1627-SOL: Public Sector Reform Program Loan for US$25 million, approved on 27 August 1998, News release no. 051/98. 110 TA3061-SOL: Strengthening Public Sector Management, for US$600, approved on 27 August 1998.
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(v) Private sector development – the objective was to provide an
environment that is conducive for private investments and development of
private sector.
It was envisaged that the implementation of this initiative would reduce
government’s role in the economic developments and increase its focus on
improving regulatory environment for the private sector development.
Source: PSRP of SIAC government, 1997 - 2000, SI Govt. SI; accessed on Website: http://www.commerce.gov.sb/Gov/siac.htm.
The SIAC government had intended to achieve these initiatives through various
formulated Medium Term Developments (MTD) and Public Sector Investment
Program (PSIP) which were in compliance with loan conditions111 of major donors
like ADB, IMF and World Bank, who endorsed and supported government's reform
policies112.
The Asian Development Bank’s (ADB) support for the PSRP was focused on four
main areas, and one of these is corporatization and privatization of SOEs and
development of legal and regulatory frameworks of sectors in which privatized SOEs
would operate in (ADB News Release No. 051/98; on “Loan to Solomon Islands to
Reform Public Sector” 27 August 1998). According to an ADB report113 SIAC
government has been the only government in the 1990s that had shown progress in
keeping its reform program on track and maintaining its commitment. Its commitment
and seriousness in pursuing public sector reforms were reflected in a number of
achievements made since it came to power in mid 1997. Some of these achievements
include stabilization of the economy, bringing under control the recurrent expenditures
and reduction of public expenditures by 8 percent, maintaining fiscal discipline,
placing senior officers on performance contracts with measurable performance
indicators, improving budgetary submission and reporting, rationalizing and
111 (COHRE, 1999; Australian Budget - $2 billion Aid Funding to Advance Regional security, prosperity and development, accessed on website: http://www.australlia.org.nz/whatsnew_article.php?NewsEvent_ID=433). 112 Policy and Structural Reform Programme of the Solomon Islands Alliance for Change Government 1997 – 2000, accessed on website: http://www.commerce.gov.sb/Gov/siac.htm. 113 ADB TAR: SOL 32398, Technical Assistance to the SI for Strengthening Public Sector Management (Phase 2), March 2000.
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streamlining of employment processes and laws to ensure transparency and equal
opportunity, and reviewing and engineering structures and systems in government
ministries to eliminate waste and improve efficiency. The progress however was
hampered by political and social instabilities in 1999 which resulted in a change of
government in mid 2000.
Following the ousting of SIAC government in June 2000, the government of Coalition
of National Unity, Reconciliation and Peace (GCNURP) led by Manasseh Sogavare
took over the government rein and ruled for the remaining five months of SIAC’s
political term.
In spite of government’s commitment to pursue its policy on public sector reform
which include privatization of its SOE114, little progress was made due to continuous
deterioration of the economy, aggravated by increased law and order problems
experienced in the country at the time. Government’s focus on reform was diverted to
resolving issues and difficulties that led to social and political instabilities.
Likewise, the new elected government formed in December 2001 and headed by Allan
Kemakesa also faced similar challenges. Although Kemakesa government had
committed itself to implement reforms, its immediate focus was to address the
lawlessness that ripped the country and brought back confidence of foreign investors
and Aid donors who had withdrawn their support following continuous threat and
deteriorating governance and economy115.
The restoration of law and order following RAMSI intervention in 2003 has enabled
the government to redirect its focus on implementing its reform policies under its
‘National Economy Recovery, Reform and Development Plan (NERRDP) 2003 –
2005 in the later half of 2003. With support of traditional Aid donors, the initiatives to
reform SOEs considered various options for improving performance, including
114Government of Coalition of National Unity, Reconciliation and Peace, June 2000, accessed on website: http://www.commerce.gov.sb/Gov/Previous_Gov.htm. 115 Solomon Islands Government Program of Action: Policy, Objectives, Strategies and Targets 2002 – 2005; Honiara, January 2002, Solomon Islands; accessed on website: http://www.commerce.gov.sb/Gov/PresentGov.html.
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corporatization and privatization116 within an appropriate legal and regulatory
framework. In spite of this, the reforms progressed at a very slow pace, with the focus
once again diverted to post-tsunami recovery in 2007. Furthermore, the ADB support
of the NERRDP, as specified under its Country Strategy (ADB, Solomon Islands,
August 2004) and ADB Technical Assistance (TAR:SOL 38147, December 2004)117,
is to support government in improving transportation infrastructures and services, and
strengthening the environment to enable greater private sector participation through
capacity building and good governance.
In addition, it was agreed during 2004 Country Programming Mission that coincided
with Technical Assistance (TA) Fact-finding Mission, that ADB would provide TA to
support the development and implementation of privatization policies and reforms,
private sector performance and SOEs performance improvement. ADB’s support was
indicated through its commitment in financing the TA loan of $US1 million for
privatization of SOEs on concessional terms from its Special Fund Resources (SFR).
This is an interest free loan that carries a service charge of one percent per annum and
is repayable over a 40-year period, including a ten year grace period.
4.5 An overview of state-owned enterprise reform
The policies pertaining to public enterprise reform has clearly spelt out government’s
initiatives to commercialize and streamline certain government functions and services,
and privatize its portfolio companies. The public enterprise reform and
implementation programs so far has focused on strengthening the management,
financial and technical capacities of the SOEs and commercialization (through its
corporatization program) of certain government functions which have been identified.
116 The privatization process envisaged under the 1998 PSRP needs to be revived, however care needs to be taken that privatization does not lead to a simple replacement of public sector monopolies with unregulated private sector monopolies (ADB, Country Strategy and Program Update (2005 – 2006); Solomon Islands, August 2004 accessed on website: http://www.adb.org/Documents/CSPs/SOL/2004/CSP-SOL-2004.pdf. 117 ADB, TAR:SOL 38147 Technical Assistance to Solomon Islands for State-Owned-Enterprise reforms and Private Sector Participation (Co-finance by Government of Australia, December 2004).
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4.5.1 Corporatization and privatization program
Under the Mamaloni-led Government of National Unity and Reconciliation (GNRU}
(March 1989 – June 1993; November 1994 – August 1997) and Hilly-led government
of National Coalition Party (NCP) – from June 1993 – November 1994, some
government holdings were divested and services corporatized. The divested holdings
included Solrice Limited, Mendana Hotel, National Fisheries Division and the
National Bank of Solomon Islands (ADB report, 1998, GNRU Policies and Program
of Actions, 1989).
Furthermore, four public-regulated service departments, namely Government Printing
Services, Government Supplies, Government Water Supplies Unit, and National
Shipping Services were corporatized in 1993, followed by the corporatization of
Solomon Islands Department of Postal Service (SIDPS) in 1997. (Solomon Star issue
of February, 1993; Solomon Star issue, March 1993; CBSI Annual Report, 1989;
Vasumitra, 1999; SIPC ACT, 1996).
The Investment Corporation of Solomon Islands (ICSI) was actively involved in
implementing government's corporatization program at that time, a process which
involved redundancy of a number of public servants. Except for the National Shipping
Services, where nearly 95% of the floating staff of the former Marine Division was
made redundant, many of the employees in these public-regulated service departments
were simply transferred to the new corporatized entities. Moreover, at the time of
corporatization, government assets such as buildings, equipment, and machines that
were used and operated by these former government departments were merely
transferred, in principle, to the newly transformed entities.
4.5.2 Strengthening of management and financial capacities.
While Mamaloni and Hilly governments, in the 1990s, have gone into corporatizing
public-regulated service departments and work towards its privatization policies, the
deteriorating state of efficiency in most SOEs had placed demand on Ulufa'alu (1997)
and Kemakesa (2003) governments to address the issue as part of their efforts toward
achieving their privatization policies. Hence, the SOE reform policies under Ulufa'alu
and Kemakesa governments were focused on implementing measures to improve SOE
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management and financial capacity118. Support for the 1998 PSRP and 2004 NERRDP
came from various development partners including the Asian Development Bank
(ADB) who played a major supporting role in the implementation of government
policies which include privatization of selected SOEs, development of legal and
regulatory framework of commercial activities, and strengthening management
capacity of its SOEs through its Public Sector Reform Program loan119 and Phase I of
Strengthening of Public Sector Management120.
The implementation of the privatization policy under Ulufa'alu government began
with developing appropriate legal and regulatory framework for commercial sector,
and strengthening of management and financial capacity of the SOEs. Although the
implementation of various projects was said to have been successful and kept
momentum121, the progression on these projects were either cancelled or abandoned
following the 2000 coup122 during which time most major SOEs located on the
troubled island of Guadalcanal were closed and major development partners
withdrawn their support. Difficulties faced by the nation during the period of turmoil
had not only diverted government's attention from its reform program, but also
absorbed most of its resources.
With restoration of law and order under the assistance of Regional Assistance Mission
to Solomon Islands (RAMSI) in June 2003, Kemakesa government embarked on a
national economic recovery reform and development program. Once again the
government attempted to revive the 1998 PSRP policies which were abandon during
the social and economic instabilities. Principal economic reforms include SOE reforms
and privatization, development of infrastructure and utilities, private sector regulatory
reforms, financial sector reforms and provision of policy and governance advice to
118 (ADB TAR: SOL 32398, Technical Assistance to the SI for Strengthening Public Sector Management (Phase 2) March 2000). 119 Loan 1627-SOL: Public Sector Reform Program Loan for US$25 million, approved on 27 August 1998. 120 TA3061-SOL: Strengthening Public Sector Management, for US$600, approved on 27 August 1998. 121 (ADB TAR: SOL 32398, Technical Assistance to the SI for Strengthening Public Sector Management (Phase 2) March 2000). 122 (ADB, TAR:SOL 38147; TA support to SI for Reform of SOEs and private sector participation (Co-financed by government of Australia) December 2004).
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provincial governments and formulation of Sectoral policies to promote investment
and growth. The development partners once again showed their strong support of the
process, with the ADB taken on a substantial role in the focused areas of its assistance.
Highlighting government’s commitment to empower all SOEs to function as any other
business, Mr. Boyers (minister of finance in the Kemakesa government, 2005)
emphasized that substantial improvement and accessibility to public services will only
be achieved by applying good governance and improving management of SOEs.
Hence, government has committed itself to providing assistance aimed at improving
SOE financial management and service delivery.
Furthermore, an Economic Reform Unit (ERU) was established within the Ministry of
Finance (MOF) to formulate and implement economic reforms.
With ADB Technical Assistance, under its Country Strategy and Program,
incorporation with other sources, the implementation of reform policies continues to
gear toward privatization and SOE reforms, infrastructure policy and regulations and
legal and regulatory business environment. Given below are some of the progress and
developments of government’s effort towards the strengthening and capacity building
of the SOEs.
(i) Commodity Export Marketing Authority (CEMA)
The Commodity Export Marketing Authority has been since 1995 undertaking an
internal restructuring to separate its regulatory and facilitating functions from the
commercial functions as stipulated under the CEMA Act (Amendment) 1995. The
provisions provided under the ACT enable CEMA to fully operationalize its functions.
The intention as mentioned in the CBSI Annual Report (1999) is for commercial
functions of CEMA to be privatized by end of 2000 or early 2001. Again this goal has
not been achieved.
(ii) Solomon Islands Electricity Authority (SIEA) and Solomon Islands Water
Authority (SIWA)
Efforts to improve the technical and management capacities of SOEs were pursued
resulting in the signing of contracts in 2005 between the Boards of the two service
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authorities and the Japanese government, through its JICA program, and World Bank
to provide technical and management supports respectively to the Authorities.
Under these agreements, the contractors were expected to work along side their local
counterparts with the goal to part knowledge that would improve all aspects of the
Authorities based on modern management techniques. This includes assisting the
Service Authorities to deliver reliable services at low costs. Moreover, the contracts
are funded through a grant, based on successful performance in improving utilities
services plus performance bonus payments paid directly from improved company's
profits and not from government funds (Solomon Star Newspaper, “Donors to fund
expats on grants”, issue of 2 November, 2005, Honiara, Solomon Islands; Solomon
Star Newspaper, “Reform to SOE urgent”, issue of 5 October, 2005, Honiara,
Solomon Islands).
(iii) Solomon Airlines
Technical consultants from PNG Airlines were invited by SI government in 2005 to
review the operation of Solomon Airlines which over the years has come under heavy
scrutiny for its poor performance. According to the General Manager of ICSI,
Solomon Airlines is one of the likely candidates to be privatized soon; unfortunately
much has yet to be done to increase the sustainability and value of the SOE in order to
warrant it for privatization (Solomon Star Newspaper, “Technical consultants from
PNG Airlines to review Solomon Airlines”, issue of 15 June, 2005).
The aim of the consultancy work was to identify areas of improvement with the
ultimate goal of salvaging the SOE from its poor financial state. Among other
recommendations, it was recommended that SOE needs to trim down on its staff level
and improve the management capacity. Based on the recommendations of studies
undertaken by ADB and the PNG consultants, Solomon Airlines has gone ahead and
restructured its operations. In addition, the government is currently working towards
opening up the aviation sector to greater competition. This commitment is
demonstrated through the drafting of a civil aviation act, which was passed in 2008
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and gazette on 23 March 2009, thus making Solomon Islands a partner to the Pacific
Air Service Agreement (ADB Development Outlook: Solomon Islands 2008123)124.
(iv) Solomon Islands Fishing and Processing Limited (SIFPL):
A grant of $70 million was given by the Japanese government in 2005 to assist SIFPL
to improve its infrastructures. The grant, which was part of the effort to revitalize the
economy, came in the form of two brand new pole and line fishing vessels, four bait
boats, two bait boat engine kits and other fishing equipment. According to Japanese
representative Norihiro Ikeda, the assistance was intended to assist the SIFPL improve
its growth and profitability (Solomon Star Newspaper, “Japan’s $70m help will boost
Soltai’s operation”, issue of 22 December, 2005).
These are just some examples of capacity building programs under government’s
reform policies since 1997 to improve its SOEs performances in the process towards
qualifying them for privatization. It is a continuing project and government is
continuously working closely with ICSI, ERU, SOEs, and the development partners to
strengthen the management, financial and technical capacities of the SOEs. Until these
SOEs can operate sustainability and increase their values, the much intended
privatization is yet a distant concept.
4.6 Solomon Islands postal reform
4.6.1 Background overview of Solomon Islands postal system
The Solomon Islands postal system is a core infrastructure of the economy125, which
was first established by the colonial government primarily for the purpose of
enhancing its public function through dissemination of knowledge and information,
and for overcoming barriers of distance that confronts them. Prior to its
corporatization, postal service function was executed by the Solomon Islands
Department of Postal Service (SIDPS) which was established under the Ministry of 123 http://www.adb.org/Documents/Books/ADO/2008/SMALLPAC.pdf. 124 Civil Aviation (Amendment) Act 2009 was approved and gazette on 23 March 2009 (refer to website: http://www.parliament.gov.sb/files/legislation/Acts/Civil_Aviation_(Amendment)_Act%202009.pdf). 125 Improved efficiency and customer responsiveness in this sector has the potential to overcome
distance barrier and stimulate the economic growth.
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Post and Telecommunication. As years progressed, the postal service extended its
initial function in response to customer’s needs by providing a full range of services
that were prompt, reliable and economical. From commercial perspective, the primary
aim of the SIDPS was to maintain the integrity of the postal services on the basis of
sound fiscal operation policies, operated as a commercial-oriented organization along
economic considerations, and to create a fair and attractive work place for its
employees126.
The postal system serves all islands and provinces of the Solomon Islands which
scattered over a distance of 1600 km from East to West and 900 km from North to
South. Because of the scatteredness of the islands and their proneness to natural
disaster, postal service administration contends with challenges that administrations in
bigger nations don’t normally face. For this, and also for other strategic reasons, postal
service administration in Solomon Islands continues to be predominated by state even
after the nation has gained its political independence.
In spite of this, the monopoly that has been enjoyed by the SIDPS is being challenged
as new competitors are entering into the market over the period of last decade.
Electronic communications in all its forms which include fax, internet, and electronic
mails are undermining the core business of the incumbent operator. Simultaneously,
the express carriers which include DHL, TNT and airline and shipping freights are
threatening the “higher end” market for fast delivery of documents and small
packages—a competition, if not regulated properly, could erode the ability of the
postal incumbent to sustain its universal service obligation.
Apart from the competitive market forces, SIDPS was also confronted with various
impediments that undermined its performance and productivity. Various reports and
documents127 have highlighted general poor performance of the postal department
prior to its corporatization. Such poor performance was attributed to a combination of
factors as highlighted earlier in chapter 1.
126 Post Office Act, 1978; Honiara, Solomon Islands. 127 Reports including Smyth, M.D.S. 5 – 7 August, 2004; Smyth, D.S. 23 June 1995; Vasumitra, 1999.
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These include factors which are geographical in nature, poor infrastructures,
difficulties associated with its legal status as a public department, and inadequate
physical infrastructure and facilities resulting in considerable delay in mail processing.
These factors impacted significantly, both on the overall efficiency of its service
delivery, and operator’s ability to improve its current services and the development of
new products. Subsequently, anticipated level of work output (especially from the
provincial postal branches) was not very impressive.128
In view of this, government of the day had perceived the need to improve the postal
services as imperative. When the National Coalition Party (NCP) government came to
power in 1993, it re-emphasized the restructuring policy in respect to postal services
as initially proposed under previous policy papers129 adopted by the Parliament in
1979 and early 1990s. This paved way for the process that led to the enactment of
SIPC Act (1996) which provides legal framework to effect the corporatization of
postal division.
4.6.2 Corporatization of Solomon Island postal service
The Solomon Islands Postal Corporation (SIPC)130 has assumed a statutory form after
it was established on January 1 1997 under the Solomon Islands Postal Corporation
Act131. Following its corporatization the new legal entity, now known as ‘The
Solomon Islands Postal Corporation (SIPC)’, assumed the functions that were
formally executed by former SIDPS of the Ministry of Post and Telecommunication.
The key objective of corporatizing the postal service is to allow the newly transformed
postal corporation to create better conditions that will enhance better performance and
128 According to information gathered during a formal interview with the Assistant Administrative
Officer (AAO) Mr. Alitoni of the Solomon Islands Postal Corporation, January 2007. 129 The Policy for structure of Public Service adopted by parliament in 1979; The Public Service
structural and internal adjustments, 1991 and New Policy for the structure of Public Service, 1992. 130 The Solomon Islands postal corporation was corporatized in 1997 under the 1996 SIPC Act, thus giving it a statutory form. 131 The Solomon Islands Postal Corporation Act 1996 (No. 2 of 1996); Enacted by the National Parliament of Solomon Islands on 31 July 1996.
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greater financial accountability than that which had been achieved under direct
government operation (Smyth; 5-17 August 2004).132
4.6.2.1 Functions and powers
The provisions given under the SIPC Act 1996 define certain functions and powers
pertaining to the postal corporation and its management, board of directors (BOD) and
the elected minister who is charged with the responsibility for the administration of
this Act. These functions and powers are briefly outlined and discussed below.
(a) Management
The functions of the corporation as provided for in the SIPC Act (1996) include (a) the
provision of postal services within Solomon Islands and other countries, (b) carry on
any business or activity relating to postal services; and (c) carry on any business or
activity which is incidental to those mentioned in (a) and (b). The provisions also
provide that the corporation can do anything that is intended to facilitate the discharge
of its functions or is incidental or conducive to their discharge (SIPC Act 1996;
subsection II: Cap 7 and Cap 8/1).
Furthermore under subsection II: Cap 8/2 of the Act, specific power is also vested on
the Corporation to (a) determine the prices of all its goods and services, (b) enter into
contracts and agreements, (c) acquires lease, holds, develops and disposes real and
personal property, (d) forms and participates in the formation of companies, (e)
participates in partnership, trusts and unincorporated joint-ventured and other
arrangements for the sharing of profits; and (f) borrows from government or other
persons in Solomon Islands and to give securities over assets and pay interests on
loans.
The management is charged with the responsibility to oversee the overall
implementation of the organization policies and its performance, and be instrumental
in the formulation of organization policies and drawing up of the organization's budget
before it is endorsed by the BOD and approved by the minister responsible. Moreover, 132 Mission on Postal Legislation and Reform: The Solomon Islands by M.D.S. Smyth, UPU Consultant together with Mr. Samuel Sive, General Manager of Solomon Islands Postal Corporation, August, 2004, Honiara.
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under the provisions of the Act (subsection II: Cap14) the chief executive officer shall
at all times maintain a record of shares and notify the minister and the BOD of any
changes in the shares ownership.
(b) Board of Directors (BOD)
The provisions under the SIPC 1996 Act (subsection II: Cap 6/1) has stipulated that
the new corporation will have a BOD whose function is to be responsible for the
general policy governing the affairs of the corporation. The BOD could make
decisions, on issues that are important to the operation and development of the
corporation, within the legal framework as provided for under the subsection III: Cap
10/2-13 of the Act. Such issues may include increasing, reducing or allotting capital
shares of the corporation.
Additionally, the provisions also stipulated that the Board of Directors, prior to
minister's approval, will from time to time by negotiating with the shareholders,
increase the share capital of the corporation by new shares of such amount as it think
expedient. Likewise, the BOD may elect to reduce the share capital on issue, subject to
repurchase of shares being made at face value from shareholders in proportion to their
holdings, and may (a) allot the corporation’s share capital to the government, in shares
equivalent to government's contribution to the capital of the corporation; and with
minister's approval to (b) any corporate body established by S.I laws, (c) any
international financial institutions and; (d) provincial or local government authorities
(SIPC Act 1996: Cap 11–12).
(c) Elected Minister responsible
Subject to the provisions given under the Act (subsection II: Cap9), the elected
minister responsible has the ultimate power to issue directions on general policy
matters pertaining to the corporation and its operation. This means that the regulatory
function of the SIPC falls by default on the minister and the ministry responsible for
the Postal Act. Except for the ex-officio, the minister responsible also has the power
given under the provisions of the Act to appoint members of the BOD, and its
Chairperson (Schedule 2; subsection 6: caps1-3), and in like manner has the power to
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revoke the appointment of any member of the board appointed by him (Schedule 2;
subsection 6: caps 3/3).
4.6.2.2 Mission, goals and values
The activities of the corporation are guided by the corporate mission, goals and values
established following its corporatization.
(a) Mission
"To be recognized as the best customer service organization in the world."
The SIPC aims to achieve its mission by:
� providing the best customer service
� meeting customer's changing needs through innovations, and
continuing development and improvement in business
� achieving excellence in all processes, operations and practices
� creating a safe, sound and secure working environment for
employees to promote job satisfaction
� empowering employees to provide job enrichment and to motivate
them to participate in the success of the business
� operating profitably and earning fair returns on investments to
sustain and develop business
� venturing into other viable business opportunities
(b) Corporate goals
The corporate goals include:
� be responsive to the needs and expectations of customers
� provide a quality customer service
� create an excellent work environment for the employees
� develop and empower employees to their full potential
� ensure a fair rate of return and profitability for business, and
� obtain a continuous and sustainable growth in business
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(c) Corporate values
The corporate values are as follow:
� give first priority to customers
� support employees and strive ethically for success
� team up for continuous improvement, innovation and creativity Adopted from Vasumitra Report: 1-12 April, 1999.
4.7 Postal Services and products
The main business of the postal corporation is acceptance and delivery of mails and
parcels both domestically and internationally. Apart from this, it has also diversified
into other services and products which are classified under following main business
ventures: Letter mail and Parcel Business (domestic mail, International mail and bulk
re-mailing), Retail Business (post shop), Philately Business, Express Business
(Express Mail Service) and Financial Business (money transfer and post saving). The
following discussion will provide a brief overview on each business activity that the
SIPC has involved in. Due to lack of information in the form of written reports and
record keeping, most of the information provided below are based on consultant’s
reports for the period from 1997-1999 and 2004; and from discussions held with the
management in 2007/2008.
(a) Letter Mail and Parcel Business (Domestic mail, International mail and Bulk Re-mailing)
This has been the core business of the corporation and the main source of revenue.
Letter mail is being monopolized by the SIPC, hence it is responsible to ensure that
efficient service is provided to customers in all sectors of the society both locally and
abroad (Smyth Report, 1995; Vasumitra, 1999). While parcel business had dropped
due to high competition from other competitors133, mail business continues to grow.
Such growth was attributed mainly to general growth in business on the islands.
133 Competitors including Solomon Airlines, shipping companies, and other Express companies such as TNT, DHL, and Trans-Pac Express.
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According to the management source, much of the revenue during, and couple of years
after, the ethnic violence period came from bulk re-mailing. Repatriation of most
expatriates during the period had resulted in significant drop in the international mails.
Law and order problems had contributed significantly to deteriorating economy and
reduction in the economic activities.
(b) Retail Business
The postal retail business was launched in 1997 through the establishment of Post
Shop at the main General Post Office in Honiara and the post offices in the provincial
centres. Although the concept of post shop is popular among the local population, the
business incurred a loss of about SBD$70,000 in the late 1990s (Vasumitra, 2004).
This was attributed to huge unsold stock of merchandize and inventory. However,
management is hoping to turn its retail business into a more profitable one by giving
specific attention in areas of business redesigning, cost control, inventory
management, stock update, customer needs analysis and promotion.
(c) Philately Business
Philately business has been in operation well before the postal division was
corporatized, and has always been a revenue earner with a loyal customer base.
However, lack of proper attention had resulted in business incurring losses prior to its
corporatization in 1998.
Such loss was attributed to high costs of printing and commission to agents, improper
inventory management, and insufficient philatelic marketing and promotions
(Vasumitra, 2004). The first financial report after the corporatization of postal services
in 1997 indicated that Philatelic has made some profit134 in its operation under the new
corporation. Such proceeding was attributed mainly to an increase rate by 30 percent
on philatelic stamps in 1995 (Smyth, 2004). Lack of financial information does not
allow this report to state the financial performance of the philatelic business.
134 Income statement of the year ended 31st December 1998 shows a total revenue of SBD$1, 199, 418 from Stamps/Philatelic sales; and a total expense of SBD$ 35, 692 on Philatelic products gives a profits of SBD$ 1, 163, 726 (Vasumitra Report, 1-12 April 1999.
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Although the philatelic business does not have direct competitors, it has indirect
competition with other collectibles like coins and phone cards. Hence the corporation
intends to strengthen its philatelic business through the formulation of a marketing
strategy based on information gathered from market research. Part of the formulated
strategy will include promotion of philately as a hobby and the selection of printers
and agents based purely on commercial basis.
(d) Express (EMS) Business
Express Mail Service (EMS) is another service business operated by the corporation,
and it has two products. These are Domestic and International Express Mail Service
(EMS). The two main competitors in the market are DHL and TNT who also provide
express services, but their operations are strongly based in the capital of Honiara. With
regard to freight sector, there are few competitors including Solomon Airlines and
shipping agents.
With plans to establish a reliable transport network consisting of postal vans, motor
powered canoes and a good distribution network through their eleven (11) post offices
throughout the country, the corporation is hoping to achieve a competitive advantage
in the EMS. Furthermore, plans are in the pipeline for the corporation to go into joint
venture with a shipping company to gain distribution advantage in the freighting
sector.
(e) Financial Business
Initially the financial business had three (3) products. These are currency exchange
service (CES), money orders and postal orders. Although these services are
continually provided throughout the years, they are not making much commission as
most of the money transfers were made through commercial banks. In view of this, the
corporation aimed to improve its money transfer service (MTS) by resorting to a faster
money transfer version that will involve sending money transfer advice through fax
machines provided at all its post offices. This was achieved in January 2005135, when
the corporation launched the ‘Western Union Money Transfer Services’ (WUMTS) at
135 Information provided by the Operational Manager, Mr. R. Volia on January 2005.
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its main General Post Office in Honiara. Plans are underway to extend the service to
its postal branches in the provincial centers. The corporation is making revenues in the
form of commissions from customers who transmit money.
Another corporate goal that comes under corporation’s financial business plan is the
provision of a Post Saving Service to the rural and sub-urban populace. The idea was
further deliberated by the corporate management who negotiated with the Australia &
New Zealand Banking Group Ltd. (ANZ) in Honiara on the possibility of a
partnership in the scheme. This goal was successfully achieved when SIPC
Management and the ANZ Bank formally signed a Memorandum of Understanding
(MOU) on June, 2005 to work in partnership in providing banking services to rural
people through the postal network in the provinces. Under this arrangement, the ANZ
Bank has agreed to provide technical and financial support to upgrade existing postal
infrastructure, while the corporation provides the network of operation across the
islands, and an in-depth understanding of doing business in remote communities. The
upgrading of the existing infrastructure include the establishment of ANZ branches,
ATM machines and EFTPOS terminals within nominated postal branches nationwide
(Solomon Star Newspaper, “ANZ and postal join force in rural banking, issue of 17
June, 2005; Solomon Star Newspaper, “Rural people to benefit from rural banking
services”, issue of 25 June 2005; Solomon Star Newspaper, “ANZ and Solpost make
banking history in Tulaghi” issue of 10 November, 2006).
4.8 Analysis on the effects of change on management variables
The change in the legal status of the entity through the process of corporatization does
not only have significant implications on corporation's purpose and how it is
regulated, but has also impacted on major aspects of management and how they
function.
According to McKinsey’s 7S framework, the seven management variables are
structure, strategy, styles, system, skills, staff and shared values136 (see figure 4.2).
136 See Appendix B for specified definition for each variable.
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The interdependence of these variables implies that the effectiveness of one variable
affects the performance of another, and subsequently the overall organization
performance.
Figure: 4.2 McKinsey 7S Framework Source: Adapted from McKinsey 7S model; accessed on website: http://www.chrisfoxinc.com/7SAndPascale.htm.
(a) Structure
In the context of SI postal system, the major change that had ever happened is the
change in the legal status of the organization from a department of a government
ministerial portfolio (Postal Services Act 1978) to a statutory public corporation, as
enacted under SIPC 1996 Act. The implication of such change on the organization
structure and its operation is significant. For instance, as a corporation, the
organization now has a board of director (BOD) that is accountable for the overall
operation of the corporation, and is represented by the general manager in the day to
day functioning of the corporation.
The BOD, with the help of the general manager, makes policy decisions pertaining to
the corporation and its activities.
Under the new establishment, SIPC has a total workforce of 85 employees who
function within four main divisions—Finance and Administration, Philatelic, Business
Development and Operations (see organization structure in figure 4.3).
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Figure 4.3 Initial organization chart of Solomon Islands Postal Corporation Source: Postal Master Plan 1996 – 2000.
Within each division, there are other sectors or departments including eleven (11)
postal branches, nine (9) of which are located in the provincial sub-urban centers and
two in the capital, Honiara. Each sector or department is headed by a sectoral
manager, who is accountable to respective divisional manager, who in turn is
accountable to the general manager. The structure defines the responsibility of
employees, and line of command that ensures control and accountability of the
organization’s performance.
(b) Strategy
The legal instrument, under which SIPC was corporatized, has given the corporation
power to operate on commercial line like any other businesses; and as such, it can
enter into contracts or activities in its own name. The initial purpose of providing
postal services has now been broadened to include functions of generating revenue
through its business operations and to ensure a continuous sustainable economic
growth.
The corporation seeks to fulfill its purpose by being responsive to customer’s
changing needs through innovations and business developments, achievement of
excellence in all its processes and practices, and fostering a good work environment
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that empowers employees to perform. The later includes the involvement of individual
division in setting its own goals in compliance with organization’s effort to achieve
corporate strategic goals. This does not only foster a spirit of cooperation toward
achieving the goals, but also instills feeling of ownership of goals and accountability
for results by both management and employees. Furthermore, the establishment of
research and development department, whose function is to research into various
aspects of the organization, indicates corporation’s priority in ensuring efficiency,
growth and development of the organization.
(c) System
Prior to its corporatization, systems pertaining to procedure of control, performance
appraisal, training and recruiting, were absorbed within the public service system of
operation. Upon its corporatization, the SIPC has now adopted its own system of
carrying out these important tasks based on the standard system of service operation as
laid down by the Universal Postal Union (UPU)137. Furthermore, a two-way formal
communication system is adopted through which information flows from top
management down to all divisions, sectors and network of postal branches, and vice
versa. Information is delivered through policy and regulations handbook, meetings,
discussions, reports, letters, memorandums and word of mouth.
Customer enquiries and/or grievances are normally channeled to customer service
section by means of telephone, email, letter or word of mouth. The corporation has a
system in place to handle grievances received from customers.
(d) Styles
According to McKinsey’s 7S model, style refers to the leadership approach of top
management, and organization’s overall operating approach. In the context of SIPC,
leadership and leadership roles are specifically defined under the structure of the
organization. The demarcation of leadership’s role from that of the subordinates
connotes power and authority vested in the leadership position. As mentioned in
section 4.6 (a), the organization is headed by a general manager who is accountable to
137 Universal Postal Union is the United Nations specialized agency for postal services.
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the BOD for the overall running of the corporation. The divisional and sectoral
managers are vested with responsibilities to oversee proper and effective
implementation of their divisional and sectoral functions. Feedback from the
subordinates is usually channeled through the respective line of command as specified
in the structure of the organization.
(e) Skills
An assessment on the skills inventory of the corporation shows that most of the
corporation’s shop floor staff lacks appropriate skills and knowledge that are critical to
corporative success. This is basically attributed to the fact that most employees of the
corporation were former public servants (with no business-oriented experiences) who
were merely transferred from public service departments into the new corporation
during its inception. Recognizing the relative importance of training to performance,
management has put a training program in place that ensures its personnels are given
opportunity to involve in professional developments that will provide them with
appropriate knowledge and skills to perform the organization functions efficiently.
Moreover, such training should also provide them with critical knowledge and
experience that will help them to cope with changes in the environment, and to make
decisions that are appropriate and beneficial to the attainment of corporate goals.
According to management source, a number of employees have already benefited
through this program, by undertaking professional development trainings locally as
well as abroad.
(f) Staff
Reports from the management source revealed that corporatization of SIDPS had
made little or no change as far as staffing of the SIPC and costs were concerned,
especially in its initial years. Furthermore, reports revealed that the corporation has
experienced overstaffing and high expenditure costs, large portion of which was
absorbed into wages and high operational costs138. Overstaffing was mainly due to
transferring of civil servants into the new corporation, and furthermore the adoption of
138 According to Income statement for year ending 31 December 1998, salary accounted for about 40% of the total expenditures.
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a new salary structure which was two-levels higher than that of the civil service and
proved too expensive to sustain with corporation’s moderate revenues. From the
outset, these problems implied poorly on government’s ability and intentions, during
the initial stage, to plan and manage the implementation of reform.
Such poor planning had resulted in;
i. poor job classification, and inadequate or absence of job descriptions
(especially in the lower brackets) leading to a lot of duplication and
overlapping of tasks139
ii. poor work attitude and performance, especially in the operation and
customer service sections. These were attributed to lack of appropriate
knowledge and skills to perform effectively; and
iii. prevalence of public sector work culture and values, which are
incompatible to business-oriented enterprise.
However, these above problems were dealt with by the management resulting in
formulation of job descriptions for existing positions and a reduction in the number of
staff as years progressed. The salary structure was supposed to have been reviewed in
2000, but due to a number of factors which include social and economic woes
experienced in the country, the corporation continues to encounter financial
difficulties140 that hinder its intention.
According to ECORYS (European Commission) and OAG (Office of Auditor-
General) reports in 2008, SIPC (like most SOE and statutory bodies) has not been able
to produce its accounts for many years; therefore there is lack of information to
monitor the corporation’s fiscal performance and risks.
139 According to an interview with the Assistant Administrative Officer, Corporate Services Department, SIPC; Mr. Alitoni; January 2007. 140 A report on the status of audits of Solomon Islands Government entities as at 30 June 2008 by the Office of Auditor-General (OAG) revealed that there has not been any financial auditing done to Solomon Islands Postal Corporation accounts since the last one in 1998. According to the same report the corporation’s outstanding financial statements over the years are currently being audited by the Office of Auditor General, but the report has not yet been released. This information is also confirmed by ECORYS report by the European Commission on the ‘Solomon Islands Public financial management performance report, November 2008.
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The last time that SIPC’s financial statement was audited was in 1998. According to
both reports, SIPC financial statements since 1999 are currently being audited by the
OAG, under a Regional Assistance Mission to Solomon Islands (RAMSI) funded
State Owned Enterprise Accounts Strengthening Project (SOEASP); but the report is
yet to be released. It is only after such audit report is finalized and released, would the
corporation know of its true financial position to make any plans of adjusting its salary
structure to reflect the responsibilities involved in each position within the corporate
structure, and its affordability to sustain it.
(g) Shared values
This refers to values and beliefs that are shared by both management and employees.
These values (tangible or intangible) define the role of the corporation within the
community it functions and guide employees towards a set of valued behavior. The
shared values of the SIPC are defined within the functions and goals of the
organization as outlined in section 4.5.2.1 and 4.5.2.2, and the procedures, behavior
and attitude demonstrated by both management and employee towards their
implementation and achievements. The tangible values are those that seek to achieve
tangible results. In view of this, the critical tangible values of the corporation include
the provision of quality services and products that fulfils customer’s needs and
expectations; and the profitability and sustainability of the corporation. According to
Pascal,141 such tangible values, which he referred to as “hard minded values”, are tied
to unambiguous and quantifiable goals.
The intangible values, on the other hand, are those values that management and
employees strive for, not necessarily because they are profitable, but because they are
important to the corporation.
These “soft hearted values”, as Pascal referred to, are important as they pertain to
intangibles that are tied to higher-order ideals that affect employees, customers and
society.
141 Cited in McKinsey’s 7-S and Pascal’s Adaptation Thereof; accessed on website: http://www.chrisfoxinc.com/7SAndPascal.htm.
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The intangible values are reflected in the cordial relationship that exists between the
management and its employees, and recognition of individual’s needs and aspiration
for personal and/or professional enhancement and development by management, who
sought ways to support employees in achieving their goals. Moreover, management’s
recognition of individual or group’s positive or outstanding contributions to the
betterment of the organization through some forms of reward or award. Likewise
acquiring and maintaining loyal base customers requires values such as treating
customers fairly and with respect. Better customer service means loyal and more
customers, which imply more business transactions that lead to profits and
sustainability of the corporation. Although the corporation has faced a lot of
difficulties following its inception, it is working hard to achieve both the tangible and
intangible values.
4.9 Other issues
Following its corporatization, the SIPC continues to maintain the assets and the
facilities formerly used by the SIDPS. However, the transfer of ownership title has
been an issue since the inception of the corporation which has not been resolved to
date simply because no commitment has been shown to deal with the issue by those
responsible in the government authority. Part of the reason could have been that SIPC
is a public corporation and therefore the transfer of ownership title is not an issue. In
addition, the ceasing of government grants following its corporatization does not help
the corporation in resolving the dire need of renovation, let alone little maintenance, to
run down premises in the provincial postal branches.
The ceasing of government grants a couple of years following its corporatization has
put the corporation in a very challenging position to support its own operation with
limited resources available at its disposal. In spite of this, the corporation has been
sustaining itself although being faced with a number of operational and financial
difficulties during early years of the 21st century.
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With technical assistance and guidance provided by the developing partners and
Universal Postal Union (UPU) Technical Advisors, the corporation has undertaken a
strategic review, emphasizing on strategic planning and financial analysis.
While its business ventures seem to be operating sufficiently, unavailability of data
has significantly undermined the effectiveness of financial management, if there is at
all any, thus presents difficulty in determining the financial position of the Postal
Corporation to date. This is attributed to the fact that the financial accounts have not
been audited for the last 10 years, although the State-Owned Enterprise Act 2007142,
section 13 clause (1-6) had articulated government’s effort to strength its policy on
ensuring the SOE Board and its management accountable to the responsible Minister
for its operation and performance.
Furthermore, section 14 clause (1:article a-c)) and clause (2) of the SOE Act 2007
stipulated that within 3 months after the end of its financial year, the board should
provide to the relevant minister of the crown a report on the operations of the SOE and
an audited consolidated financial statements for that financial year. In addition as per
volume mail, little information is available to allow this study to reliably gauge the
volume of incoming and outgoing mail both domestically and internationally.
4.10 Barriers to state-owned enterprise reform
The implementation of public enterprise reform in the Solomon Islands is not smooth
and obstacle-free. An assessment on the progress of SOE reforms indicated that the
SOE reforms are lagging behind the schedules due to a number of factors. Some of
these are identified and discussed below.
a) Inadequate public policy on ownership issues
A significant barrier to successful public enterprise reform in Solomon Islands is the
ineffective public policy on the SOE ownership issue. Such ineffective government
policy has further created other related problems which include no clear government 142 The State-Owned Enterprise Act 2007; retrieved 26 June 2009 on website: http://www.parliament.gov.sb/files/legislation/StateOwnedEnterprisesAct2007.pdf.
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policy on SOE performance and lack of political consensus on problems created by
government ownership on SOEs. Consequently, poor performance demonstrated by
the SOEs is usually viewed as a series of specific problems instead of general failure
of the policy framework itself. This resulted in government, not only failing to detect
recurring problems, but it also went on to apply same proven solution across the whole
sector thus making SOE reform extremely complicated, inefficient and difficult to
progress. Limited time allocated by state to deal with SOE issues, is usually devoted
only to chronic SOE problems, and failed to realize and deal with new emerging
problems in other areas which are neglected.
Furthermore, the narrowed view that SOE reform is confined to privatization in the
sense that it will eventually be divested to private hands, and the widespread prejudice
against private sector participation, has contributed to lack of enthusiasm and
commitment by state for SOE reforms and what reforms needed to be done. As a
result there is no systematic SOE reform that is guided and driven by effective set of
policies.
b) Weak governance
The ineffective regulatory aspects pertaining to current ownership policies has
accounted for weak governance in all levels of authority. This is manifested in the fact
that government through the Parliament has failed to scrutinize the SOEs’ annual
financial reports as required and stipulated in their respective Acts. Furthermore, as
owner of the SOEs, the government has also failed to set clear performance
expectations, and likewise the SOE boards in maintaining the commercial viability of
the public enterprise. The failure of most SOEs to update their audit reports is a clear
manifestation of the weak mechanism of monitoring and accountability, which in
greater degree contributed to complacency of the SOE boards and their management
to ensure productivity and viability of the SOEs.
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c) Political and social instability
Governments of the 1990s and 2000s have seen more political in-house fighting for
power than it is before. Members of Parliament crossing floor, and motions of no
confidence against the PM are common practices applied to weaken the government of
the day. Such changing of governments within short-term period does not allow ruling
government enough time to implement its reform policies and to focus on achieving its
objectives.
In the late 1990s, just when government was aggressively pursuing the broad-based
economic reform, social conflict had erupted between two major ethnic groups giving
rise to number of negative social and economic impacts which called for
government’s immediate attention and diversion of its resources to address the crisis.
As if this is not enough, the economic and public sector reforms aimed at improving
the environment for private sector development and performance of SOEs, continued
at a slow pace in 2007 as government again diverted its focus to post-tsunami recovery
effort.
When the present government came into power in 2007, it directed its focus on
bringing the nation together through reconciliation and rehabilitation of those who
have been involved and/or victimized directly or indirectly during the social unrest in
early 2000, as well as the improvement of the national security and foreign relations.
d) Poor financial performance
Most of the SOEs which has been earmarked for privatization are not performing well,
financially, to attract potential buyers to invest in them. The poor fiscal performance
of a number of SOEs are attributed to a combination of challenges which include
fluctuation of the world market prices, cash flow problems which adversely affected
SOEs’ revenue generating capability, poor governance and management practices,
lack of competence, inadequate basic infrastructures, conflicting objectives and
political interference. Hence most of the SOEs are still maintained by the state until
such time they are financially sustainable and guaranteed viability. In fact, there is
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much work yet to be done to improve their financial position to a level that will not
only attract the potential buyers, but also to give government a good price value in
return.
e) Conflict of interest
Another impeding factor to the process of privatization is the conflict of interest
among the management and members of board. While government clearly defines its
intentions on privatization program, some management and members of board are
non-committed for the simple reasons that they wish to continue maintain their
positions and enjoy the privileges and benefits143 attached. This accounted for a
number of ill decisions made by the management and board to satisfy their personal
interests, rather than to enhance efficiency and reliability of services and/or products,
and attainment of commercial objectives.
A classic example that illustrates conflict of interest in the process of decision making
is the decision made by the Solomon Islands government and Telecommunication
Evaluation Committee (TEC) to award 15-year mobile license to little-known mobile
network company called Bemobile144, over Digicel145, an interested investor which in
the mean time had been very much involved, even presenting as a party in the
parliamentary review of the Telecommunication Act that eventually led to the
deregulation of Solomon Islands’ telecommunication industry in 2009.
143 Such non-commitment from those in power may arises from fear of losing the power and monetary benefits and other privileges they are enjoying as a director/member of the board or as managers of the public corporation. This is a simple example of resistance to implementation of change. In order for the government to successfully implement the intended changes, it needs to get the support of those in power including directors of the board and members of the management team as they can be hindrance to change. 144 Bemobile is a telecommunication company that provides mobile services and is based in Papua New Guinea, with 50 percent of its share is owned by Telikom PNG. Other shareholders include NASFUND (5%), Nambawan Super (5%), PNG Development Programme Ltd. (5%), and the remaining 35 percent shares are held by two US-based companies namely Trilogy International Partners Ltd. and US-funded GEMS Ltd. (20%). 145 As an interested investor, Digicel Ltd. has submitted and granted business license by the Solomon Islands Foreign Investment board, and since then have indicated its seriousness to do business by going out on its own survey missions to identify best sites in the country to set up mobile telephone infrastructure, equipment and facilities.
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The decision has drawn public criticisms based on public perception that the issue of
self interest was not properly addressed when government appointed the memberships
of TEC, which include the committee chairperson, Mr. Hemmer (who is the Chief
Executive Officer of Pacific Oil146, a subsidiary of Solomon Islands National
Provident Fund (SINPF)147); an US based Lawyer148, plus government representatives,
and two oversea lawyers, one from Switzerland and another from Singapore. The
composition of the committee does not include any network or communication
engineer who has the technical know-how of how such business operates, and
moreover, the unique telecommunication challenges that customers in Solomon
Islands are faced with.
From the outset, the decision is seen as highly political, with economical interests,
engineered by both PNG and SI governments. While it can be said that PNG
government is interested in expanding its telecommunication business through its
connection with Bemobile; the SI government is interested in the USD$10 million
(SBD$80 million) performance bond promised to be paid by the company to SI
government if it fails to meet its target coverage within the time specified, and more
importantly, its intention to protect SI Telekom interests by turning down a strong
competitor such as Digicel Co. Ltd. The later raises serious questions on SI
government’s genuineness to improve the efficiency and reliability of
telecommunication services in the country, and to properly regulate the user-talk time
rates as has been demanded by the public over the years.
The 15-year license which was issued in December 2009 requires Bemobile to provide
network coverage to Guadalcanal and Malaita including Honiara by the end of Phase I
146 Pacific Oil has taken over former Shell Company Ltd, and is the largest leading supplier of fuel and other petroleum products in Solomon Islands. Pacific Oil is a subsidiary of SINPF, with 80 percent shares, while GRP & Associates, a company owned by Mr. Hemmer owned remaining shares of 20 percent. 147 SINPF is the largest shareholder of SI Telekom Co. Ltd., holding 51 percent shares in the business. 148 The independence and impartiality of the appointed US based lawyer is also in question since Bemobile is partly owned by two US based telecommunication companies namely Trilogy International partners LLC, and GEMS Ltd.
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which lapsed at the end of June 2010, and to provide network access to 81 percent of
the total population within 21 months of the issuance of the license.149
To provide full network coverage on Guadalcanal and Malaita provinces in Solomon
Islands, the company would need to acquire 30 land sites (which mostly are
customary-owned) on each of province to erect telecommunication towers. To date
only four sites are acquired on Malaita, and less than 20 sites on Guadalcanal150.
Hence, the failure of Bemobile to provide the first promised requirement of coverage
by the end of Phase I, under the agreements, has already cost the company USD$1.5m
(SBD$12m) fine to the Solomon Islands government; and this penalty will be applied
again if the promised coverage for phase II is not fulfilled by the end of phase II
(Solomon Star Newspaper, “Mobile phone entrant failed first requirement: Bemobile
penalized”, issue of 30 June 2010).
(f) Disagreement over buying-off conditions
The delay in the privatization process for two public enterprises which are financial
viable (i.e. former SIPL151 and SI Telekom) is due mainly to disagreements over
buying-off conditions between the government and the prospective buyer, whereby
irrational demands were placed as conditions for buying off government's shares. For
instance in late 1990s, when SIAC government had approached the major shareholder
of SIPL, Commonwealth Development Corporation (CDC), to buy off its shares
making it the sole owner of the company, CDC accepted the offer but on the condition
that the government will let them to acquire 5,500 hectares of land and to remove any
149 Sasako. A and Matau, R “Telecommunications: Bemobile KO’s Digicel to win Solomon’s Mobile license, Island Business, accessed on website http://www.islandsbusiness.com/islands_business/index_dynamic/containerNameToReplace=MiddleMiddle/focusModuleID=18982/overideSkinName=issueArticle-full.tpl retrieved on 21/06/10. 150 Solomon Star Newspaper, BEMOBILE – Last lap around Malaita, Guadalcanal and Honiara, June 21 2010, accessed on website http://www.solomonstarnews.com/viewpoint/private-view/6459-bemobile-last-lap-around-mala-guadalcanal-a-honiara. 151 Former SIPL prior to the 1999 ethnic tension was one of the few SOEs that was performing well financially and was a candidate for privatization under the Mamaloni and Ulufa’alu government respectively. The company is now operating under a new ownership arrangement, a joint venture between the state and Kulim (Malaysia)Bhd via its Papua New Guinea (PNG) based subsidiary New Britain Oil Palm Ltd with the former owning 80% of the holdings (SS issue of 19 September, 2005).
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export remission pertaining to their products. Similar situation also applies to SI
Telekom152.
(g) Lack of fund
Another significant inhibiting factor to privatization process is government’s lack of
funding to implement its SOE reform policy. In the 1990s, government was faced with
a lot of difficulty in securing funds to implement its privatization program. For
example SIAC government in late 1990 had negotiated with the ADB to reduce their
lending rates, but although the bank agreed to this request, it feared that the SI
government may not take the initiative to improve their economic situation. Secondly
the European Union (EU), from which SI government has always secured funds from,
has made a policy to seek IMF and the World Bank's consent before any request for
funding from the developing countries is approved. Unfortunately, SI is not one of
those countries endorsed by the IMF. This situation has created setbacks on
government’s intention to implement its privatization programs in 1990s.
4.11 Conclusion
The extensive involvement of the SI government in the national economic
developments through its SOEs is (apart from generating revenue for government
treasury) partly attributed to strategic reasons which include lack of entrepreneurial
and technical skills, lack of private funding and critical minimum infrastructures such
as roads, power and inter-island transportation. However, because of its narrow and
weak economic base, government continues to depend on external funding to finance
its major projects. In spite of this, the general performance of the SOEs is not very
impressive resulting in state having to salvage them from bankruptcy, hence a drain in
government’s meager resources.
152 (source: Interview with Anthony Makabo – Director of former Public Enterprise Reform and Implementation Unit of the Ministry of Finance, May 1999).
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The fiscal and social challenges faced over the years, has pressured state to implement
public sector-wide reform that advocates small, but efficient public sector and greater
private sector participation in the economic developments. This concept forms the
basis for government’s sector-wide structural adjustment program (SAP) under which
its policy on commercialization and privatization of public regulated utilities and
commercial ventures is defined. This led to divestment of a number of government
holdings and corporatization of public-regulated service departments, which include
the SIDPS, in the 1990s. In spite of this, the privatization process is lagging behind
due to various reasons which include inadequate public policy on ownership issues,
weak governance, political and social instabilities, conflict of interest, poor financial
status of the SOEs, and lack of funds to implement the process.
The Solomon Islands Postal Corporation was established in 1997 within the legal
framework as provided for under the SIPC Act 1996. The statutory provisions
stipulated under its legal framework give it powers to commercialize functions and
operations which were formerly assumed by the SIDPS, and to make decisions
compatible to commercial objectives. The transformation does not only entail change
in the structure, but also on the goals and functions of the corporation to effectively
delivery quality services and products at a level competitive for economic growth and
sustainability. Since its corporatization, the SIPC has diversified its services to
include retailing, post savings and rural banking services, fast money transfer services,
and express mail service (EMS).
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Chapter 5
Data analysis and result interpretation
5.1 Introduction
The purpose of this chapter is to interpret and report on the empirical research results
in relation to the objectives and propositions set forth in chapter two. The chapter
starts by providing a demographic profile of the respondents to the general survey
undertaken to assess the impact of the corporatization of Solomon Islands Department
of Postal Service (SIDPS) on postal service quality and level of customer satisfaction.
This is followed by a descriptive analysis on the problems associated with postal
services; and the state of postal service and the level of customer satisfaction both
before and after corporatization. These descriptive analyses provide the basis for
discussions in the next section that focuses on whether reform has led to
improvements in service quality, and whether it has enhanced the level of customer
satisfaction.
Reliability and factor test results on the validity of the construct used for hypothesis
testing are also presented and discussed prior to the presentation of the hypothesis test
results. The hypothesis test results are used to confirm the findings of the analyses that
are presented, and also go to answer some of the questions that are related to the
objectives of this study. Lastly the discussions in the later part of this chapter highlight
some factors that have contributed to the success of Solomon Islands Postal
Corporation (SIPC) in implementing its reform in relation to its services, the
challenges faced and barriers impeding its effort to successfully implement and sustain
reforms that seeks to fulfil its obligation to provide access to quality postal service for
its customers irrespective of their locations.
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5.2 Demographic profile of the sample
The data analyses and results used in the discussions are based on responses derived
from questionnaire survey on Solomon Islands postal service quality and customer
satisfaction, in which 150 respondents were involved.
A hundred percent of the respondents are Solomon Islanders and were responding
from the suburban centres of the nine provinces of Solomon Islands, including
Honiara, in the proportion as shown in Table 5.1 below.
As indicated, 20 respondents each representing postal users from Malaita province,
Western province and Honiara respectively have participated. Sixteen respondents are
from Isabel province, 14 from Renbel province and 15 respondents each from the
remaining four provinces which include Choiseul, Central, Makira and Temotu.
Table 5.1: Respondents profile
Nam
e of
Pro
vinc
e
Num
ber o
f par
ticip
ants
Gender Age Marital status Education Level Employment Sector
Fem
ale
Mal
e
<25
26-3
9
40>
Sin
gle
Mar
ried
Oth
ers
Prim
ary
Sec
onda
ry
Uni
vers
ity
Pro
f qu
alifi
catio
n
Oth
ers
Gov
ernm
ent
Priv
ate
Oth
ers
Choiseul 15 8 7 2 5 8 1 13 1 0 2 3 10 0 4 8 3 Western 20 10 10 3 7 10 9 11 0 0 2 9 9 0 13 4 3 Central 15 6 9 5 6 4 6 9 0 0 5 7 3 0 4 5 6 Isabel 16 8 8 5 5 6 5 9 2 1 7 4 4 0 7 4 5 Malaita 20 2 18 1 9 10 4 13 3 0 5 11 3 1 20 0 0 Honiara 20 10 10 4 6 10 3 16 1 1 5 9 5 0 15 2 3 Makira 15 9 6 4 5 6 3 10 2 0 1 8 6 0 8 4 3 Temotu 15 8 7 0 9 6 2 11 2 0 6 4 5 0 6 2 7 Renbel 14 7 7 6 4 4 7 7 0 1 3 4 6 0 2 4 8 Sub-total
68 82 30 56 64 40 99 11 3 36 59 51 1 79 33 38
Total 150 = 150 = 150 = 150 = 150 = 150
Of the 150 respondents, 43.3 percent (N: 68) are female and 54.7 percent (N: 82) are
male. Of this, 20 percent (N: 30) are identified in the age category of 25 below, 37.3
percent (N: 56) from ages 26 to 39 years, and 42.7 percent (N: 64) are from ages forty
and above. As per marital status, about 27 percent (N: 40) of the respondents are
single, 66 percent (N: 99) are married and 7 percent (N: 11) are indicated to be in
other relationship.
119
The respondents are also categorized under their level of education. The frequency test
shows that 2 percent (N: 3) have indicated to have only reached primary level of
education, while highest percentage of 39.3 (N: 59) have attained an university degree,
followed by 33.3 percent (N: 51) who hold professional qualification. Twenty four
percent (N: 36) have indicated secondary school education as their highest level of
education attained. As per employment, 52 percent (N: 79) are employed in the public
sector, 21.3 (N: 33) in private sector and 25.3 percent (N: 38) are comprised of
students and ordinary citizens.
5.3 Problems associated with postal services in Solomon Islands.
According to various reports (e.g. individual country reports, UPU reports), as
discussed in chapter 2, have highlighted a number of problems that characterized
postal services in the developing countries worldwide. Some problems highlighted in
these reports include declining mail volume, poor economic growth which
subsequently leads to poor service quality153, and low investment. In some island
regions, like the Caribbean whose context is similar to that of the Pacific region, a
number of challenges such as distance and remoteness of the islands from the urban
centers where postal facilities are located, inadequate infrastructure and proneness to
natural disasters were highlighted to have increased the impediments to service
accessibility and efficiency of service delivery.
This study has identified nine major issues in the Solomon Islands postal service
delivery, which it intends to use to gauge the extent to which postal customers
perceived them to be problems. The nine issues include; loss of items, damaged items,
untimely delivery, non-functional telecommunication facilities, lack of accessibility to
service, high access-related costs, time involved in accessing service is long,
unavailability of service, and delay in responding to grievance.
153 This include poor service delivery, high cost for service, inaccessibility to service, and delay in responding to complaints, damaged or lost items.
120
Table 5.2 Problems in Solomon Islands postal service
Response in %
Problems Strongly agree
Agree Not sure
Disagree Strongly disagree
Mean Standard deviation
Loss of posted items 10.0 34.0 29.3 16.7 10.0 2.8267 1.13366
Damaged posted items 3.3 32.0 31.3 26.7 6.7 3.0133 0.99655 Untimely delivery 12.0 38.0 17.3 23.3 9.3 2.8000 1.19843
Non-functional telecommunication
facilities
2.7 32.7 33.3 27.3 4.0 2.9733 0.93368
Lack of accessibility 4.7 40.7 14.7 30.7 9.3 2.9933 1.13218
High access-related costs 6.7 45.3 16.0 24.0 8.0 2.8133 1.11960
Time involved in accessing service is
high
6.0 37.3 32.7 15.3 8.7 2.8333 1.04539
Delay in responding to grievance 10.0 32.7 34.7 16.0 6.7 2.7667 1.05179
Availability of services 5.3 22.7 33.3 32.7 6.0 3.1133 1.00025
N = 150
Min = 1 (high agreement)
Max = 5 (low agreement)
Customers’ responses on these perceived problems are indicated on a scale of 1 (=high
agreement or strongly agree) to 5 (= low agreement or strongly disagree). Scale 3
represents ‘neither agree nor disagree’. The responses are tabulated, analyzed and
discussed hereafter.
The descriptive analysis exhibited in Table 5.2 gives the responses to the construct, in
percentage, with their average means and standard deviations. As illustrated on the
table, mean values >2.7 but <3.0 were indicated for ‘delay in responding to grievances
(2.7667), loss of posted items (2.8267), untimely delivery, untimely delivery (2.800),
non-functional communication facilities (2.9733), accessibility (2.9933), high access
related costs (2.8133), and time factor (2.8333)’. On the scale of 1 to 5, each of these
issues is perceived to be a problem.
Furthermore, both “damaged posted items and service availability’ have mean values
>3.0 but <3.2, implying a moderate stance on the issues as being problems, or not
problems. In other words respondents are, in general, not definitely certain on whether
‘damaged posted items’ and ‘service availability’ are problems as far as provision of
postal service in Solomon Islands is concerned.
121
The low standard deviation indicated for ‘damaged posted items’ (0.99655) and ‘non-
functional telecommunication facilities’ (0.93368) implied low variance in the
moderate perception respondents held on these issues as respectively discussed above.
High corresponding standard deviations indicated for all other issues (>1.0) suggested
that there is high variance in the common opinion held about them as being problems.
The findings in this analysis confirmed that Solomon Islands postal service, like those
in other developing countries, is not immune to a number of problems that plagued the
efficiency of service delivery. The loss of posted items, untimely delivery, lack of
accessibility to services, access-related costs and time factors, delays in responding to
grievance, and so on, are few common problems which are related to proximity of
postal facilities and inadequate critical infrastructures needed to logistically facilitate
the provision of services that fulfils customer’s needs and expectations. In the absence
of these, customers residing in communities beyond the proximity of the postal
facilities will be denied accessibility to socially interact and communicate with
friends, families and business contacts beyond their locality.
5.4 State of Solomon Islands postal service quality and level of
customer satisfaction before and after reform
The postal service performance standards and measurements have been the hot topics
of discussion within the postal community over the last decade, with focus on the
formulation of realistic service performance measurement and tools154. While a
number of measuring tools were suggested and/or used to measure postal
performance, this study chose to use service quality and the level of customer
satisfaction for this purpose. Hence, this section presents the analyses on the state of
postal service quality and level of customer satisfaction before the corporatization of
SIDPS in 1997 and after corporatization.
154Gene Del Polito,(2007) “Service performance measurement – a test of actual legislative intent”, POSTCOM, Association for Postal Commerce, Arlington, USA; retrieved 20 August 2008 on website: http://www.postcom.org/public/articles/2007articles/service%20performance%20measurement--a%20test%20of%20actual%20lPostCom, Association for Postal Commerceegislative%20intent.htm.
122
The analyses are based on the responses obtained from the opinion survey which was
administered to 150 respondents, who represented postal service users in Solomon
Islands; and have had some personal interactions and experiences with the SI postal
services both before and after the corporatization of postal service. Taking this into
consideration, the findings discussed in the following sections are primarily based on
customers’ perception on the quality of postal service in Solomon Islands as indicated
in their responses to a set of seven statements (see table 5.3(a)) pertaining to various
quality issues; and level of customer satisfaction as indicated in their responses to a set
of nine statements given in table 5.3(b).
The responses are indicated on a scale of 1 to 5 with 1 = strongly agree (SA), 2 =
agree (A), 3 = not sure (NS), 4 = Disagree (D) and 5 = strongly disagree (SD).
Table 5.3 Statements on service quality and customer satisfaction
(a) Statement on service quality (b) Statement on customer satisfaction
1. Time involved in accessing postal service is a major problem
1. Customer is happy with the delivery time span
2. Cost involved in accessing postal service is a major problem
2. Customer is happy with postal service charges
3. Grievance procedures are intact 3. Costs associated with accessing postal services is reasonable from customer’s point of view
4. Response to grievance is prompt 4. Customer finds postal staff friendly and helpful 5. Mails never get lost, damaged or delay (security) 5. Customer is well aware of the grievance handling
procedure 6. Accessibility to postal service in the rural areas is evident 6. Customer’s complaints and grievances are handled
promptly 7. Availability of postal services at all time (e.g. Phone card,
aerogram, stamps, ICT facilities ) 7. Customer’s mails are always received on time
8. Customer’s mails are never damaged or lost
9. Customer is happy with the technology in use by the postal department
5.4.1 Descriptive analysis on the state of postal service quality in
Solomon Islands
5.4.1.1. Service quality before corporatization
The descriptive analysis on the state of postal service in Solomon Islands prior to
corporatization, as illustrated in table 5.4(a), revealed that more than 50 percent of
respondents have indicated agreement to statement 1 (56.6%) and statement 2 (64%)
which stated that time and costs involved in accessing postal service were major issues
of concern. The responses to other statements indicated less than 50 percent
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agreement, with lowest percentage of agreement was indicated for security (16.7%),
prompt response to grievance (18%) and accessibility (22%).
Highest percentage of disagreement was indicated for statement pertaining to service
accessibility (66%) and security (59.3%), while responses to all other statements had
indicated less than 50 percent disagreement with the lowest shown for service
availability (14%), time (16.7%) and cost (18%).
Total percentage of those taking neutral position was less than 50 percent for all
statements with highest indicated for prompt response to grievance (42%) and service
availability (42%) followed by intactness of grievance procedures (38%); and the
lowest percentage was indicated for accessibility (12%), and cost (18%).
Table: 5.4 Descriptive Statistics on Service quality before and after corporatization
(a) Before Corporatization Response in % Variable items Strongly
agree Agree Not sure Disagree Strongly
disagree Mean Standard
deviation Time factor 23.3 (N:35) 33.3 (N:50) 26.7 (N:40) 8.0 (N:12) 8.7 (N:13) 2.4533 1.18484 Cost factor 22.0 (N:33) 42.0 (N:63) 18.0 (N:27) 11.3 (N:17) 6.7 (N:10) 2.3867 1.14568 Grievance procedure intact 9.3 (N:14) 22.7 (N:34) 38.0 (N:57) 19.3 (N:29) 10.7 (N:16) 2.9933 1.10822 Prompt response to grievance
0.0 (N:0) 18.0 (N:27) 42.0 (N:63) 27.3 (N:41) 12.7 (N:19) 3.3467 0.91949
Security – Mails never get delay, damage or lost
4 (N:6) 12.7 (N:19) 24.0 (N:36) 37.3 (N:56) 22 (N:33) 3.6067 1.08620
Service accessibility 1.3 (N:2) 20.7 (N:31) 12.0 (N:18) 36.0 (N:54) 30.0 (N:45) 3.7267 1.14045 Service availability 5.3 (N:8) 38.7 (N:58) 42.0 (N:63) 5.3 (N:8) 8.7 (N:13) 2.7333 0.96702
Analysis No. (150) Minimum (1) Maximum (5)
(b) After Corporatization
Response in % Variable items Strongly
agree Agree Not Sure Disagree Strongly
disagree Mean Standard
deviation Time factor 22.7 (N:34) 49.3 (N:74) 17.3 (N:26) 10.7 (N:16) 0.0 (N:0) 2.1600 0.89802 Cost factor 27.3 (N:41) 45.3 (N:68) 14.7 (N:22) 12.7 (N:19) 0.0 (N:0) 2.1267 0.95746 Grievance procedure intact 12.7 (N:19) 30.7 (N:46) 38.0 (N:57) 15.3 (N:23) 3.3 (N:5) 2.6600 0.99549 Prompt response to grievance
22.0 (N:33) 16.7 (N:25) 33.3 (N:50) 19.3 (N:29) 8.7 (N:13) 2.7600 1.24070
Security – Mails never get delay, damage or lost
10.7 (N:16) 24.7 (N:37) 16 (N:24) 31.3 (N:47) 17.3 (N:26) 3.2000 1.28492
Service accessibility 12.0 (N:18) 25.3 (N:38) 8.7 (N:13) 27.3 (N:41) 27.0 (N:40) 3.3133 1.41011 Service availability 21.3 (N:32) 46.7 (N:70) 14.0 (N:21) 12.7 (N:19) 5.3 (N:8) 2.4733 1.48232
Analysis No. (150) Minimum (1) Maximum (5)
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In general the above analysis has established that;
(a) The quality of postal service prior to corporatization was significantly influenced
by ‘time’ and ‘cost’ factors, ‘promptness to respond to grievances’, ‘security’
and service accessibility’. Note that statements 1 and 2 were negatively
constructed, as compared to statements 3 to 7. In view of this, rating <3.0 for
statement 1 and 2 indicated ‘agreement’ that time and cost factors were major
concerns; whilst for statements 3 to 7, the same rating indicated ‘agreement’
which implied that issues highlighted in the statement were of less concern.
Hence, bearing this in mind, the average mean values >3.0 as indicated for
service accessibility (3.7), security (3.6) and prompt response to grievance (3.3),
supports the above analysis that these factors were perceived as major quality
concerns. In contrast, the mean values <3.0 indicated for time and cost factors
have also supported the above analysis that these two factors were major
concerns, and have significant influence on customers’ perception of service
quality during pre-reform period.
(b) The descriptive analysis on the intactness of grievance procedures revealed a
moderate stance on the issue. As illustrated in table 5.4(a), only 32 percent of the
total respondents agreed that the procedures were intact, while 38 percent neither
agree nor disagree, and 30 percent disagreed. The average mean value of 2.9933
confirmed this finding.
(c) Service availability was not a major quality concern as services were perceived
to have always been available at the postal outlets. The average mean value of
2.7333 confirmed this finding.
In summary, the above analysis revealed that the quality of postal service in Solomon
Islands prior to reform was generally poor.
5.4.1.2. Service quality after corporatization
The descriptive analysis on the state of service quality after reform, as illustrated in
table 5.4(b), revealed that more than 50 percent of the total respondents have agreed
125
that time (72%) and costs (70.6%) involved in accessing postal service are major
issues of concern.
Moreover, 68 percent have indicated that postal services are available at the postal
outlets at all time, while less than 50 percent indicated agreement to the remaining
statements. Furthermore, the total percentage of those who disagreed to the all
statements were less than 50 percent with highest percentage indicated for service
accessibility (50.4%) followed by security (48.6%), and the lowest percentage was
indicated for time (10.7%) and cost (12.7%).
Total percentage of those indicated ‘not sure’ (neutral position) are less than 40
percent with highest of 38 percent indicated for intactness of grievance procedures,
and lowest percentage of 8.6 percent was indicated for service accessibility.
From the above analysis, the following findings are established:
(a) That time, cost, security and service accessibility continue to be major issues of
concern in spite of reform. The low average mean value for time (2.1600) and
costs (2.1267) suggested high agreement to the statements that these factors are
major quality concerns. Furthermore, security and service accessibility with
average mean values of 3.2000 and 3.3133 respectively supported the analysis
that these variable factors continued to be perceived as major concerns.
(b) The remaining factors which include intactness of grievance procedures, prompt
response to grievance and service availability are not major quality concerns, as
indicated by their average mean values which are < 3.0
In summary, these findings have established that although there are some
improvements in all factor variables; time and cost factors, including security and
service accessibility continue to be perceived as major quality concerns in spite of
reform. On the contrary, the remaining three factors (intactness of grievance
procedure, prompt response to grievance and service availability) are not perceived as
major quality problems.
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5.4.2 Descriptive analysis on the level of customer satisfaction
5.4.2.1. Customer satisfaction before corporatization
The nine-variable items used to measure the level of customer satisfaction include
delivery time span, postal rates, access-related costs, friendly/helpful staff, awareness
of grievance procedure, promptness in responding to grievance, timely delivery,
security and information & communication facilities at the postal outlets (also see
table 5.3b).
Table 5.5 Descriptive analysis of customer satisfaction before and after corporatization
(a) BEFORE CORPORATIZATION
Response in % Variable items Strongly
agree Agree Not sure Disagree Strongly
disagree Mean Standard
deviation Delivery time span 1.3 (N:2) 11.3 (N:17) 24.7 (N:37) 46.0 (N:69) 16.7 (N:25) 3.6533 0.93397 Postal rates 0.0 (N:0) 18.0 (N:27) 32.7 (N:49) 34.7 (N:52) 14.6 (N:22) 3.4600 0.95278 Service access-related costs 2.7 (N:4) 9.3 (N:14) 17.3 (N:26) 50.7 (N:76) 20.0 (N:30) 3.7600 0.96711 Friendly/helpful staff 3.3 (N:5) 43.3 (N:65) 20.0 (N:30) 25.3 (N:38) 8.0 (N:12) 2.9133 1.06775 Awareness of grievance procedure
2.7 (N:4) 5.3 (N:8) 29.3 (N:44) 34.7 (N:52) 28.0 (N:42) 3.8000 0.99664
Promptness in responding to grievance
2.0 (N:3) 4.7 (N:7) 27.3 (N:41) 40.0 (N:60) 26.0 (N:39) 3.8333 0.93706
Timely delivery 2.7 (N:4) 11.3 (N:17) 23.3 (N:35) 36.0 (N:54) 26.7 (N:40) 3.7533 1.11690 Mail security 0.0 (N:0) 4.0 (N:6) 39.3 (N:59) 36.7 (N:55) 20.0 (N:30) 3.7533 0.89695 ICT at postal outlets 4.7 (N:7) 12.0 (N:18) 25.3 (N:38) 40.7 (N:61) 17.3 (N:26) 3.5667 1.11978
Analysis No. (150) Minimum (1) Maximum (5)
(b) AFTER CORPORATIZATION
Response in % Variable items Strongly
agree Agree Not
Sure Disagree Strongly
disagree Mean Standard
deviation Delivery time span 12.0 (N:18) 42.7 (N:64) 24.0 (N:36) 17.3 (N:26) 4.0 (N:6) 2.5867 1.03746 Postal rates 4.7 (N:7) 45.3 (N:68) 36.0 (N:54) 9.3 (N:14) 4.7 (N:7) 2.6400 0.89202 Service access-related costs 16.7 (N:25) 39.3 (N:59) 18.0 (N:27) 22.0 (N:33) 4.0 (N:6) 2.5733 1.12534 Friendly/helpful staff 18.0 (N:27) 50.7 (N:76) 15.3 (N:23) 7.3 (N:11) 8.7 (N:13) 2.3800 1.12727 Awareness of grievance procedure
8.7 (N:13) 11.3 (N:17) 33.3 (N:50) 30.7 (N:46) 16.0 (N:24) 3.3400 1.14006
Promptness in responding to grievance
9.3 (N:14) 10.7 (N:16) 43.3 (N:65) 24.7 (N:37) 12.0 (N:18) 3.1933 1.08496
Timely delivery 13.3 (N:20) 32.7 (N:49) 19.3 (N:29) 26.0 (N:39) 8.7 (N:13) 2.8400 1.20447 Mail security 3.3 (N:5) 12.0 (N:18) 38.0 (N:57) 28.0 (N:42) 18.7 (N:28) 3.4667 1.03409 ICT at postal outlets 8.7 (N:13) 28.0 (N:42) 28.0 (N:42) 26.7 (N:40) 8.6 (N:13) 2.9867 1.11720
Analysis No. (150) 150 Minimum 1 Maximum 5
According to the descriptive analysis given in table 5.5(a), the total percentage of
those indicated ‘agreement’ to all the nine-variable items prior to corporatization are
below 50 percent, with highest indicated for friendly and helpful staff (47%) and the
127
lowest was indicated for security (4.0%). In contrast, the highest percentage of
disagreement was indicated for all constructed variable items (above 49%) except for
postal rates and security which had 33 percent.
The highest percentage of disagreement was indicated for service access-related costs
with 71 percent, followed by prompt response to grievance (66%), delivery time span,
awareness of grievance procedures and timely delivery all with 63 percent
disagreement, and finally ICT at postal outlets with 58 percent and security with about
57 percent.
Moreover, total percentage of those taking neutral position on all nine factor-items
range from 20 percent which was indicated for friendly and helpful staff, to 39 percent
which was indicated for security. The high average mean values (> 3.0) indicated for
all the variable items suggested that the level of customer satisfaction pertaining to
postal services was poor prior to corporatization.
From the above analysis, the following findings are established:
(a) That prior to corporatization of SIDPS the level of customer satisfaction
pertaining to postal services was generally poor.
(b) That factors contributed to high customer dissatisfaction were service access-
related costs, lack of prompt response to grievances, untimely delivery,
delivery time span, lack of awareness in grievance procedures, mail security
and non-functional ICT facilities at the postal outlets. The high average mean
values (>3.0) which were indicated for these factors agreed with this finding.
(c) That there was a moderate level of customer satisfaction related to
friendliness and helpfulness of postal staff. The average mean value of 2.9133
supported this finding.
5.4.2.2. Customer satisfaction after corporatization.
The descriptive analysis on the level of customer satisfaction, following reform of
SIDPS as exhibited in table 5.5(b), revealed more than 50 percent agreement
128
(satisfaction) for delivery time span, postal rates, access-related costs, and friendly &
helpful staff, while less than 50 percent agreement was indicated for awareness of
grievance procedure, prompt response to grievance, timely delivery, security and ICT.
Highest disagreement (dissatisfaction) was indicated for awareness to grievance
procedure and security, both with 47 percent followed by promptness in responding to
grievance (37%) and ICT and timely delivery with 35 percent. The remaining variable
items have indicated <30 percent disagreement.
The highest percentage of those neither agreed nor disagreed was indicated for
promptness in responding to grievance with 43 percent, followed by security (38%),
postal rates (36%) and awareness to grievance procedure (33%), while lowest
percentage was indicated for access-related costs (18%) and timely delivery (19%).
The above analysis has established the following findings:
a) That the level of customer satisfaction has generally improved following the
corporatization of SIDPS.
b) Factors that have positively contributed to improved level of customer
satisfaction are friendliness and helpfulness of postal personnels, delivery time
span, postal rates and access-related costs. The low average mean values (<3.0)
indicated for these four factors have confirmed this finding.
c) In contrast, the factors that negatively influence the level of customer
satisfaction include awareness to grievance procedure, promptness in
responding to customer grievance, and security. High average mean values
(>3.0) that were accorded to each one of them supported this finding.
d) That there was a moderate level of customer satisfaction related to timely
delivery and ICT at the postal outlets. The average mean values of 2.8400 and
2.9867 indicated for them, respectively, supported this assumption.
129
5.5 The impact of corporatization on Solomon Islands postal
service quality and level of customer satisfaction The discussion on the impact of corporatization on Solomon Islands postal service
quality and level of customer satisfaction is based on the comparative analysis of the
empirical findings discussed in section 5.4.1 and 5.4.2 respectively. The use of mean
and standard deviation outputs will be applied wherever it is appropriate or necessary
to verify and confirm findings.
Mean: This is the average of the responses made to each statement. The low mean
implies high agreement to the statement, and high mean implies low agreement.
Standard deviation: This is the measure of dispersion from mean. The standard
deviation of mean will also be used in the discussion to confirm and/or explain
findings of the analyses wherever it is appropriate. The higher the standard deviation,
the wider the dispersion of common opinion on the statement from the mean, and the
lower the standard deviation, the closer the common opinion clustered to the mean.
5.5.1. Impact of corporatization on service quality
A comparative analysis on the findings given in section 5.4.1.1 and section 5.4.1.2
(which was based to data given in table 5.4(a) and (b)) respectively had revealed that
corporatization of Solomon Islands postal service has led to some general
improvements in the postal service quality. Except for time and cost factors, all other
variable factors pertaining to quality issues considered, have indicated improvements
in varying degrees as discussed below.
a) The intactness of grievance procedures and the availability of services.
The intactness of grievance procedures and the availability of services at the
postal outlets have indicated improvements following the corporatization of
postal services. The improvement in the mean values from 2.9933 and 2.7333
to 2.6600 and 2.4733 respectively (compare table 5.4(a) and table 5.4(b)) and
also table 5.9a and table 5.9b under columns labelled mean values) attested to
130
the fact that reform has led to improvement in the effectiveness and efficiency
of the grievance procedures adopted by incumbent operator, as well as the
provisions (and availability) of services at the postal outlets.
The corresponding standard deviation of 0.99549 for intactness of grievance
procedures indicated high agreement (low variances) to the common
perception that grievance procedure is intact. On the other hand, while high
agreement is indicated for improvements in availability of services, the high
standard deviation of 1.48232 implies high variances in the common
assumption respondents hold on this issue.
The improvement in the common opinion held with regard to service
availability is attributed to the fact that other much needed services such as fast
money transfer services (i.e. Western Union Money Transfer Services) and
postal banking have been introduced and provided through the postal outlets
since 2005. These new developments have increased the need for customers to
seek and use various services offered at the postal outlets.
b) Prompt response to grievances
The findings have also revealed that there is reasonable improvement in
incumbent’s responsiveness to customer grievances. Comparatively, the mean
values (see table 5.4(a) and table 5.4(b); and also table 5.9(a) and table 5.9(b))
for ‘prompt response to grievance’ indicated that there was improvement in
this area following reform, although there is a wide dispersal in this opinion as
indicated by the standard deviation of 1.24070 after reform. Such high variance
in the common opinion could be attributed to the fact that some grievances are
sometimes taken longer to deal with by the postal incumbent due to various
factors such as inadequate facilities and infrastructures required to efficiently
dealt with each of the complaints lodged by customers. It is also noted that
grievances vary in nature and importance.
131
While some grievance can be dealt with in as much shorter time as in few
hours or day, others may require longer period of time155 to deal with. The fact
that customers have different expectations on how soon they think the
incumbent operator should deal and respond to their grievances, influences
their perception on the ability of operator, and the quality of their services.
Such misconception could have been avoided if communications between the
postal network; and between the postal personnel and complainants are
maintained.
c) Security and accessibility to postal services
Minimal improvements are indicated in the security of mails and service
accessibility, although the improvements are not significant as indicated by
their mean values of 3.2000 (from 3.6 before reform) and 3.3133 (from 3.7
before reform) respectively (see table 5.4(a) & table 5.4(b)). In other words,
the minimal improvements indicated in the analysis are not significant enough
to strike a positive difference from its previous state, thus continues to remain
stagnant (in same moderate position). The wider dispersion of the
corresponding standard deviations, from the average mean, imply high
variances in the common perceptions held on the quality of mail security and
accessibility of services.
Minimal improvement indicated in the security of mail is attributed to the fact
that most postal outlets are moderately equipped with basic facilities, and
therefore have low capacity to improve and/or deal with security issues within
their jurisdiction. This study has established that the delivery of domestic letter
mails to and from postal outlets could take an average time of two weeks
depending on the frequency of transportation to respective destinations, while
international mail could usually take two to three weeks. Furthermore, the
minimal improvement in accessibility of postal service to rural areas could be
attributed to the fact that postal network is located mostly in urban and
155 This study has established that the turnaround time in responding to customer grievances or complaints ranges from 2 weeks to 2 months depending on the nature of the grievances, which are mostly related to service delivery.
132
suburban areas, and accessibility of service to rural populace is difficult due to
distance, inadequate infrastructure and the implied high costs.
(d) Time and cost factors
Time and cost factors continue to remain major quality concerns in spite
corporatization of SIDPS. Note, that the improvements in the mean values for
these two factors after reform (see table 5.4(a) & 5.4(b)) does not mean an
improvement in reducing time and costs involved in accessing services, but
rather indicated high agreement to the initial statement that “time/cost is a
major problem” in spite reform. This is further supported by low
corresponding standard deviations (<3.0) which confirmed the common
opinion that time and cost associated with accessing of postal service are major
problems.
These key findings suggested that although corporatization of Solomon Islands Postal
Service has led to some general improvements in the service quality, such reform has
made no positive impact on reducing time and costs involved in accessing postal
services for customers.
In view of this finding, question arises as to the role of postal incumbent operator in
reducing time and costs involved in accessing services. To gain better understanding
of the magnitude of the problems, it is important to highlight important factors that
contributed to such problems, and the limitations faced by the incumbent operator in
reducing time and cost for access.
A number of factors have been identified to have significant influence on the time and
costs involved in accessing services, important of which are proximity (also taking
into account the geographical features of the islands whose inhabitants are clients of
the service), and inadequate infrastructure. As mentioned in chapter 4, the postal
facilities throughout the country are located in urban and suburban centres, while the
majority of customer served resides in surrounding rural communities, and scattering
nearby islands.
133
Furthermore, in view of inadequate infrastructures, customers requiring the use of
postal services would either walk great distance to suburban centre, where the postal
facilities are located or travelled by motor-powered boats or paddled dugout canoes.
Services to remote island communities depend very much on government vessels,
whose schedules are unreliable since most of these area lies within uneconomical
zones. In this regard, the length of time involved in accessing services is, not only a
problem for customers, but also has significant implication on the costs customers
incurred in the process of accessing the services.
Nevertheless, any plans by the incumbent operator to improve the provision of
services within minimum time and costs to customers would be very much depend on
the improvement of infrastructures such as communication and transportation which
falls under the national development planning.
Hence, unless government of the day makes an effort to provide and improve the basic
infrastructures, provision of quality mail services at minimum time and cost to the
customers would continue to be a challenge for the postal incumbent.
5.5.2 Impact of corporatization on level of customer satisfaction
The findings established from the comparative analysis of the statistical outputs given
in sub sections 5.4. 2.1 and 5.4.2.2 (based on data exhibited in table 5.5(a) and 5.5(b))
have revealed that corporatization of SIDPS has led to general improvement in the
level of customer satisfaction. However, like service quality, the improvements in the
level of satisfaction vary for different variable factors as discussed below.
The comparative analysis on the level of customer satisfaction prior to, and after
reform of SIDPS revealed the following findings:
(a) Delivery time span, postal rates and service accessibility
There is a significant improvement in the level of customer satisfaction pertaining
to delivery time span, postal rates, service-access related costs and the friendliness
and helpfulness of postal personnel. This is indicated by the improvements in their
respective average mean values following reform (see table 5.5(a) & 5.5(b) for
134
comparison of their mean values). Low standard deviation (0.89202) indicated for
postal rate following reform suggested that there is low variance in the common
assumption that there is a high level of customer satisfaction pertaining postal
charges imposed by incumbent operator. Furthermore, although the findings have
indicated an increase in the level of customer satisfaction in the other three
variables mentioned, there is an indication that these assumptions or opinions
widely varies as indicated by the high standard deviations that correspond to them.
(b) Timely delivery and ICT at the postal outlets
There is reasonable improvement in the level of customer satisfaction pertaining to
timely delivery and ICT at the postal outlets, as indicated by the improvements in
their mean values following reform (compare their mean values in table 5.5(a) and
5.5(b)). In spite of this, both factors have scored high standard deviations (>1.0)
which suggested that there is high variance in this assumption.
(c) Awareness of grievance procedure, prompt response to grievance and security.
Minimal improvement in the level of customer satisfaction was indicated in
awareness of grievance procedures, promptness in responding to grievance, and
security of mail service’, although such improvements are not significant enough
to move the overall rating from neutral toward high satisfaction.
As indicated in table 5.5(a) and 5.5(b), the average mean values for these variables
have improved only by a few points, but still remain within the neutral range as
represented by rating scale of 3. The low corresponding standard deviations prior
to reform as compared to that after corporatization, suggested strong stance in the
common opinion that prior to corporatization customers are neither satisfied nor
dissatisfied on these issues. However, the high standard deviations indicated after
reform, for these three factors, suggested high variances in these assumptions.
The above findings generally confirmed that the corporatization of SIDPS has made
some general positive impact on enhancing the level of customer satisfaction.
135
5.6 Reliability and construct validity (factor analysis) test outputs
Prior to hypothesis testing, the constructs were assessed for reliability using
Cronbach’s alpha test; and factoring using the Principal Axis Factor (PAF).
Cronbach’s alpha test is used to determine the internal consistency of the variables,
and subscale measurements used in the analysis while PAF is applied to determine the
underlying factors that summarize the essential information contained in the variables.
Hence, the use of factor analysis outputs in this study is to summarize the structure
(reliability) of variables, and to see if the items are tapping into the same construct.
The outputs of Cronbach’s alpha reliability test and factor analysis on the principal
variables used in the analyses of this study are discussed below under sub-subsections
5.6.1 (a) and (b); and subsections 5.6.2 (a) and (b) respectively.
5.6.1. Reliability test outputs
The acceptable Cronbach’s alpha value in the reliability testing is 0.5.
(a) Service quality (before and after corporatization)
According to the reliability statistics given in table 5.6, the subscales for service
quality both before corporatization and after corporatization appeared to have
reasonable degree of consistency with alpha value of 0.731 and 0.622 respectively,
both of which are greater than Cronbach’s alpha value of 0.5.
Table 5.6: Reliability Statistics for Quality of service and Customer satisfaction (before
and after corporatization)
Variable Reliability scores Cronbach’s alpha 0.5
Reliability or not reliable
Service quality before 0.731 0.5 Reliable
Service quality after 0.622 0.5 Reliable
Customer satisfaction
before
0.846 0.5 Reliable
Customer satisfaction after 0.903 0.5 Reliable
In spite of this, an improvement in Cronbach alpha value for service quality for the
period after corporatization would have come from deleting ‘cost factor’ and
‘availability of service’, both of which have lowest Correlation value of 0.99 and .125
respectively (see Table 5.7 - Item-Total Statistic under column labelled Corrected
136
Item-Total Correlation). However, removal of these items will improve the Cronbach
alpha value by only 0.082, hence it is decided that these items be retained especially
when there is already an unrealistically low number of variables. Similarly, the
Corrected Item-Total Correlation values for items before corporatization have
indicated positive correlations, hence all items are worthy of retention.
In addition, the alpha value of each factor-item, under the Squared Multiple
Correlation (SMC) column (see table 5.7) both before corporatization and after
corporatization, have also revealed a reasonably significant degree of correlation
coefficient between each variable with a linear combination of other variables, thus
support the decision to retain all items for analysis.
(a) Customer satisfaction (before and after corporatization)
The Cronbach’s alpha values for customer satisfaction, both before and after
corporatization, are well above the recommended Cronbach’s alpha value of 0.5. As
shown in table 5.6 above, the reliability scores were 0.846 and 0.903 respectively, thus
confirmed the reliability of the subscales of the construct for both period respectively.
Furthermore, as shown in table 5.8, all values indicated under the column labelled
Corrected Item-Total Correlation are greater than alpha value 3.0, indicating positive
coefficient correlation between each variable item and the total overall scale. This
confirms that the subscales of constructs are reliable and can be retained for analysis
purposes.
5.6.2 Construct validity (Factor analysis)
The factor test outputs on the two sets of variables for service quality and customer
satisfaction, using the Principal Axis Factor (PAF), confirmed their appropriateness
and reliability as revealed in their correlation matrix test outputs, and Kaiser-Meyer-
Olkin (KMO) and Bartlett’s test of sphericity, which are exhibited in Table 5.9 and
Table 5.10 respectively.
137
Tabl
e: 5
.7 It
em-T
otal
sta
tistic
s fo
r ser
vice
qua
lity
befo
re a
nd a
fter c
orpo
ratiz
atio
n
(b)
Bef
ore
corp
orat
izat
ion
(b)
Afte
r cor
pora
tizat
ion
Sca
le
Mea
n if
Item
D
elet
ed
Sca
le
Varia
nce
if Ite
m
Del
eted
Cor
rect
ed
Item
-Tot
al
Cor
rela
tion
Squ
ared
M
ultip
le
Cor
rela
tion
Cro
nbac
h's
Alp
ha if
Ite
m
Del
eted
Sca
le
Mea
n if
Item
D
elet
ed
Sca
le
Varia
nce
if Ite
m
Del
eted
C
orre
cted
Item
-To
tal C
orre
latio
n Sq
uare
d M
ultip
le
Cor
rela
tion
Cro
nbac
h's
Alp
ha if
Item
D
elet
ed
Tim
e fa
ctor
18
.793
3 15
.897
.4
96
.533
.6
87
16.5
333
18.6
00
.286
.5
69
.601
C
ost f
acto
r 18
.860
0 16
.725
.4
21
.592
.7
05
16.5
667
19.8
58
.099
.4
74
.646
G
rieva
nce
proc
edur
e in
tact
18
.253
3 16
.177
.5
14
.372
.6
82
16.0
333
16.7
71
.474
.4
60
.549
Prom
pt re
spon
se
to G
rieva
nce
17.9
000
17.0
44
.540
.3
66
.682
15
.933
3 16
.157
.3
94
.559
.5
65
Secu
rity
17.6
400
17.9
10
.315
.3
16
.729
15
.493
3 14
.117
.6
06
.587
.4
83
Serv
ice
acce
ssib
ility
17
.520
0 17
.594
.3
23
.423
.7
29
15.3
800
14.8
41
.441
.5
74
.545
Serv
ice
avai
labi
lity
18.5
133
16.7
88
.538
.4
11
.680
16
.220
0 17
.864
.1
25
.215
.6
70
Tabl
e: 5
.8 It
em-T
otal
sta
tistic
s fo
r cus
tom
er s
atis
fact
ion
befo
re a
nd a
fter c
orpo
ratiz
atio
n
(a)
Bef
ore
corp
orat
izat
ion
(a)
Afte
r cor
pora
tizat
ion
Sca
le
Mea
n if
Item
D
elet
ed
Scal
e Va
rianc
e if
Item
D
elet
ed
Cor
rect
ed
Item
-Tot
al
Cor
rela
tion
Squ
ared
M
ultip
le
Cor
rela
tion
Cro
nbac
h's
Alp
ha if
Ite
m
Del
eted
Sca
le
Mea
n if
Item
D
elet
ed
Sca
le
Varia
nce
if Ite
m
Del
eted
C
orre
cted
Item
-To
tal C
orre
latio
n Sq
uare
d M
ultip
le
Cor
rela
tion
Cro
nbac
h's
Alp
ha if
Item
D
elet
ed
Del
iver
y tim
e sp
an
28.8
400
30.0
41
.534
.4
90
.832
23
.420
0 44
.205
.6
28
.515
.8
95
Post
al c
harg
es
29.0
333
31.4
28
.379
.4
83
.847
23
.366
7 45
.804
.6
08
.466
.8
97
Asso
c co
st fo
r ac
cess
28
.733
3 29
.217
.5
96
.670
.8
26
23.4
333
43.4
96
.618
.5
79
.896
Frie
ndly
/hel
pful
sta
ff 29
.580
0 29
.937
.4
54
.414
.8
42
23.6
267
42.9
87
.655
.4
66
.893
Awar
enes
s of
grie
v pr
oced
ure
28.6
933
28.6
97
.627
.5
14
.823
22
.666
7 42
.801
.6
60
.590
.8
93
Prom
pt re
sp to
gr
ieva
nce
28.6
600
27.8
37
.776
.6
68
.808
22
.813
3 41
.119
.8
37
.785
.8
79
Tim
ely
deliv
ery
28.7
400
27.4
55
.656
.6
68
.819
23
.166
7 40
.865
.7
55
.700
.8
85
Secu
rity
28.7
400
31.8
45
.369
.2
45
.848
22
.540
0 43
.002
.7
28
.589
.8
88
Tech
nolo
gy
28.9
267
27.2
76
.672
.5
58
.817
23
.020
0 43
.953
.5
90
.508
.8
98
138
(a) Service quality (before and after corporatization)
The mean values, standard deviations and correlation matrix of service quality before
and after corporatization were determined and respectively given in table 5.9 (a) and
table 5.9 (b). As explained earlier in the analysis, because of the way the survey
statements were written, low mean value shown for time and cost factors indicated high
agreement that these factors were seen as major problems affecting service quality,
while high mean values indicated for all other factor items indicated high agreement that
these factors are major problems influencing service quality.
The descriptive statistics exhibited in table 5.9(a) revealed that service quality prior to
corporatization of postal service was significantly influenced by five factors which
included time and costs involved in accessing the service, with mean values of 2.4533
and 2.3867 respectively, as well as promptness to respond to grievances, security and
service accessibility with mean values of 3.3467, 3.6067 and 3.7267 respectively.
Table: 5.9 (a) Inter-Item correlation matrix table for service quality before corporatization
Variable Mean Std. Deviation
Time factor
Cost Factor
Grievance procedure intact
Prompt response to Grievance
Security
Access
Availability
Time factor 2.4533 1.18484 1.000 Cost factor 2.3867 1.14568 .572 1.000 Grievance procedure 2.9933 1.10822 .273 .430 1.000
Prompt response
3.3467 .91949 .274 .222 .404 1.000
Security 3.6067 1.08620 .046 .290 .215 .440 1.000 Accessibility 3.7267 1.14045 -.241 -.139 .222 .353 .178 1.000 Availability 2.7333 .96702 .458 .215 .405 .331 .104 .481 1.000
Table: 5.9 (b) Inter-Item correlation matrix table for service quality after corporatization
Variable Mean Std. Deviation
Time factor
Cost Factor
Grievance procedure intact
Prompt response to Grievance
Security
Access
Availability
Time factor 2.1600 .89802 1.000 Cost factor 2.1267 .95746 .460 1.000 Grievance procedure
2.6600 .99549 .219 .320 1.000
Prompt response
2.7600 1.24070 .450 -.082 .395 1.000
Security 3.2000 1.28492 .187 -.124 .295 .519 1.000 Accessibility 3.3133 1.41011 -.156 .030 .488 .212 .569 1.000 Availability 2.4733 1.48232 -.002 -.047 -.081 -.069 .331 .224 1.000
The statistics exhibited in table 5.9(b) also revealed that in spite of reform time, cost,
security and accessibility continued to have significant influence on the quality of postal
139
service in Solomon Islands. This is indicated by their mean values which were <3.0 for
time and cost factors and >3.0 for security and accessibility.
Furthermore, the correlation matrix values for the variable-items before corporatization
indicated moderately significant correlation between the variables, except for
accessibility which correlated negatively with time factor and cost factor. This implies
that if service accessibility increases, the time factor and cost factor will decrease.
Similarly, it is also indicated that there is positive correlation between each variable with
other variables after corporatization except for service availability which correlated
negatively with all other variables, except for security and accessibility. This finding
concurred with the reliability coefficient correlation test results as discussed above.
Hence, the implication for service quality following reform (see table 5.9b), is that; if the
availability of services increases, time and costs involved in accessing services will
decrease; and moreover, any loopholes in the grievance procedures adopted by the
incumbent operator, and obstacles impeding prompt response to customer grievances
will also be reduced; while both the security and accessibility of services will be
increased.
Table 5.10 (a) KMO and Bartlett’s test of sphericity on service quality before corporatization
Table 5.10 (b) KMO and Bartlett’s test of sphericity on service quality after corporatization
Kaiser-Meyer-Olkin Measure of Sampling Adequacy
.574 Kaiser-Meyer-Olkin Measure of Sampling Adequacy
.5
Bartlett's Test of Sphericity
Approx. Chi-Square
307.607 Bartlett's Test of Sphericity
Approx. Chi-Square
352.491
Df 21 Df 21 Sig. .000 Sig. .000
The Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy and Bartlett’s test of
sphericity have an overall KMO measure of 0.574 before corporatization (see table
5.10(a)) and 0.5 after corporation (see table 5.10(b)). Both these values have met the
acceptable value of 0.5 as recommended by Kaiser (cited in Field, 2005) for a
satisfactory factor analysis to proceed. Moreover, the Bartlett’s test of sphericity for
service quality before and after corporatization were also indicated to be significant,
both with a value of .000, showing an associated probability which is less than 0.05.
140
This means that the correlation matrix in both analyses is not an identity matrix, and
therefore factor analysis is appropriate.
The average value of the communalities, as displayed in table 5.11(a) and Table 5.11(b)
for period before and after corporatization were 0.739 (i.e. 5.179 / 7) and 0.877 (i.e.
6.145 / 7) respectively. Based on Kaiser’s criterion of acceptability (which is at the value
of 0.7 and 0.8), these are acceptable.
Table 5:11 (a) Communalities on service quality before corporatization
Table 5:11 (b) Communalities on service quality after corporatization
Initial Extraction Initial Extraction Time factor 1.000 .758 Time factor 1.000 .916 Cost factor 1.000 .893 Cost factor 1.000 .914 Grievance procedure intact 1.000 .499 Grievance procedure intact 1.000 .814 Prompt response to Grievance
1.000 .677 Prompt response to Grievance
1.000 .889
Security 1.000 .801 Security 1.000 .826 Service accessibility 1.000 .817 Service accessibility 1.000 .876 Service availability 1.000 .734 Service availability 1.000 .910
Extraction Method: Principal Component Analysis Extraction Method: Principal Component Analysis.
Furthermore, factor analysis using PCA, had extracted three significant factors with
eigenvalues156 >1.0, which together had accounted for more than 73 percent Total
Variance Explained (i.e. factor 1=39.441%, factor 2=18.471%, and factor 3=16.082%)
among the inter-correlations of the constructs for service quality before corporatization
(see table 5.12(a)).
Table 5.12 (a) Total Variance Explained for service quality before corporatization
Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings
Total % of
Variance Cumulative % Total % of
Variance Cumulative % Total % of Variance Cumulative
% 1 2.761 39.441 39.441 2.761 39.441 39.441 1.931 27.583 27.583 2 1.293 18.471 57.912 1.293 18.471 57.912 1.704 24.347 51.930 3 1.126 16.082 73.994 1.126 16.082 73.994 1.544 22.064 73.994 4 .693 9.897 83.891 5 .509 7.275 91.166 6 .409 5.848 97.014 7 .209 2.986 100.000
Extraction Method: Principal Component Analysis.
156 “Eigenvalues is a term most commonly reported in factor analysis, and are calculated and used to decide how many factors to extract in the overall factor analysis” Brown, J.D (2001), University of Hawaii, p.15.
141
Similarly, after reform (refer to table 5.12(b)), four significant factors157 with
eigenvalues >1.0 were extracted and together they had accounted for more than 87
percent Total Variance Explained among the inter-correlations of the constructs.
Table 5.12 (b) Total Variance Explained for service quality after corporatization
Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings
Total % of Variance Cumulative % Total % of
Variance Cumulative % Total % of Variance Cumulative
% 1 2.389 34.128 34.128 2.389 34.128 34.128 1.737 24.808 24.808 2 1.617 23.106 57.235 1.617 23.106 57.235 1.690 24.148 48.956
3 1.096 15.656 72.891 1.096 15.656 72.891 1.487 21.247 70.203 4 1.042 14.887 87.778 1.042 14.887 87.778 1.230 17.575 87.778 5 .411 5.865 93.643 6 .239 3.416 97.060 7 .206 2.940 100.000
Extraction Method: Principal Component Analysis.
Factor loadings illustrated in table 5.13(a) showed that for the constructs prior to reform,
three items have factor loadings greater than 0.5 on factor 1, two items on factor 2 and 2
on factor three. Similarly, factor loadings after reform (see table 5.13(b)) showed that
two items have factor loading on factor 1, two items on factor 2, two items on factor 3
and one item on factor 4.
Table 5.13 (b) Factor analysis: Rotated component matrix for service quality after corporatization
Component
1 2 3 4 Service accessibility
.900 0.00 0.00 .238
Grievance procedure intact .755 .253 .357 -.230
Prompt response to grievance .215 .910 0.00 -.109
Security .496 .592 -.172 .447 Cost factor .129 -.117 .940 0.00 Time factor -.214 .656 .661 0.00 Service availability 0.00 0.00 0.00 .951
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 6 iterations.
Extaction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 4 iterations.
157 The four factors include factor 1 which has accounted for 34.128 percentage of variance, factor 2 with a total of 23.106 percent of variance, factor 3 with 15.656 percent of variance and factor 4 with 14.887 percent variance.
Table 5.13 (a) Factor analysis: Rotated component matrix for service quality before corporatization
Component
1
2
3 Cost factor .883 -.220 .255 Time factor .805 .322 .00 Grievance procedure
intact .525 .273 .385
Service accessibility .00 .879 .189 Service availability .422 .745 .00 Security .00 .00 .893 Prompt response to
grievances .192 .386 .701
142
This implies that the data used in both cases (i.e. before and after corporatization) are
multidimensional, and therefore do not seemingly measure the same latent construct. For
instance, for service quality before corporatization, cost, time and grievance procedure
in factor 1 measured the same latent construct, while service accessibility and
availability in factor 2 measured the same latent construct, and security and prompt
response to grievance measured the same latent construct. The same also applies to case
2 (after corporatization) whereby the data are multidimensional. Moreover, the fact that
all variable items in both cases (before and after corporatization) have factor loadings
greater than 0.5 in their expected factors, and less than 0.5 in others, demonstrated that
constructs are valid.
(b) Customer satisfaction (before and after corporatization)
According to the descriptive statistics exhibited in table 5.14(a), all nine variable-items
used in the analysis have significant influence on the level of customer satisfaction prior
to reform, with all having mean values >3.0 except for friendly & helpful staff with
mean value of 2.9133.
Table: 5.14(a) Inter-Item correlation matrix table on customer satisfaction before
corporatization
Variable
Mea
n
Stan
dard
D
evia
tion
Del
iver
y tim
e sp
an
Post
al
char
ges
Ass
ocia
ted
cost
s fo
r ac
cess
Frie
ndly
/hel
pfu
l sta
ff A
war
enes
s of
grie
vanc
e pr
oced
ures
Pr
ompt
re
spon
se to
gr
ieva
nce
Tim
ely
deliv
ery
Secu
rity
Tech
nolo
gy
Delivery time span 3.6533 .93397 1.000
Postal charges 3.4600 .95278 .369 1.000
Access costs 3.7600 .96711 .286 .572 1.000
Friendly/helpful staff 2.9133 1.06775 .124 .059 .324 1.000
Awareness of griev procedur 3.8000 .99664 .386 .225 .416 .488 1.000
Prompt resp to griev 3.8333 .93706 .509 .244 .511 .482 .654 1.000
Timely delivery 3.7533 1.11690 .548 .271 .622 .246 .383 .647 1.000
Security 3.7533 .89695 .210 .181 .148 .216 .200 .326 .354 1.000
Technology 3.5667 1.11978 .452 .220 .306 .530 .571 .634 .445 .394 1.000
143
Table: 5.14(b) Inter-Item correlation matrix table on customer satisfaction after corporatization
Variable
Mea
n
Stan
dard
D
evia
tion
Del
iver
y tim
e sp
an
Post
al
char
ges
Ass
ocia
ted
cost
s fo
r ac
cess
Frie
ndly
/hel
pfu
l sta
ff A
war
enes
s of
grie
vanc
e pr
oced
ures
Pr
ompt
re
spon
se to
gr
ieva
nce
Tim
ely
deliv
ery
Secu
rity
Tech
nolo
gy
Delivery time span
2.5867
1.03746 1.000
Postal charges 2.6400 .89202 .426 1.000
Access costs 2.5733 1.12534 .434 .548 1.000
Friendly/helpful staff 2.3800 1.12727 .497 .411 .425 1.000
Awareness of griev procedur 3.3400 1.14006 .341 .464 .417 .505 1.000
Prompt resp to griev 3.1933 1.08496 .584 .509 .541 .587 .733 1.000
Timely delivery 2.8400 1.20447 .554 .415 .643 .495 .514 .753 1.000
Security 3.4667 1.03409 .406 .482 .524 .601 .605 .703 .588 1.000
Technology 2.9867 1.11720 .568 .460 .252 .452 .420 .506 .527 .441 1.000
In contrast, following reform, only three variable-items (refer to table 5.14(b)) were
indicated to have greater influence on the level of customer satisfaction. These are
security (mean value = 3.4667), awareness of grievance of procedure (mean value =
3.3400), and prompt response to grievance (mean value = 3.1933). In spite of this, both
inter-item correlation matrix tables (refer to table 5.14(a) and table 5.14(b)) have
indicated positive correlation between each variable with other variables. This confirms
the reliability test on the same as discussed above, and therefore deemed appropriate for
all variable-items to be retained for factoring.
Table 5.15 (a) KMO and Bartlett’s test of
sphericity on customer satisfaction before corporatization
Table 5.15 (b) KMO and Bartlett’s test of sphericity on customer satisfaction after corporatization
Kaiser-Meyer-Olkin Measure of Sampling Adequacy
.838 Kaiser-Meyer-Olkin Measure of Sampling Adequacy
.734
Bartlett's Test of Sphericity
Approx. Chi-Square
769.903 Bartlett's
Test of Sphericity
Approx. Chi-Square
602.113
Df 36 Df 36 Sig. .000 Sig. .000
The KMO and Bartlett’s test of sphericity for customer satisfaction before and after
corporatization, as shown in table 5.15(a) and table 5.15(b), had an overall KMO
measure of 0.838 and 0.734 respectively, both of which were greater than alpha value
0.5, thus confirm the acceptability for factoring.
144
Likewise, the Bartlett’s tests of sphericity for customer satisfaction before and after
corporatization were also indicated to be significant with alpha value of .000
respectively, showing an associated probability which is less than 0.05. This disconfirms
the null hypotheses that the original correlation matrix is an identity matrix, thus
factoring is appropriate.
Furthermore, the average value of communalities for customer satisfaction before and
after corporatization (see table 5.16(a) and table 5.16 (b)) was 0.5677 and 0.5995
respectively. Again based on Kaiser’s criterion of acceptability, this is acceptable taking
into account the sample size of 150 and relatively fewer number of variables used.
Table 5.16 (a) Communalities on customer satisfaction before corporatization
Table 5.16(b) Communalities on customer satisfaction after corporatization
Initial Extraction Initial Extraction Delivery time span 1.000 .497 Delivery time span 1.000 .486 Postal charges 1.000 .471 Postal charges 1.000 .674 Access-related costs 1.000 .498 Access-related costs 1.000 .662 Friendly/helpful 1.000 .539 Friendly/helpful 1.000 .627 Awareness of grievance procedures
1.000 .555 Awareness of grievance procedures
1.000 .614
Prompt response to grievance 1.000 .785
Prompt response to grievance 1.000 .759
Timely delivery 1.000 .672 Timely delivery 1.000 .638 Security 1.000 .638 Security 1.000 .231 Technology 1.000 .455 Technology 1.000 .705
Extraction Method: Principal Component Analysis. Extraction Method: Principal Component Analysis.
The communalities of variables before corporatization, as illustrated in table 5.16(a),
shows that prompt response to grievance have accounted for more than 78 percent of
variance, while timely delivery and security more than 60 percent of variances,
friendly/helpful staff and awareness of grievance procedure for more than 50 percent
variances and the remaining four variables accounted for more than 45 percent
variances. In comparison with the communalities of the same variables after
corporatization (see table 5.16(b)), the results showed that prompt response to grievance
has accounted for 75 percent of variance followed by technology with 70 percent
variance. Both Postal charges and access-associated costs have accounted for more than
65 percent variance, while friendly/helpful staff, timely delivery and awareness of
145
grievance procedure have explained for more than 60 percent variances, span of delivery
time 48 percent and finally security with the lowest variance of 23 percent.
The total variance explained output for customer satisfaction before corporatization, as
illustrated in Table 5.17(a), shows that only one factor with eigenvalue > 1 was
extracted, and has accounted for 56.7 percent variance among the inter-correlations of
the total variable items. Nothing can be said much about the loading of each variable as
all are heavily and positively loaded onto the only extracted component as indicated in
table 5.18(a). Furthermore, since only one component is extracted, the solution cannot
be rotated. This is a case showing that data is unidimensional and is measuring into the
same latent construct which could best be labeled as service efficiency.
Table 5.17(a) Total variance explained before corporatization
Component Initial Eigenvalues Extraction Sums of Squared Loadings
Total % of Variance Cumulative % Total % of Variance Cumulative % 1 5.109 56.762 56.762 5.109 56.762 56.762 2 .850 9.440 66.203 3 .747 8.297 74.500 4 .638 7.085 81.585 5 .540 6.005 87.591 6 .407 4.526 92.117 7 .327 3.637 95.754 8 .247 2.744 98.497 9 .135 1.503 100.000
Extraction Method: Principal Component Analysis.
Table 5.17(b) Total variance explained after corporatization
Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings
Total % of
Variance Cumulative % Total % of
Variance Cumulative % Total % of Variance Cumulative
% 1 4.136 45.950 45.950 4.136 45.950 45.950 2.963 32.920 32.920 2 1.261 14.012 59.962 1.261 14.012 59.962 2.434 27.042 59.962 3 .937 10.411 70.374 4 .807 8.966 79.339 5 .666 7.404 86.743 6 .446 4.957 91.700 7 .334 3.713 95.413 8 .254 2.824 98.236 9 .159 1.764 100.000
Extraction Method: Principal Component Analysis.
146
The total variance explained output after corporatization, however, has shown that two
components with eigenvalues > 1.0 have been extracted, and together they have
accounted for 59.9 percent of the total variance explained among the variable items
(refer to Table 5:17(b)). Since two components with eigenvalues >1.0 are extracted, the
component matrix solutions (as exhibited on Table 5.18(b)) were able to be rotated to
find factor loadings.
Table 5.18(a) Component Matrix for customer satisfaction before corporatization
Table 5.18(b) Component Matrix for customer satisfaction after corporatization
Component Component
1
1 2 Prompt handling of grievance
.886 Prompt handling of grievance
.859 -.144
Timely delivery .819 Technology .767 -.341
Security .798 Timely delivery .766 .226
Awareness of grievance procedure
.745 Awareness of grievance procedure
.738 -.263
Friendly/helpful staff .734 Assoc. cost for access .693 .426
Assoc. cost for access .706 Delivery time span .649 .256
Delivery time span .705 Friendly/helpful staff .575 -.544
Postal charges .686 Security .463 -.132
Technology .674 Postal charges .480 .666
Extraction Method: Principal Component Analysis. Extraction Method: Principal Component Analysis. a 1 components extracted. a 2 components extracted.
Table 5.19 Rotated Component matrix for customer satisfaction after
corporatization
Component
1 2
Technology .808 .227 Friendly/helpful staff .790 Prompt handling of grievance .753 .438 Awareness of grievance procedure .736 .269 Security .440 .194 Postal charges .819 Assoc cost for access .261 .770 Timely delivery .445 .663 Delivery time span .336 .611
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a Rotation converged in 3 iterations.
147
The factor loadings as exhibited in table 5.19 indicated heavy loadings on component 1
from technology, friendly/helpful staff, promptness in handling grievance and awareness
of grievance procedure, all with eigenvalues > 0.5. Heavy factor loadings in component
2, with eigenvalues >0.5, were indicated from postal charges, access-related costs,
timely delivery and delivery time span.
This output showed that the data is bi-dimensional, measuring into two different latent
construct which could be labeled as service and efficiency for the first construct, and
time and costs for the second construct. This is also reflected in the component matrix
output illustrated in table 5.18b. However, since cost and time implies efficiency, it
could be said that component 2 is simply a sub-component of component 1, thus agreed
with the one-dimensional data as discussed in the previous case (i.e. before
corporatization).
5.7 Hypotheses testing and outputs
5.7.1 Hypothesis one test output
H1: ‘The customer satisfaction is positively related to service quality before and after
corporatization’.
The correlation test was applied to prove if there is a positive relationship between
service quality and customer satisfaction before corporatization and also after
corporatization.
Table 5.20 H1: Correlation test outputs before and after corporatization (a) Before corporatization (b) After corporatization SQ Before
corporatization CS Before
corporatization
SQ After corporatization
CS After corporatization
SQ Before corporatization
Pearson Correlation
1
.223**
SQ after corporatization
Pearson Correlation
1
.566** Sig. (2-tailed) .006 Sig. (2-tailed) .006 N 150 N 150 150 CS Before corporatization
Pearson Correlation
.223 1 CS after corporatization
Pearson Correlation
.223 1
Sig. (1-tailed) .006 Sig. (1-tailed) .000 N 150 150 N 150 150
**Correlation is significant at the 0.01 level (2-tailed). **Correlation is significant at the 0.01 level (2-tailed).
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The correlation test output as displayed in table 5.20a indicated a significant positive
relationship between service quality and customer satisfaction before corporatization
(r=0.223, p<0.05). Likewise the correlation test output shown on table 5.20 (b) also
indicated a significant positive relationship between service quality and customer
satisfaction after corporatization (r=.566, p<0.05). Both these results statistically
confirm that there is a significant positive relationship between service quality and
customer satisfaction both before and after corporatization.
5.7.2 Hypothesis two test output
H2: ‘The customer satisfaction is dependent on service quality before corporatization
(and after corporatization).
Table 5.21 H2: Chi-square test outputs before and after corporatization
(a) Before corporatization (b) After corporatization Value Df Asymp.Sig (2-
sided)
Value Df Asymp.Sig (2-
sided)
Pearson Chi-square
487.577 405 .003 Pearson Chi-square
985.030 392 .000
Likelihood Ratio 317.410 405 1.000 Likelihood Ratio 438.322 391 .049
Linear-by-Linear Association
7.443 1 .006 Linear-by-Linear Association
47.792 1 .000
No of valid cases 150 No of valid cases
150
Chi-square test was applied to test if customer satisfaction is dependent on service
quality before corporatization and after corporatization. The independent variable is
service quality and the dependent variable is customer satisfaction.
The chi-square test results exhibited in table 5.21(a) & table 5.21(b) showed that the
dependency of customer satisfaction on service quality is significant both before and
after corporatization. For instance, the analysis output for period before corporatization
as illustrated in table 5.21(a) showed that the Pearson chi-square with 405 degree of
freedom has a value of 487.577 with a significance of .003 (p=.003) which is <0.05.
This result confirms that prior to corporatization the level of customer satisfaction was
dependent on service quality. The same is also confirmed for period following reform as
indicated by the output given in table 5.21(b) which showed that Pearson Chi-square
with 391 degree of freedom has a p-value of 985.030 with a significance of .000 which
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is <0.05. Hence, based on these statistical results, it could be confidently said that
customer satisfaction is dependent on service quality after reform.
5.7.3 Hypothesis three test output
H3: ‘The level of customer satisfaction in postal service differs before corporatization
and after corporatization.’
Table 5.22 H3: Paired samples t-test output on customer satisfaction
Paired difference
Mean
Std.Deviation
Std. Error Mean
95% confidence interval of the difference
Lower Upper t df Sig.(2-tailed)
Pair 1 CS b4 CS after
-.72074 1.02020 .08330 -.88534 -.55614 -8.652 149 .000
Paired Samples t-test was used to test the above hypothesis and the output as exhibited
in table 5.22 showed that t (149) =8.65, p=.000. The probability of .000 is less than <.05
thus negating the null hypothesis, and concluded that there is an improvement in the
level of customer satisfaction following the corporatization of Solomon Islands postal
services.
Note that this statistical conclusion confirms the descriptive analysis findings discussed
in section 5.5.2 above that there is an improvement in the level of customer satisfaction
following reform.
5.7.4 Hypothesis four test output
H4: ‘The quality of Solomon Islands postal service differs before and after
corporatization’.
Table 5.23 H4: Paired samples t-test output on service quality
Paired difference
Mean
Std.Deviation
Std. Error
Mean
95% confidence interval
of the difference
Lower Upper t df Sig.(2-
tailed)
Pair 1 SQ b4
SQ after
-.36476 .98482 .08041 -.52365 -.20587 -4.536 149 .000
150
Paired samples t-test was also used to test the above hypothesis, and the output as given
in the table 5.23 revealed that service quality before corporatization differs from that
after corporatization.
The probability of .000 which is <.05 indicated that service quality has improved
significantly following the corporatization of postal services as indicated by t (149) =
4.53, p = .000). This finding statistically confirms the findings discussed in section 5.5.1
that the quality of postal service has improved following the corporatization of SIDPS.
5.8 Discussion on the findings
The general findings of this study have confirmed to certain degrees the assumption that
transformation of an organization or a corporate entity often leads to improvement in the
intended outcomes. The intended outcomes as in this case study refer to the
improvement in postal service quality and the level of customer satisfaction.
The statistical findings discussed in section 5.4 and section 5.5 above have revealed that
the transformation of Solomon Islands postal service, through the process of
corporatization, has generally contributed to improvement in service quality and level of
customer satisfaction respectively.
This is confirmed by simple comparative analysis of the data collected on both variables
for the periods before and after corporatization, in which the analyses show general
improvements on both service quality and level of customer satisfaction following the
implementation of structural reform. Hypothesis 3 and hypothesis tests outputs (see
subsections 5.7.3 and section 5.7.4) have also confirmed these findings.
However, although such improvements may not be significantly overwhelming, it is
significant enough to say the least considering the impediments to efficiency of service
delivery that incumbent operator has to deal with. Proximity to postal facilities,
geographical features of island communities, and inadequate infrastructure are few
factors that have significant influence on the efficiency of postal service delivery and
subsequently, level of customer satisfaction.
151
The relatively high costs and time involved in accessing postal service, as revealed in the
statistical findings, are mainly attributed to those factors mentioned above.
In view of this, it is worth acknowledging the positive outcome which attributed mostly
to incumbent’s painful effort in delivering services that fulfil its customers’ needs and
expectations in spite of having to operate against all odds. As exemplified through the
case study of Solomon Islands Postal Corporation, the structural reform of SIDPS
through the process of corporatization, has given management the autonomy to
introduce and adopt commercial-oriented goals and initiatives that broadly focus on
improving (apart from other indicators such as profitability, product development and
productivity) service quality and customer satisfaction.
Furthermore, apart from fulfilling its universal service obligation, strong competition
from internet and parcel businesses and the desire to impart services with maximum
value at minimum cost as much as possible, are the driving force behind incumbent’s
effort to impart services that fulfil its customer expectations.
Finally, this study also confirmed the assumption that there is a positive relationship
between service quality and level of customer satisfaction. This study has statistically
proven that when quality of services improved, the level of customer satisfaction has
also improved. In other words, the level of customer satisfaction is dependent on service
quality. Hypothesis 1 and hypothesis 2 test outputs also confirmed this finding.
5.9 Success factors
In various UPU reports, three factors that have been highlighted as being the most
important ingredients for successful postal reforms are; favourable legal and regulatory
framework, government commitment, and the availability of outside funding. The
findings of this study reveals that the positive impact of corporatization of Solomon
Islands postal service as statistically proven and discussed in sections 5.5 and 5.6 above
is attributed to a number of success factors. The significant ones that have been
identified include;
152
a. establishment of a legal framework, which provides clear legal boundary
within which the corporation operates
b. clear vision, mission and strategic aim and objectives which set a
benchmark of performance that the corporation and all its sub-
components strives to achieve
c. strong management and leadership support which empowered the
members of the corporation to continue to strive for better service
performance in spite of being faced with a number of social and
economical dilemmas
d. strong emphasis on technical and human capacity building
e. diversification (business) strategy
Without these success factors, the SIPC would have demised. In spite of the social and
economic turmoil experienced in the country over the last decade, the corporation
painfully continued to pursue its obligation of providing basic postal service access to
the nation.
According to UPU reports, establishing an effective legal and regulatory framework is
critical not only in demarcating the role of management and the regulator, but also in
regulating the provision of postal services in order to achieve its purpose. This could not
have been easily achieved without government’s commitment and ongoing support and
guidance in the transformation process.
Furthermore, strengthening of human and institutional capacity to manage the affairs of
the corporatized postal entity, and to deliver, maintain and sustain quality postal services
that satisfies customers is imperative to the success of postal reform and its viability.
According to Barker (2004)158, strong leadership and introduction of performance-based
culture in all levels of organization is one of the factors that has contributed to the
success of Australian Post, which has been named as one of the world’s top performing
post. In the case of SIPC, strong management and leadership support has empowered its
employees to develop commitment towards achieving effective and sustainable
158 An integrated approach to business transformation; Pushing envelope, The postal project volume by David H. Barker, Australia Post.
153
change159 which is reflected in the sustainability of its business operations in spite being
faced with a number of challenges. Such success is also attributed to the significant
support that came from the developing partners, and particularly from UPU, in building
and strengthening the human and institutional capacity of the Solomon Islands Postal
Corporation.
Finally, to depend entirely on letter mail and parcels is not sufficient to sustain the
business operation and services of the corporation. Therefore, another success factor that
contributes to the sustainability of Solomon Islands postal reform is the adoption of
business strategies that focus on diversifying products and services to meet its customer
needs.
Over the last two decades, the corporation has diversified its services and products to
include philatelic, retailing, reposting of letter mails (especially those from Australia),
financial services, and post banking. In 2005 the corporation has established business
partnership with ANZ Bank (SI) to provide post banking through its postal network
throughout the country.
5.10 Challenges and barriers to the efficiency of postal service
delivery in Solomon Islands
Like other developing countries, Solomon Islands postal service has faced a number of
challenges in its endeavour to provide basic postal service access to all citizens in the
country or abroad irrespective of location.
Some of the major challenges that this study has identified include;
1. the challenge to continuously improve, maintain and provide quality postal service
2. the challenge to provide regular basic postal access to all island communities
throughout the country, irrespective of their location, at affordable prices; and at
reduced costs to the incumbent
159 This change includes changing from public service culture to commercial culture.
154
Several factors are identified to have given rise to challenge 1 and challenge 2
mentioned above. First, the chronic financial difficulties that the incumbent have faced
with regard to its operational costs. Following its corporatization the national
government has withdrawn its financial support for the service. The situation worsened
following the collapse of the economy at the turn of the century due to the social unrest
which led to the closure of major business investments and repatriation of most
expatriates and foreign investors who were major customers of the corporation. It would
have helped if government could provide capital in its initial phase of reform towards its
long term development, rather than leaving the newly corporatized entity to sustain
itself. Failure to do this implied little seriousness on government’s part in taking full
ownership of reform.
Secondly, inadequate transportation and telecommunication infrastructures, which are
very much needed to provide logistic support. Inadequate and poor transportation
services, does not only severely hindered the drive for economic prosperity, but have
also hampered incumbent operator’s effort in striving to fulfil its universal service
obligation (USO) in providing basic postal service access to all communities and
citizens of the nation.
Transportation infrastructure in Solomon Islands depends heavily on shipping, because
road networks on larger islands and the internal air services are limited. The findings of
this study have established that both air and marine transportation to inter-island
destinations are inadequate and unreliable160. Furthermore, the freighting priority on air
transport, for instance, is more in favour of the travelling passengers. In view of this, the
possibility of mailbags reaching their destinations within the delivery time span is very
much dependent on the loadings of respective scheduled flights.
In addition, wharves, roads (including feeder roads) and bridges have deteriorated to
such an extent that now requires major rehabilitation. Hence, as long as the inadequacy
and unreliability of these logistic infrastructures and services remain, the quality of
160 Country Infrastructure Reports: Solomon Islands – Economic and development goals; retrieved on website: http://www.unescap.org/TTD/ppp/reports/SolomonIslands_5June2007.pdf on 13/04/09.
155
postal service will always be an issue, especially for customers located in the provincial
centres and those living beyond the provincial suburban centres.
Third factor relates to the geographical and environmental features of the country, which
exemplified through wider dispersion of island communities served by the postal
incumbent, and their proneness to natural disaster and bad weather. Bad weather
conditions affect the efficiency of postal service delivery as it directly affected the
schedules of marine and air transportations, and also road accessibility to rural
communities.
All these three factors mentioned above have significant bearing on the challenges that
the incumbent operator has to deal with, in its effort to provide and maintain regular
quality postal service to the public at large.
3. the challenge to provide maximum security of postal items
4. the challenge involved in acquiring and maintaining appropriate technologies to
ensure provision of goods and quality services.
Ensuring maximum security on postal services is major a challenge, as this requires
appropriate advanced technologies and tracking system to be in place. The inability of
the incumbent to guarantee maximum security on its mail service attributed significantly
to inadequate facilities in all its postal outlets to monitor and maintain the flow of mails.
In spite of this, the incumbent is doing its best with whatever resources it has available at
its disposal to provide a service that fulfils its customer’s expectation.
5. The challenges imposed by the advent of internet, facsimile, GSM-Text messages
An increasingly growing challenge faced by the Solomon Islands Postal Corporation is
the introduction of ICT and internet services by private operators; and the nation-wide
access to email services under UNDP “peoplefirst network”161 project, which enable
communication links to communities throughout the country.
161 Peoplefirst network is a project funded under UNDP which aims to improve communication link throughout the country. The project has set up a number of Email facilities link to its network throughout the country.
156
Not only does the introduction of ICT and internet services threaten the postal letter mail
service162, but it also threatens to take the “cream” of the profitable mail away through
the concentration of their operations in urban and suburban areas where business and
industrial sectors are centrally located; thus leaving the island’s rural and remote areas to
the postal incumbent to serve.
In addition to the challenges discussed above, this study has also identified through its
opinion survey, some factors (see table 5.24) which are barriers to sustainable reform as
far as improving the postal service quality in Solomon Islands and level of customer
satisfaction is concerned.
Respondents to the general survey which was introduced earlier in this chapter have
been asked to evaluate each of these factors, based on their experience with the postal
service, on a scale of 1 to 5. The lower number represented “not a major barrier’ (less
significant) and higher number represented ‘major barrier’ (significant).
Table: 5.24: Challenges and barriers
Mean Standard Deviation
Analysis no.
Social, economic and political institutions and processes are not well developed 3.6467 .7438 150
Bureaucracy (inflexible) 3.5333 .68215 150
Political changes and interference 3.7533 .59004 150
Lack of capital and infrastructure 3.9200 .49859 150
Untrained staff 3.7267 .64399 150
Inability to shift from old organization culture to new values 3.7200 .63584 150
Lack of management support 3.6867 .62538 150
Lack of organizational redesign appropriate to corporatization 3.6733 .60752 150
Lack of consultation with stakeholders 3.5867 .64700 150
External pressure (especially from donor countries) 3.3800 .68218 150
Lack of leadership 3.7400 .63911 150
Inappropriate systems and processes of reform that does not fit in with countries context 3.5733 .68880 150
Haunting fear of redundancy (IR issues) 3.4400 .74618 150
These factors include inadequate and not well developed social, economic and political
structure and processes, bureaucracy, political changes and interference, lack of capital
and infrastructure, untrained staff, inability to shift from old organization culture to new
values, lack of management support, lack of organizational redesign appropriate to
162 More customers, especially in urban and suburban areas, preferred to do business on internet and send messages.
157
corporatization, lack of consultation with stakeholders, external pressures, lack of
leadership, inappropriate systems and processes of reform that does not fit in with
country’s context, and the haunting fear of redundancy.
An average mean score was calculated for each of these barriers, with lower average
implies relatively low significance, and higher average score represents a relatively high
significance. As exhibited in Table 5.24, the calculated mean values for all factors were
above an average score of 3.
This implies high agreement that all these factors have posed significant barriers, not
only to the successful implementation of reform, but also to the sustainability of the
postal service reform in Solomon Islands. The corresponding standard deviations for all
factors were less <1.0, which imply less variances in the general opinions on these
factors as being significant barriers to the successful implementation of postal reform in
Solomon Islands and its sustainability.
In view of these challenges, it is not proper in the true sense of the subject, to assume
that Solomon Islands Postal Corporation is capable, without strong support from the
national government, of meeting and addressing these challenges alone due to a number
of underlying factors, some of which have already been discussed under the above
mentioned challenges, which create barriers to sustainable reform. Walsh (2001)
accentuated that, while the need for postal reform is necessary, the institutional capacity
to support and manage the process in many developing countries is weak.
In the report, he identified lack of fund to sustain reform over time, and inadequate
infrastructure as two major constraints to effective and sustainable reform. An effective
reform enhances postal operator’s capability to realise benefits from economic
developments (World Bank, 1997; Walsh, 2001). While financial support from outside
is beneficial for both the corporatized entity and the economy, government need to take
responsibility in overseeing that such reform is sustainable in the long run by transfusing
capital towards long term developments. Such capital support will help corporatized
postal corporation to increase its capacity to sustain and maximize economic benefits of
reform.
158
In spite of this, Walsh (2001) warned that transformed postal corporation’s success in
maximizing chances for sustainable improvement is not only determined by its
efficiency, but also by the level and efficiency of the national infrastructures that are
critical in providing logistic support for efficient postal delivery services.
In view of this, both sectoral reform and a better delivery of postal infrastructure
services are essential. To achieve this, a reassessment of principal/agent relationship is
required in order establish a new incentive structure which clarifies the accountabilities
of both parties (World Bank, 1997; Walsh, 2001); and for such incentive structure to be
successful both parties must be committed to fulfil their responsibilities. In addition,
Walsh (2001) highlighted that an effective reform must create an institutional and
political context which guarantees that the resources of the posts are well managed and
that managers are encouraged to do the right thing.
In spite of all these, it is worth acknowledging that the Solomon Islands Postal
Corporation has come a long way, and has learned and grown through its experiences
since its inception in 1997. In spite of difficulties and problems it encountered after its
inceptions, the corporation continues to improve and work hard to overcome these
problems and bring it to where it is today.
5.10 Conclusion
This chapter dwells on the analyses and findings of the empirical study undertaken to
gauge whether transformation of Solomon Islands Department of Postal Service in 1997,
through the process of corporatization, has led to improvement in postal service quality
and level of customer satisfaction. The statistical findings discussed in the discourse
were based on a general opinion survey in which 150 participants from all provinces of
Solomon Islands participated. The findings revealed that, like many developing island
countries, Solomon Islands Postal Corporation has faced a number of problems that
influence the efficiency of its service delivery.
Untimely delivery, loss of items, lack of accessibility to services, high access-related
costs and time factors, delay in responding to customer grievance are few problems
159
highlighted in this study. But to say that the incumbent is purely responsible for
inefficient service delivery would be unfair because such inefficiency is attributed to a
combination of factors significant of which include proximity of postal facilities to
customers and inadequate infrastructure which provides critical logistic support in the
efficiency of postal delivery service.
In spite of all these problems, the findings of this study have statistically proven that
corporatization has led to general improvement in the level of service quality and
customer satisfaction. These findings are based on comparative analyses of the collected
data pertaining to service quality and customer satisfaction prior to, and after
corporatization of Solomon Islands postal service, using SPSS analytical tests which
include descriptive, paired sample t-tests and chi-square testing. Paired sample T-test
confirmed the descriptive analyses which statistically revealed improvements in service
quality and level of customer satisfaction following reforms, while Chi-square tests
confirmed the dependency of customer satisfaction on service quality.
These improvements were attributed to a number of factors which include strong
leadership and management support in directing and empowering the members of the
corporation towards achieving it mission and goals, adoption of business strategy that
focuses on diversifying its products and services, and strong emphasis on institutional
and human capacity building with external support from the development partners.
Major challenges faced by the corporation are incorporated in two major factors which
include continuous improvement and provision of quality postal service at affordable
cost, to both customers and the incumbent operator; and introduction of ICT and
internet. A combination of factors which include economic downturn, inadequate
transportation infrastructures, remoteness of the island communities and their proneness
to bad weather conditions, and lack of appropriate technologies have intensified the
challenges faced by the corporation. In view of this, the incumbent on its own will not
be able to address these challenges without government adequate support.
According to World Bank report (1997) and Walsh (2001), an effective reform is one
that enhances the transformed postal corporation’s capacity to realize economic benefits;
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and to achieve this, both sectoral reform and provision of adequate essential
infrastructures, to facilitate and support an efficient postal delivery service, is essential.
This requires the reassessment of principal/agent relationship in order to establish the
accountabilities of both parties. Therefore in order for transformed postal corporation to
attain maximum reform benefits, both parties must be committed in fulfilling their
responsibilities. While the corporation and its management focused their attention on
doing the right thing to attained economic benefits that will subsequently impact
positively on improved service quality and sustainability of the corporation, state on its
part should also take the responsibility of providing institutional support that would
enhance corporation’s capability to provide efficient postal delivery service, and to
maximize economic benefits from its business developments.
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Chapter 6
Summary and conclusion
6.1 Introduction
This chapter draws to conclusion the major discussions and findings of this study. It
provides a summary of the important issues discussed in each of the preceding chapters,
and major empirical findings as per reform of Solomon Islands Postal Services in
relation to the major objectives and hypotheses set forth in chapter 1. In the course of
discussion, major objectives of the study will be revisited to determine whether they
have been successfully achieved, and the implications on the government policies and
the lessons learned. Finally, drawn from these discussions and findings, major
recommendations and areas for future research will be highlighted.
6.2 Summary of discussions
The study on the impact of corporatization on postal service quality and customer
satisfaction begins with an introductory background given in chapter 1, which sets the
focus on the introduction of organization changes within government machinery through
regulatory reform that led to change in the governance structure, through the process of
corporatization. Reforms of this genre are components of a wider spectrum of reforms,
consolidated under public sector structural reforms; and are mostly applied to
infrastructures, telecommunication, public utilities, transportation and health sectors.
The strategic focus of such reforms is to improve their efficiency and maximize profits
that subsequently will lead to economic growth and sustainability. However, for the
transformed service organizations to achieve this end, provision of service quality that
satisfies customers is of paramount importance. Therefore, effective reform is one that
enhances the capability of the transformed service organization to improve and provide
service quality that meets or supersedes customer’s expectations.
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Examples of transformed public-regulated service organizations (for instance in health,
transportation and telecommunication sectors) that have either succeeded or somewhat
succeeded in improving service quality following the implementation of reforms were
highlighted. From these examples, the discussion draws focus to the general assumption
that reform (due to competition), through the process of corporatization, often leads to
improvement in service quality and customer satisfaction. This assumption lays the
foundation and purpose for this study and why this study is important. While the given
examples have proven the assumption true in their context, this study seeks to examine
whether the assumption is true in the context of postal sector reform, as exemplified
through the case study of Solomon Islands Postal Corporation.
Hence the aim of this study is to examine whether corporatization of Solomon Islands
Postal Service has contributed towards achieving an efficient service delivery network
that is characterized by high service quality and, that which fulfils customer satisfaction.
Later sections of chapter 1 include a brief introduction to research methodologies,
chapter organization, definitional issues on terms ‘corporatization’, ‘service quality’ and
‘customer satisfaction; and the delimitations pertain to the scope and assumptions of this
study.
Traditionally, the term ‘postal sector’ broadly encompassed any activities and services
related to letter mails and parcels and other related activities. Discussions in chapter 2
highlighted the important role that postal sector plays in the socio-economic
developments in many countries. A global perspective on the postal developments is
also provided; including an overview on the general performance of postal sectors in the
developing countries. The discussion on the latter highlighted some general weaknesses
that typify postal systems in many developing countries, and that have subsequently
contributed to their overall low performance output.
In spite of postal system’s long history, new developments which include the
introduction of advanced information and communication technologies (ICT) have
changed the postal sector environment, imposing high competition which threatens its
postal letter mail service.
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With the introduction of new information and communication technologies, customers’
expectations and preferences have also changed, increasing their demand for fast and
quality services. In view of this, many countries in both developed and developing
countries have responded to these changes by implementing regulatory reforms that
enable them to transform their postal sectors in the way that best suited their context.
Developed countries, for instance those of the European Union, have gone ahead to
liberalize their postal sectors, while many developing countries, including those in the
Pacific Island region, have involved only to the extent of modernizing their national
postal services through the process of corporatization and/or privatization.
Such regulatory reforms provide legal framework that enables incumbent operators to
pursue objectives which are commercial-oriented; and moreover implement initiatives
that intends to enhance their performance and meet customer’s changing needs and
expectations. These include improving the production processes to gain efficiencies, and
diversifying product/services to enhance their viability, since their core product (letter
mail) has greatly been threatened by the introduction of internet and advanced ICT.
Providing products/services that are perceived of having quality value, and fulfil
customers’ demands is critical for incumbent’s viability amidst competitive
environment.
Discussions in chapter 2 also provide a global perspective on the postal reforms, with
particular focus on the corporatization of public postal operators and postal
developments, in various regions around the world including; member countries of the
European Union, Caribbean region, African-Sahara region and the Asia-Pacific region.
In addition, research has revealed that there are examples of successful reforms that
reaped benefits which include efficient delivery service, profitability, high service
quality, high customer satisfaction, service accessibility, high mail volume, new
investment and value-added product developments. Such success and benefits justify the
assumption that transformed service organizations can thrive successfully in
competitively dynamic environment given the effective and adequate institutional
support to facilitate successful reform process.
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However, crucial to the economic growth and sustainability of postal service
organizations is the provision of service quality that satisfies customers. This led to
further discussions that recapped on service quality and customer satisfaction as
discussed in chapter 1; and the relationship between competition163, service quality and
customer satisfaction, and the assumption that transformation of postal administrations
will increase capability of the transformed postal corporation in improving and
providing postal service at a level of quality that is deemed acceptable to customers
satisfaction.
The importance of service quality is reflected in UPU’s efforts in providing training for
postal corporations and administrations in its member countries. Some successful cases,
particularly from countries in Asia Pacific region, whereby postal service quality were
indicated to be improved following their implementation of reforms, are highlighted in
the discussion.
Later section of chapter 2 briefly introduced Solomon Islands Postal Corporation and its
adopted strategic mission and quality/customer-oriented goals and objectives which
highlighted its intention to provide quality service that satisfies its customers. These
provide basis for an in-depth deliberation on postal reform in Solomon Islands as
dwelled on in chapter 4, and discussion on the empirical findings on the impact of such
reform on Solomon Islands Postal Corporation’s service quality and customer
satisfaction as discussed in chapter 5 respectively. Finally, the key assumption that
forms the basis of this study, and the research questions as highlighted in chapter 1, are
revisited; and the principal aims and objectives of the study, including the hypotheses
this study seeks to test are also listed and discussed.
Chapter 3 dwells on research methodology employed in this study, which include both
quantitative and qualitative research approach. Qualitative research involved consulting
secondary sources for information and data pertaining to the topic of this study, while
quantitative research involved the use of a questionnaire survey that focuses on the state
163 The transformation of public service organizations through regulatory reforms allows postal corporation to do business in competitive environment.
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of postal service quality and level of customer satisfaction before and after postal
reform.
The quantitative data was analysed using the SPSS analysis and test methods to establish
the impact of postal reform on service quality and level of customer satisfaction
respectively, and the relationship between service quality and customer satisfaction, and
its importance in successful business performance.
Chapter 4 of this study dwells on the Solomon Islands government’s role in the national
economic developments through its state-owned enterprises; and its initiatives in
implementing public sector structural adjustment program in response to challenges and
fiscal difficulties it has faced since it gained its independence from the British Colonial
Authority in 1978. A main component of the structural adjustment program (SAP) was
the improvement of economic and financial sector which was in accordance with its
commercialization and privatization policies.
This led to discussions on reform initiatives undertaken by the successive governments
in 1980s and 1990s. These included divestment of certain public holdings,
commercializing and corporatizing specified public-regulated service functions (e.g.
public utilities, national shipping service etc.), streamlining certain government services
pertaining to those provided by state-owned enterprises (SOE) and privatization of
portfolio companies (e.g. Government Supplies Ltd., and Government Printery Ltd) and
liquidating those SOEs which were not profitable. Part of the financial sector reform
under the successive governments in the 1990s focused on the improving and
strengthening SOE management and financial capacity with the support of the
development partners.
The Solomon Islands Department of Postal Service (SIDPS) was the latest government
function that undergone corporatization reform in the 1990s. However, since the
corporatization of Solomon Postal Services in 1997, no empirical research has been done
to assess its success in improving organization performance. While a broader spectrum
of analysis can be applied to assess the impact of postal service performance after
reform, this study narrows its performance analyses to service quality and customer
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satisfaction. These two aspects form the basis on which the main research questions and
objectives of this study are formulated. Hence, the main focus of this research is to
investigate whether the transformation of SIDPS through the process of corporatization
has contributed positively to the improvement of postal service quality and the level of
customer satisfaction.
Early writers (such as Olivers, 1980; Parasuraman et al, 1991; Christopher, 1998) have
highlighted two main concepts of service quality. First is the disconfirmation model
which conceptualizes service quality as a measure of how well the level of service
delivered matched customer’s expectations. This notion viewed service quality as the
difference between customer expectations on all factors that matters to customers
(Santos, 2003). The second notion is the perception-only model which some earlier
writers (including Page and Spreng 2002, Dabholkar et al, 2000) argued is more superior
to disconfirmation model in that service quality is judged in terms of overall excellence
and superiority, at a factor level through cross sectional design (Zeithmal et al 1985;
Santos, 2003). This notion suggested that service quality is an overall evaluation of
service performance.
This study basically applied the second notion, perception-only model, in which it uses
customer’s overall judgment on service quality, based their experiences with the postal
services, as compared to their expectation of the level of postal services they should be
receiving. Like service quality, customer satisfaction has also gained a lot of writers’
(Li et al, 2006; Veloutsou, 2006; Bleul, 2005) interest because of its assumed
relationship with service quality and long term business success. To be able to achieve
customer satisfaction, organization must be able to determine and deliver exactly what
customers expected and/or want. According to Bleul (2005) customer satisfaction is
equivalent to making sure that product and service performance meets customer
expectations.
In another definition, Bleul (ibid) viewed customer satisfaction as the perception of
customer that the outcome of a business transaction is equal to or greater than his/her
expectation. Furthermore, Boronico (1997) suggested that customer satisfaction is
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subjected to reliability and quality of services. Such notion implies that there is a
relationship between service quality and customer satisfaction. According to Jones and
Suh (cited by Gilbert and Veloutsou, 2006) there are two types of customer
satisfaction—transaction specific and overall satisfaction.
These concepts are similar to perception model and overall performance model which
were discussed under service quality. Transaction specific model relates to customer’s
experience with the organization and its products or services, while overall satisfaction
derives from an accumulation of experiences customers have with various facets of the
organization. It is these accumulated experiences that form the basis on which customer
established personal standards and expectations on which they use to measure service
quality.
6.3 Aims, objectives and hypotheses of the study
6.3.1 Aims of the study The principal intention of this study is to examine whether the assumption that
corporatization, as a performance improvement strategy, has led to improvement in
service quality and customer satisfaction as exemplified through the case study of
Solomon Islands Postal Corporation.
Hence the general aim of this study is to:
(a) examine the impact of corporatization of SIDPS on postal service quality and the level of
customer satisfaction
(b) To assess whether there is a positive relationship between the service quality and the level of
customer satisfaction before and after corporatization.
6.3.2 Objectives of the study
The key objectives of this study (refer to chapter 2, section 2.10.3), and four hypotheses
(refer to chapter 2, section 2.10.4) this study seeks to test are listed below. These
objectives and hypotheses will be revisited and discussed in section 6.4, under the
summary of the findings.
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The principal objectives of this study are as follow:
1. Discuss the rationale for postal reform in Solomon Islands
2. Identify key problems in the postal service delivery in Solomon Islands
3. Determine whether corporatization of SIDPS has led to improvement in service quality
4. Determine whether the outcome of service quality improvement process has lead to customer
satisfaction
5. Examine whether service quality and customer satisfaction have improved after corporatization
in contrast to before corporatization
6. Explain the relationship between service quality and customer satisfaction; and dependency of
customer satisfaction on service quality
7. Identify and explain factors that led to successful postal reform in Solomon Islands
8. Establish major challenges and barriers to successful implementation of postal reform in
Solomon Islands; and the efficiency of postal delivery service
9. Highlight major policy implications drawn from the findings of this study, and provide
recommendations for future considerations.
10. Discuss lessons learned from this study
11. Identify major areas for future research
6.3.3 Hypotheses
Four hypothetical assumptions are: 1. Customer satisfaction is positively related to service quality before and after corporatization
(H1)
2. Customer satisfaction is dependent on service quality before corporatization (and after
corporatization) (H2)
3. The level of customer satisfaction in postal service differs before corporatization and after
corporatization (H3); and
4. Quality of postal service differs before and after corporatization (H4)
Prior to hypotheses testing, the constructs for both service quality and customer
satisfaction were assessed for reliability using Cronbach’s alpha test to determine the
internal consistency of the variables. The reliability outputs revealed that subscale
measurements for both constructs are consistent and reliable, with alpha values greater
than 0.5.
Furthermore, factor analysis using the Principal Axis Factor (PAF) was also applied on
both constructs to determine the underlying factors that summarize the essential
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information contained in the variables. The outputs revealed that constructs for service
quality are multidimensional, while the construct for customer satisfaction prior to
reform indicated unidimensional and construct for customer satisfaction after reform
indicated bi-dimensional. Since the same construct was used for customer satisfaction
analyses, both before and after reform, the differences in their dimensional factors raise
question.
However, in spite of this, a closer analysis on the factor loadings, as illustrated in
dimensional factor for period prior to reform, revealed that all data are measuring into
the same latent (uni-dimensional) construct which best labeled as service efficiency.
Although the constructs for customer satisfaction after reform indicated bi-dimensional,
a closer analysis on factor loadings under the two rotated components (refer to table 5.19
in chapter 5) indicated that component 2 is merely a sub-component of component 1,
therefore it is in congruence with one dimensional construct as indicated for customer
satisfaction prior to reform.
6.4 Summary of the empirical findings
This section provides a summary of the empirical findings of this study as per the impact
of corporatization of Solomon Islands Postal Service in relation to the key objectives.
Wherever it is appropriate, qualitative findings will be included to provide insight and
better understanding on the findings and issues discussed.
6.4.1 Rationale for postal sector reform in Solomon Islands
Objective 1 of this study sought to discuss the rationale for postal sector reform in
Solomon Islands. According to the findings of this study as discussed in chapters 1, 2
and 4, postal sector reform in Solomon Islands is triggered by a number of factors, most
important of which is the changing nature of the postal environment which is attributed
to globalization and introduction of advanced ICT. These global changes have a
dramatic impact on how national postal administration has traditionally done its
business. More competitors are coming into the market and competing particularly in the
parcel segment.
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While the national postal administration continues to monopolize letter segment, there is
an increase preference for the usage of email and internet services which are provided by
a number small internet businesses and agencies. This reflects how advanced ICT has
influence customer’s changing needs and expectation for faster and quality services.
In view of this, state was under intense pressure to reform its postal sector in order to
enhance the capability of its national postal administration to cope with the emerging
challenges, and to take advantage of the opportunities presented. The deteriorating state
of the national economy, inadequate postal service products, poor postal service
qualities; all these together have also intensify the need to corporatize Solomon Islands
Postal Service in view of the dynamic environment that is now influencing its postal
business. Hence in 1997, the Solomon Islands Postal Service was corporatized under the
1996 SIPC Act; and the strategic goal is to enhance the capability of the transformed
Solomon Islands Postal Corporation to provide service quality that fulfills customer’s
needs and expectations. It is anticipated that in its pursuit of commercial oriented goals,
the corporation will eventually be financially self-reliant and continue to improve its
postal products and service quality to satisfy its customer’s needs, which in turn will
boost its economic growth and sustainability.
6.4.2 Problems
The findings and discussion under this subsection related to objective 2. The study finds
that, like other developing countries, Solomon Islands postal delivery service is faced
with a number of problems. Of the nine problematic issues identified to have
characterized SI postal services, seven of them have been indicated to be significant
problems and subsequently have greatly influenced the efficiency of service delivery.
These include delay in responding to customer grievances, untimely delivery, loss of
posted items, high access-related costs, service accessibility, which include time
involved in accessing the services; and non-functional telecommunication facilities. In
view of these problems, a major focus of this study is to assess whether corporatization
of Solomon Islands Postal Service in 1997 has made any impact in resolving these
problems, and subsequently improves postal service quality and level of customer
satisfaction.
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In determining the impact of reform, comparative analyses of the data collected from an
opinion survey, that involved 150 postal users from nine provinces of Solomon Islands,
on variable factors used to measure service quality and level of customer satisfaction for
the period prior and post reform were employed. Each of the variable factor was put in a
form of a statement (see table 5.3 in chapter 5) and participants were asked to indicate
their honest opinion on each of the variable factor on a scale of 1 to 5, with scale 1 =
“strongly agree (SA); 2 = Agree (A); 3 = not sure (NS); 4 = Disagree (DA) and 5 =
strongly disagree (SD). The findings of these analyses are discussed in section 6.4.3 and
6.4.4 below.
6.4.3 Impact of reform on postal service quality
One of the main purposes of this research is articulated in Objective 3 which sought to
investigate whether corporatization of SIDPS has led to improvement in service quality.
To determine service quality performance seven variable factors, which fall within the
five generic dimensions164 proposed by Parasuraman et al (1985; 1988) and Li et al
(2006), are used to determine the service quality performance before and after
corporatization. These include time and cost factors that involved in accessing postal
services, intactness of grievance procedures, prompt response to grievance, security,
accessibility of service to rural areas and availability of services at all time (this include
the availability of phone card, aerogram, stamps and ICT facilities).
A comparative statistical analysis on service quality performance before and after
corporatization (see chapter 5: subsection 5.4.1.1 & subsection 5.4.1.2), revealed that
service quality performance before corporatization of postal services was generally poor
as compared to service quality performance after corporatization. In other words, the
level of postal service quality has indicated general improvements following the
corporatization of postal services.
164 The five generic dimensions are; availability of service (degree to which customers can access delivery service and contact customer service); responsiveness of service (willingness and readiness of staff to provide services and degree to which staff reacts promptly to customers); reliability of service (consistency of performance and dependability. Posted items delivered without damage within promised time scheduled); the completeness of service (degree to which the total job is completed); and professionalism of service (degree to which provider uses professional behaviours, while working with customers such politeness, respect, consideration and friendliness of the contact personnel (Li et al, 2006).
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The SPSS Sampled Pair T-Test output on hypothesis 4 which assumes that service
quality is differ from before corporatization and after corporatization also confirmed
these findings. The test output t (149) = 4.53, p = .000 with a probability less than .05
statistically confirmed that there is an improvement in the service quality performance
following reform (also see table 5.23, chapter5: subsection 5.7.4). These statistical
findings implied that corporatization of Solomon Islands Postal Service has contributed
to general improvement in postal service quality.
However, in spite of such improvement, the postal service quality performance is
volatile, to say the least, because of its susceptibility to various factors that influence its
sustainability. The descriptive analysis on individual variable factors which were used to
measure service quality, revealed that time and costs associated with accessibility of
postal services continued to have significant negative influence on the level of postal
service quality in spite of reform. In other words, reform does not make any positive
impact in reducing time and costs involved in accessing postal services, especially for
customers in suburban and rural communities.
Apart from this, all other variable factors have indicated general improvements
following reform process, but in varying degrees. For instance, the findings showed that
there is significant improvement following corporatization in the intactness of grievance
handling procedures, and the availability of services; while a reasonable improvement
was indicated in incumbent’s promptness to respond to customer grievances, and
minimal improvement was indicated for security and accessibility to postal services.
Minimal improvement in security and service accessibility implied a compromising
potential for these factors to negatively influence the state of postal service quality in
Solomon Islands. Otherwise, in overall, a general improvement in service quality was
indicated.
6.4.4 Impact of reform on customer satisfaction
The second major focus of this study is expressed in objective 4 which sought to
establish whether corporatization of Solomon Islands Department of Postal Service
Department (SIDPS) has contributed in enhancing the level of customer satisfaction.
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Nine variable factors were used in this study to measure the level of customer
satisfaction prior to reform of the postal service and after reform. These variable factors
include delivery time span, postal service rates, access-related costs, friendly and helpful
staff, customer awareness of the grievance handling procedures, promptness in
responding to customer grievance, timely delivery, security and ICT facilities.
The statistical analysis as illustrated in table 5.5(a) showed that the level of customer
satisfaction, pertaining to postal services, prior to reform was generally low. Variable
factors which have been identified to have contributed significantly to customer
dissatisfaction were service-access related costs (which were indicated to be very high),
lack of prompt response to customer grievances, untimely delivery, delivery time span,
lack of awareness in grievance handling procedures, mail security and non-functional
ICT facilities at the postal outlets. An average mean value >3.0 was indicated for all
these factors, which implied high level of dissatisfaction.
Furthermore, the comparative analysis of the data given in table 5.5(a) and table 5.5(b),
on the level of customer satisfaction prior and after corporatization, has revealed an
improvement in the general level of customer satisfaction following reform. According
to the analysis, factors that have significantly contributed to enhancing level of customer
satisfaction are friendly and helpful postal personals, delivery time span, postal rates and
access-related costs, all with an average mean value <3.0; while in contrast, lack of
awareness to grievance handling procedure, promptness in responding to customer
grievance and security were indicated to have negatively influence level of customer
satisfaction, all with high average mean value >3.0.
Like service quality, the descriptive analysis on the nine variable factors used as
measurement for customer satisfaction indicated improvements in varying degrees. The
outputs revealed a significant improvement in the level of customer satisfaction
pertaining to delivery time span, postal rates, service-access related costs and the
friendliness and helpfulness of postal personnel; reasonable improvements was indicated
in timely delivery and ICT facilities at the postal outlets; and minimal improvements
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indicated in awareness of grievance handling procedures, promptness in responding to
grievances and security of mail service.
In spite of such variances, the overall analysis has established that the corporatization of
SIDPS has made general positive impact on enhancing the level of customer satisfaction.
The test output, using SPSS Paired Samples T-Test on hypothesis 3, which assumes
“that the level of customer satisfaction in postal service differ before corporatization
and after corporatization”, also confirms this finding. The output t (149) = 8.65, p =
.000 with a probability less than <.05 (also see table 5.22; chapter 5: subsection 5.73)
statistically confirmed that there is an improvement in the level of customer satisfaction
following the corporatization of postal services.
The findings discussed above in subsection 6.3.3 and 6.3.4 also answered objective 5
which sought to examined whether service quality and customer satisfaction, pertaining
to postal services in Solomon Islands, have improved after corporatization in contrast to
before corporatization. As the findings have statistically proven, both service quality and
level of customer satisfaction have generally improved following the corporatization of
the Solomon Islands Postal Service.
Furthermore, these findings have also proven true the assumption, and furthermore
answered the key question that was raised in earlier in chapters 1 and 2. The assumption
that “reforms (through the corporatization process) lead to improvement in service
quality and customer satisfaction” is confirmed to have been proven true in the case of
Solomon Islands Postal Corporation. Secondly, in answer to the key question that state,
“does corporatization of Solomon Islands Postal Services lead to improvement of
service quality and customer satisfaction?”, the findings, as statistically proven and
discussed above, have confirmed that the transformation of Solomon Islands Postal
Service has led to improvement in Solomon Islands Postal Service quality and customer
satisfaction.
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6.4.5 Relationship between service quality and customer satisfaction
Objective 6 and hypotheses 1 and 2 all focused on relationship between service quality
and customer satisfaction, and the dependency of customer satisfaction on service
quality respectively. In view of this, findings related to objective 6 and hypotheses 1 and
2 will be summed up together here. Objective 6 sought to explain the relationship
between service quality and customer satisfaction, and dependency of customer
satisfaction on service quality; while hypothesis 1 intends to prove the assumption that
“customer satisfaction is positively related to service quality before and after
corporatization”; and hypothesis 2 intends to prove that” customer satisfaction is
dependent on service quality both before and after corporatization”.
The findings of this study have statistically proven that there is a positive relationship
between service quality and customer satisfaction. This is clearly illustrated in the
hypothesis 1 test outputs, in which SPSS correlation test was applied. The correlation
test outputs (r = 0.223, p<0.05) for period before corporatization, and (r = 0.566, p<0.05)
for period after corporatization (also see table 5.20 (a) and (b); chapter 5: subsection
5.7.1) have both indicated significant relationship between service quality and customer
satisfaction.
These findings confirmed the comparative analyses outputs of the data illustrated in
table 5.4 (a) and (b) and table 5.5 (a) and (b), which revealed that when service quality
was poor (as in the case per before reform) the level of customer was also low; and when
service quality improves (as in the case per after reform) the level of customer
satisfaction also improves. These findings have agreed with what many writers (such as
Parasuraman et al, 1991; Caruana, 2000; Yeung et al, 2002; Li et al, 2006), whose
deliberations have highlighted the significant relationship between service quality and
customer satisfaction, and the importance of such relationship in enhancing overall
business performance.
As discussed earlier, level of customer satisfaction is subjected to the reliability and
quality of service that is equivalent or exceeds customer’s expectation, thus highlighted
the dependency of customer satisfaction on service quality.
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The Chi-square test outputs (also see table 5.21 (a) and (b); chapter 5: subsection 5.72)
on hypothesis 2, indicated the significance of customer satisfaction’s dependency on
service quality, both before reform (i.e. Pearson chi-square with 405df has a p-value of
485.577 with a sig. of .003), and after reform (i.e. Pearson chi-square with 391df has a
p-value of 985.030 with a sig. of .000). The significance values for both analyses are less
than p=0.05, thus confirming that customer satisfaction is significantly dependent on
service quality.
6.5 Major success factors, challenges and barriers to sustainable
reform
The discussions in this section highlighted factors that contributed to successful
corporatization process in Solomon Islands, as exemplified in the case of Solomon
Islands Postal Corporation, and major challenges and barriers to corporatization process
and to the efficiency of postal service delivery as articulated in objectives 7 and 8
respectively. These challenges and barriers have implications, in varying degrees, on the
postal service quality, and subsequently influence the level of customer satisfaction.
6.5.1 Success factors
According to the literature review, some to the success factors that have contributed to
the success of transformed postal service operators in the developed countries, as well as
in some developing countries include;
(a) favourable legal framework that provides clear demarcation on the role of
management and the regulator, as well as having the capacity to regulate the
provision of postal services to achieve their purpose.
(b) government takes ownership of the change and made commitment in providing
continuous support through transformation process. Government ensures that it
provides adequate human and institutional capacity to manage and monitor
change in each phase of the process; and also continue to strengthen these
capacities after reform.
(c) available funding – the issue of funding is also important because without
funding it will be difficult to implement change.
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(d) strong business strategy is another factor that contributes to the success of
successful corporatized entities. Successful organization continues to look for
ways and opportunities to further enhance sustainability through adoption of
appropriate business strategies, and commitment in achieving long term strategic
plans. Furthermore, the organization continuously looking for most favourable
ways of doing business at reduced costs. With this in mind, most postal
operators have taken advantage of appropriate technologies to reduce
operational costs.
(e) innovativeness in developing new products and services amidst high competition
in doing business.
(f) adequate communication and transport infrastructure.
In the context of Solomon Islands, corporatization process implemented over the years
was made possible due to following factors:
(a) legislative and regulatory framework that laid the basis for the corporatization
process to take place; and that which provide the legal framework within which
the corporatized entity operates.
(b) financial assistance from the developing partners, without which the
corporatization process would not be possible, taking into account weak
economy of the nation and government poor financial status.
(c) government’s commitment, with support of developing partners, in ensuring the
implementation of its commercialization and privatization policies. This is
manifested in government’s effort in corporatizing its utilities and other public-
regulated service departments such as Solomon Islands National Broadcasting
service and the Solomon Islands Postal Services.
Apart from three points mentioned above, the successful implementation of Solomon
Islands Department of Postal Services (SIDPS) is attributed also to a number of success
factors. Some of the factors that contributed to the success of Solomon Islands Postal
Corporation (SIPC) in improving its postal service quality, which has subsequently
increases the level of its customer satisfaction include;
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a) clear vision, mission and strategic aims and objectives which set targets and
commitments that the corporation and all its sub-components strive to achieve.
b) strong management and leadership support which empowered members of the
corporation to continue strive for better service performance in spite being faced
with a number of social and economical dilemmas.
c) strong emphasis on technical and human capacity building with the support from
the external development partners and UPU.
d) adoption of business diversification strategy which resulted in the corporation
expanding into other business areas such retailing, re-mailing and post banking.
6.5.2 Major challenges and barriers
The biggest challenge in the corporatization process itself is the implementation of
sustainable reform, which requires comprehensive planning and greater management
capacity to implement. Some of the related challenges that have implications on the
service quality include:
(a) finance – declining revenues due to high cost of operation is one of the many
challenges encountered. This is a major challenge for postal management who
have to work with limited resources to fulfil its mission in providing services and
products that satisfy needs and expectations of customers in all sectors of the
society, while simultaneously trying to make breakeven and achieve
sustainability.
(b) human capacity – this involved the challenge of managing human capital during,
and after, the transition period. Corporatization of a public-regulated service
department entails change in the form of governance towards corporation, which
implied a shift from public practice to commercial practice, including the work
culture. Hence, the challenge is related to gaining the support and commitment of
employees to effectively implemented change, which leads to sustainability.
Another related issue is the challenge to deal with labour-related issues that arise
as a result of restructuring. Most reforms involved restructuring which entails
179
reduction of workforce due to automation and use of ICT as in the case of the
postal services.
Management has to come up with a comprehensive withdrawal and succession
planning to maintain continuity, and the associated costs. Management has to
handle these carefully so as not to leave any labour-management issues
unresolved that could be detrimental to effectiveness of reform.
(c) competition – Increasing competition from other private delivery and electronic
communication businesses pose challenge to the Solomon Islands Postal
Corporation (SIPC). The biggest challenge involves maintaining the loyalty of its
traditional domestic and business customers who tend to prefer fast and quality
services as an alternative to lower costs. This affected the volume of incoming
and outgoing mails, and subsequently corporation’s capability to maximize
economic benefits without compromising the quality of its services and
unnecessary increase in postal rates.
(d) institutional capacity – this challenge is related to inadequate institutional
capacity to continuously improve, maintain and provide basic quality postal
services to all island communities at reasonable costs. The challenge is
significant due to limited funds as highlighted in point (a) above and inadequate
postal facilities and logistic support in terms of communication and transport
infrastructures. The wider dispersion of the island communities and their
proneness to bad weather condition also have significant bearing on the
capability of the corporation to effectively fulfil its mission to provide access to
basic postal service to all sectors of the community.
Some of the barriers affecting corporatization process and its sustainability as
highlighted in chapters 4 and 5 include:
(a) political and social instability – Over the last two decades this nation has
witnessed rise and fall of governments before they completed their full term in
office. Changing of government through the motion of no confidence and
180
continuous in-house fighting and crossing of floor by the members of parliament
does not only indicate non-commitment of the government in ensuring the
implementation of government policies, but also hindered government’s effort to
implement its reform policies and to focus on achieving the intended objectives.
Furthermore, the increasing social and political unrest in early 2000 has diverted
government’s focus on reform to deal with difficulties attributed to social unrest.
The political and social turmoils have greatly affected SIPC’s ability to maximize
profit taking into account the closure of major businesses and repatriation of
expatriates (who made up larger part of its market) and the economy slow down
during the period.
(b) inadequate public policy on ownership issues – This study has found that the
public policy on ownership pertaining to SOE is inadequate and consequently
accounted for other related problems which include; no clear policy on SOE
performance and lack of political consensus on public-ownership related
problems experienced by SOE. These has created other problems such as:
government failing to realize and acknowledge that poor performances
demonstrated by SOE are attributed to general failure of the policy
framework itself.
government failing to detect recurring problems in the SOE.
government applying same proven solution across all sectors thus making
SOE reform more complicated and difficult to progress.
government spending more time mulling over chronic problems
experienced by SOE and giving limited time to focus on other major
issues affecting its SOE.
(c) weak governance - Ineffective regulatory policy on ownership issue, as discussed
in point (b) above, has led to weak governance in all levels of authority. This is
clearly manifested in:
governments failure to set performance expectations for SOE.
181
government’s failure to scrutinized SOE annual financial reports as
stipulated in the Acts of Parliament.
board of directors’ failure to ensure that SOE achieves and maintains its
performance targets.
management’s failure to update SOE audit reports, which to a greater
degree have contributed to their failure to ensure productivity and
viability of SOE.
(d) inadequate social and economic infrastructure - While government’s intention to
transform its public functions such as public utilities and postal services was
genuine, its institutional policy is inadequate to support such reform. Various
ADB reports cited in the preceding chapters have highlighted inadequate and
poor social infrastructures as barriers to economic drive and prosperity in
Solomon Islands. Such poor infrastructures have significant impact on the
efficiency of SIPC’s postal delivery service and its effort to fulfil its mission to
the communities at large. Furthermore, weak economic structure which attributed
to narrow economic base, and inadequate economic policies to facilitate wider
private sector participation in the economic development, have also contributed
to difficulties faced by the corporation in maximizing economic benefits.
(e) human incapability – first of all, this refers to the incapability of appropriate
public authorities to formulate effective policies that supported reform model
that is institutionally appropriate for the Solomon Island context, and to ensure
that proper mechanisms are established to control and monitor effective
implementation, and institutionalization of successful reforms. Furthermore, to
ensure that such policy is in congruence with that of the development partner;
and that both the policy and the institutional environment are conducive to such
reform.
Apart from the need to relieve government budget, the pressure on the Solomon
Islands government to reform its public sector was partly to fulfil its development
182
partners’ conditions for a small, leaner public sector (and a large private sector)
in return for their continuous development support and assistance.
Since the government has depended heavily on external funding, it succumbed to
donor’s conditions without proper planning and commitment, resulting in the
corporatization process being implemented on an ad hoc basis. Consequently,
most public corporations, including SIPC, continue to inherit chronic financial
difficulties, and their services continue to deteriorate.
Secondly, most employees in the transformed public corporations were mere
public servants who were transferred to the corporation following its
corporatization, and therefore lack business related skills and knowledge. This is
a barrier, especially in the initial years to the effort of getting the corporation
moving forward in achieving its goals.
With limited funds and chronic financial difficulties that the corporation is faced
with, it is a challenge for the transformed public corporation to develop and
strengthen its manpower capacity and to encourage its workforce, through
appropriate rules and policies and necessary support, to adopt new culture that is
customer-oriented and appropriate for overall business performance. Changing
an organizational culture is not an easy task, particularly when most of the
employees were formerly public servants and have grown accustomed to
‘process culture’165, which is very much associated with public organizations.
The need for a change in culture arises because of the change in the legal status
and the strategic business goal of the SIPC.
165 “Process culture is one that is largely related to bureaucracy, and often in organizations where there is actually no feedback. The employees can be so obsessed with the rules and procedures of how things are done that they lost focus on what the goal is.” (Types of organizational culture: How to analyse and develop a positive team culture” retrieved on 156/6/10 on website: http://www.organizationalculture101.com/type-of-organizational-culture.html.
183
As a service corporation, SIPC’s success is dependent on strong customer
service, therefore it needs to maintain or adopt new culture that supports its
business strategy and encourages quick feedback from the services they offer.
(f) lack of funds – this is another barrier to SIPC effort in improving its current
postal services and develop new value-added products that will fulfil the needs
and expectations of its customers.
6.6 Major policy implications and recommendations
6.6.1 Policy implication
Objective 9 of this study intends to highlight major policy implications drawn from the
findings of this study and to provide recommendations for future considerations.
Based on the findings summarized in sections 6.3 and 6.4 above, question arises as to
how effective was the corporatization of SIDPS in improving Solomon Islands Postal
Service quality and enhancing the level of customer satisfaction. The findings as
statistically illustrated and discussed in chapter 5 revealed that while some general
improvements were indicated as a result of reform, there is still need for greater effort on
the part of both the state and the management to effect significant improvements that are
sustainable.
The failure of reform to make a significant improvement in service quality and customer
satisfaction is attributed to a number of challenges and barriers as summarised in the
previous subsection. These barriers and weaknesses simply reflected the ineffectiveness
of the regulatory policies pertaining to a number of issues which are critical to
sustainable reform process. Hence, SIPC management and BOD, on their own effort, are
not capable to address major issues confronting the efficiency and productivity of the
postal delivery service. Strong support and commitment from the government is needed,
through its legislative, regulatory and institutional policies to deal with the challenges
and barriers affecting the sustainability of corporatization process. Therefore appropriate
policies need to be reviewed to ensure that they are harmonized and support efforts that
geared towards effecting successful reform.
184
Efficient control and monitoring mechanism must also be in place to prevent BOD and
management from being complacent and unaccountable for poor performance of the
Corporation.
6.6.2 Recommendations
Based on the above findings and discussions, the following recommendations are set
forth in two sets. The first set of recommendations is intended for government’s
consideration, and the second set of recommendations is geared towards the
management of SIPC.
A. GOVERNMENT
1. Government to review its existing legislative, regulatory and institutional
policies. The purpose is to ensure that these policies are harmonized towards
effecting sustainable reform, and that they are in synchronized with the current
changes in the postal sector. Government’s commitment to address legislative
and regulatory issues is important to the survival of the postal sector.
2. Since SIPC still monopolizes letter mail services, and there are competition in
other services, government should formulate regulations that would promote
level playing field and protect customer interests.
3. Establish a structure for management of SIPC which provides key performance
indicators (KPI), performance measurement system and structural accountability.
Such management structure should emphasis improvement on core postal
business and other important processes such as sorting and delivery of posted
items, security, primary customer services, marketing and promotion, and new
product development.
4. In relation to recommendation (1) and (3) above, a clause should be included in
the regulatory policy, which stipulated that management be held accountable for
the performance of the corporation, and the penalty in the case whereby the
Corporation is not fulfilling the expected standard of performance as mentioned
in point (3) above. Such policy will also ensure that management and BOD must
185
see that annual performance review is performed, and financial accounts are
audited and produced to the Parliament for scrutiny and deliberation.
5. As the principal owner of the public corporation, government must demonstrate
commitment and support from beginning of reform to post reform to ensure
efficiency of services and sustainability.
This can be demonstrated through injection of capital and technical skills into the
corporation, particularly in the initial years, to help the corporation start off on a
firm footing, and refurbishing postal facilities in all provincial branches. On
broader perspective government should demonstrate its support and commitment
through its infrastructure policy by ensuring that appropriate national
transportation and ICT infrastructures are established to enable efficient delivery
of service that subsequently would bridge the digital divide in widely dispersed
island communities.
B. MANAGEMENT
1. Review postal policies, regulations and corporate mission, goals and strategies to
ensure that they are effectively aligned, in order to strengthen its position within
the country.
2. Review the seven (7) core elements that make up McKinsey’s 7S model,
periodically, to ensure that they continuously maintained alignment with each
other and with the corporate policies, regulations, mission and goals in order to
achieve success in their operation.
3. Re-open negotiation with the government, the management of Solomon Airlines
Limited, management of Solomon Islands Telekom Limited, and private
shipping companies to establish a viable agreement on the logistic support
required from the respective stakeholders for efficient mail delivery service.
4. Establish partnership with the Solomon Islands Telekom Limited to establish
ICT facilities in all postal branches throughout the country.
5. Make it an institutional policy to communicate to all postal divisions, sectors,
and departments in the beginning of a new financial year, the expected targets
and the expected standard of performance, on which the annual performance
186
review would be based on. Head of each division, sector and department to be
held accountable for any shortfall identified in their area of responsibility.
6. Strengthened the capacity of SIPC’s Research and Development Unit (RDU) to
improve its function. This unit plays an important role in acquiring relevant data
that provides information pertaining to client’s needs and preferences, areas for
improvement in current services or system, new product developments that SIPC
needs to invest in; and the new opportunities which it could capitalize on.
7. Provide forum for customers via postal branches to exercise pressure on
management of the SIPC to improve and provide high quality services as
demanded by market situation.
6.7 Lessons learned from this study
Three important lessons that were learned from this study are discussed hereafter. First
important lesson learned is that, implementing a sustainable reform is in itself a big
challenge and as such it requires comprehensive planning and greater management
capacity to implement it successfully. Simply establishing legal framework that
facilitated change in the corporate name and its legal status implies poor planning on
government’s part, resulting in more difficulties such as overstaffing, prevalence of
public service work culture which does not support the business strategy, and lack of
appropriate technical know-how.
This was exemplified in the case of Solomon Islands Postal Service in the initial years
after it was corporatized in 1997. Not only was the new corporation experienced
overstaffing and duplication of tasks, which implied no proper job analysis and
evaluation and job descriptions, but most public employees who were initially
transferred to the new corporatized postal corporatization direly lacked business-oriented
skills and knowledge.
Secondly, in spite of significant pressure, from internal and external forces, on
government to maintain and improve its operations and provisions of public services,
reform should not be implemented exclusively on the basis of reducing government’s
187
budgetary costs. Other important factors to be considered thoroughly during the
planning stage include:
goals for reform – goals for reform must not only be clearly defined, but
also be realistic and achievable.
strategic actions- formulated strategies or strategic actions which will
facilitate the achievement of these goals must also consider both the
government and the corporation’s institutional capacities to successfully
implement such reforms. This includes the economic and logistic
supports needed for successful implementation of reforms.
sequencing- the sequencing of strategic actions (reforms) and timing for
implementing reforms and/or components of reforms must be carefully
considered and planned (SURF-AS; 1999).
Thirdly, it is also crucial that government must take ownership of such reforms and
ensures that proper and adequate institutional and economic support be provided in the
initial phase of reform to give the new corporatized entity a good foundational base of
implementing changes and plans that gears towards achieving long term goals and
sustainability. A clear vision, with well defined strategic goals combined with good
business strategy, strong leadership commitment and support, recognition of the
importance of its technological and human resources, good customer services and hard
work are some of the important criteria for successful reform.
Finally, SIPC, on its own effort, will not be able to deal with the challenges it faces in its
effort to provide quality postal service that will fulfil its customers’ expectation.
Government, as the administrative arm of the state, has a greater part to play in ensuring
that adequate infrastructures are established to provide platforms for successful reforms
and economic developments. This study revealed that, while the need to implement
reform in the postal service is necessary, both state and the corporation’s capacity to
manage the process is inadequate and weak as highlighted and discussed in the previous
section. According to the Country Infrastructure Report – Solomon Islands (June,
2007), the ‘capacity of the Ministry of Infrastructure and Development to plan and
188
coordinate responses has inevitably weakened’. This referred to government’s role in
providing efficient and operational infrastructures, which are logistically critical for the
SIPC to maximise sustainable improvements in its services, as well as to strengthen its
position as an essential platform for social and economic developments in the country.
6.8 Major areas for future research
The main focus of this study is to establish the impact of corporatization of public-
regulated service departments on service performance, as exemplified through the case
study of Solomon Islands Postal Corporation. While performance can be assessed using
a broader spectrum of analysis, this study has limited its focus on performance as per
service quality and level of customer satisfaction. Taken into account the narrowed focus
of this study, this section intends to highlight some major areas for future research.
These may include:
1. A comprehensive study on the performance of SIPC following its corporatization
in 1997 using a broader performance analyses base which may include, for
instance, financial performance and new product developments. Furthermore,
such study will also include assessment of the performance of other postal
product/services, such as retailing, financial services, post banking which are
also offered by SIPC.
2. A similar study to be carried out on other public corporations which have been
established through the corporatization process in the 1980s and 1990 to
establish the impact of reform on their performance using a broader performance
analysis base.
3. A comparative study on the performance of two or more public corporations
which were established through the process of corporatization using three or
more performance indicators as their basis for performance assessments.
The findings on the above mentioned research areas may give better insight into:
1. The effectiveness (or weaknesses) of the legislative, regulatory and institutional
policies which provides the legal framework within which these public
189
corporations are operating. Such information that will help government to review
and improve on these policies for the benefit of both government and its public
corporations.
2. Areas that government urgently need to focus its attention in order to improve,
not only its social obligations to the public, but also to empower its state-owned
enterprises to formulate and implement value-creating strategies and activities
that lead to improved performance in terms of their services, financial gains, new
developments and investments and subsequently their sustainability.
3. Challenges and barriers that all public corporations are faced with, and through
its regulatory policies, address these barriers in order to enable public
corporations fulfil their mission and objectives.
4. All aspects which are in one way or the other have contributed to the general
level of performance exhibited by the corporatized public entities.
190
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Interviewees: Interviews and Discussions held with the following personnels of the Solomon Islands Postal Corporation:
(a) Mr. John Finau – Financial Department of the SIPC, June 2008 (b) Mr. Moses Alitoni – Assistant Administrative Officer,
Corporate Division of the SIPC, June 2008 (c) Mr. Ronald Volia – Operational Manager, Operations Division
of the SIPC, June 2008
206
8.0 Appendices
8.1 Appendix A
Opinion Survey Questionnaire on Service Quality and Customer Satisfaction
SURVEY QUESTIONNAIRE/SCHEDULE
QUESTIONNAIRE NUMBER: _____
This research is conducted to fulfill the requirements for the Master of Arts programme in Management & Public Administration at the University of the South Pacific.
The purpose of this survey is to assess the impact of corporatization on service delivery and customer satisfaction in Solomon Islands Postal Service delivery.
All information will be used strictly for academic purposes only.
---------------------------------------------------------------------------------------
Section 1: Demographic profile of respondents
Please put x in the box besides the answer that best represents your response for the following items.
1. AGE 2. GENDER 3. MARITAL STATUS
1.Under 25 1. Female 1. Married
2. 26 - 39 2. Male 2. Single
3.Over 40 3. Others (Please specify: (Divorced /widowed etc.)
4. HIGHEST COMPLETED LEVEL OF EDUCATION
5. PROVINCE 6. EMPLOYMENT SECTOR
1. Primary 1. Choiseul 1. Government sector
207
2. Secondary 2. Western 2. Private sector
3.University Degree 3. Central 3.NGOs, students, ordinary citizens
4. Professional qualification
4. Isabel
5. Others (Please specify)
5. Malaita 7. ETHINICITY
6. Honiara 1. S. Islander
7. Makira/Ulawa
2. Non-SI citizen
8. Temotu
9. Renbel
Section 2: Assessment of the impact of corporatization on quality of service and customer satisfaction before and after corporatization.
Put x in the box under the answer that best represents your response to following statements.
KEY: SA= Strongly Agree A= Agree NS= Not Sure D= Disagree SD= Strongly Disagree
BEFORE
Corporatization of Solomon Islands Postal Services
AFTER
Corporatization of Solomon Islands Postal
Services
I
Quality of postal service
SA
A
NS
D
SD
SA
A
NS
D
SD
1. Time factor involved in Solomon Islands Postal Service delivery a major problem
2
Cost factor involved in Solomon Islands Postal Service delivery
208
is a major problem
3 Grievance procedures are intact
4 Grievance handling is prompt
5 Mails are never lost, damaged or delayed
6 Accessibility to postal service in rural areas is evident
7 Availability of services at all time
II Customer satisfaction
1 Customers is happy with the time taken to deliver postal services
2 Customer is happy with the charges for postal services
3 Cost associated with accessing postal services is reasonable from customers' point of view
4 Customer finds the staff in postal services friendly and helpful
5 Customer is well aware of grievance handling procedures
6 Customer’s complaints are handled promptly
7 Customer’s mails are received on time
8 Customer’s mails are never damaged or lost
9 Customer is happy with the technology in use by the postal department.
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Section 3: Major problems in postal service delivery
Put x in the box under the answer that best represents your response to following statements.
KEY: VS= Very Satisfied S= Satisfied NS= Not Sure D= Dissatisfied SD= Strongly Dissatisfied
III From the following list indicate the major problems you experience in the postal service delivery
SA A NS D SD
1. Loss of posted items
2. Damaged posted items
3. Untimely delivery
4. Non-functional tele-communication facilities
5. Lack of accessibility to postal services
6. High access-related costs
7. Time factor involved in accessing service is high
8. Delay in responding to grievance
9 Availability of services
10 How long (refer to Q8). Indicate with a tick ( ) in the box beside each option.
i. 1 week
ii. 2 weeks
iii. 3 weeks
iv. 1 month
v. 2 months or more
Section 4: Assessment of the challenges/ barriers
IV. Challenges and Barriers of corporatization reforms in Solomon Islands
Indicate the major challenges/barriers of the corporatization process in Solomon Islands. Please indicate with a tick ( ) in the box beside each option.
210
YES NO
1. The social, economic and political institutions and processes are not well developed
2. Bureaucracy which is inflexible
3. Political changes and interference
4. Lack of capital/infrastructure
5. Untrained staff
6. Inability to shift from old organization culture and values.
7. Lack of management support
8. Lack of organizational redesign appropriate to corporatization
9. Lack of consultation with stakeholders
10. External pressure (especially from donor countries)
11. Lack of leadership from within the country
12. Inappropriate systems and processes of reform that does not fit in with Solomon Islands country context
13. Haunting fear of redundancy (IR issues)
Thank you for filling in the questionnaire
211
8.2 Appendix B
Definitions on McKinsey 7S Model
1. Strategy: the plan devised to maintain and build competitive advantage over the
competition.
2. Structure: the way the organization is structured and who reports to whom.
3. Systems: the daily activities and procedures that staff members engage in to get the
job done.
4. Shared Values: called "super-ordinate goals" when the model was first developed,
these are the core values of the company that are evidenced in the corporate culture
and the general work ethic.
5. Style: the style of leadership adopted.
6. Staff: the employees and their general capabilities.
7. Skills: the actual skills and competencies of the employees working for the company
Adapted from website: http://www.mindtools.com/pages/article/newSTR_91.htm; accessed on 28 July 2009.