Examination of Witnesses (Questions 30-39)
AMICUS-CMA
16 NOVEMBER 2004
Q30 Chairman: Good afternoon, Dr Skyte.
We know you of old. We do not know your colleagues. Perhaps you
could introduce them and then we will get started.
Dr Skyte: On my right is Phil
Pinnell who is a member of the Executive Committee of the CMA
section of Amicus and he works for Post Office Limited, and on
my left is Olivia Fitch who is our Research Officer.
Q31 Chairman: Fine. Thank you very much
for coming. Maybe we could start off with the Network Review.
Has Post Office Limited consulted you on the conclusions of the
review of the directly managed branches?
Dr Skyte: It is approaching it
in two ways. First of all, we are involved with Post Office Limited
and with the CWU in a review of the regularly managed branches
which is mainly looking at the costs against a background of Post
Office Limited trying, effectively under a direction from Government,
to remove the losses of the last four years. Secondly, we are
involved in and are consulted over every change, whether it is
a closure or whether it is a proposed conversion to a franchise,
in respect of individual branches. I think the problem is the
two things do not mesh together. We believe there needs to be
a coherent approach taken to the whole of the network, particularly
the urban network, rather than looking at it in a piecemeal fashion.
The point we have made, as your Committee did in its Seventh Report,
is that the review of the directly managed branches is approached
separately from the review of the Network Reinvention programme
and the two things should be looked at as a whole. Our concern
is that this will be driven purely by financial costs or by property
considerations to do with the ease of disposal or the transfer
of a lease coming up rather than any coherent view of the whole
of the network.
Q32 Chairman: The conclusion of the company's
review as we understand it is that a core network of 320 to 390
branches would be sustainable. What is your view of that picture?
Dr Skyte: That review has yet
been concluded.
Q33 Chairman: I am using the expression
that this might be what they will end up with.
Dr Skyte: That appears to be the
directional thinking of Post Office Limited. Our view is that
there is no definable number. What there ought to be is a coherent
view. There needs to be a joined-up policy to provide an integrated
and sustainable network and a particular strategy in place to
deliver that rather than it being driven by pressures on individual
offices. Whilst this is largely an urban network issue and 24
of the directly managed branches are rural post offices, the overwhelming
majority are in the network, there needs to be a strategy. There
is a difference between the way that a directly managed Crown
office operates and the way in which a franchised office would
operate. By converting it you do not necessarily replace what
the Crown office did as a franchised operation.
Q34 Chairman: The companies told us that
it does not mean a reduced network and that the closure of 165
to 235 anticipates no more than a handful of closures next year.
Do you think that that is really possible if they are going to
make savings of £70 million on the network?
Dr Skyte: You have got to look
at it over a longer period than one year. Our overall concern
has been with Royal Mail as a whole and its approach because it
has been driven very much by the need to reduce costs overall
and to deliver a £400 million profit by the end of March
2005. In terms of the post office network element of that, it
may be that there will only be a small number closed in the next
year, but to get to a stage of eliminating the whole of the £70/£71
million deficit over the next four years may require more than
that. The other side to it is what service you get coming out
of that and this is the conflict between the role of Government
and the role of Royal Mail as the overall holding company of Post
Office Limited and having to deliver profits and financial targets
and a public and community service. I think you should ask Post
Office Limited what it is going to mean over the four years.
Q35 Sir Robert Smith: You have already
mentioned your view on franchising is the risk that the franchisee
can lose interest, but you have also suggested that maybe you
do not get quite the same range of services from a franchisee.
Does franchising play any role at all in plugging the gaps in
balancing the directly managed Crown offices?
Dr Skyte: Over the last ten or
15 years there has been a reduction in the number of directly
managed offices of around 800 and a substantial proportion of
those have been converted to franchises. We have two considerations:
one is as a union representing our members employed and, secondly,
as a union with a wider public remit of looking after our other
members who use the services. In terms of the position of our
own members, in the past we have been able to accommodate securing
the future of our members either by people accepting voluntary
redundancy or being redeployed within Post Office Limited or the
wider Royal Mail organisation, but that is going to be much more
limited in the future, not least because of the loss of 3,000
managerial positions. Secondly, we may be reaching an early end
in so far as it is possible to see a straight conversion because
it is usually the case that if you convert a directly managed
branch to a franchised operation you lose a number of counter
positions and ultimately that means there are less people serving
and you get longer queues. The people in post offices are going
to be responsible for moving from a transaction-based process
to one of a sales-based organisation and ultimately you need people
in place to do sales. If you change an office from being a directly
managed branch to being a franchised operation, not only will
you have to queue longer because of fewer positions, but there
are fewer staff to be able to generate the sales of new products
and services which are absolutely critical to the future success
of the post office network.
Q36 Sir Robert Smith: Moving on to that
second point, obviously one way to sort out the finances the other
way is to increase the business and income that is coming through
the post offices. With the changes to the way pensions and benefits
are paid by the Government there has been a move to a wider use
of banking by people and, therefore, where possible, a tying up
in allowing people to still use the post office to access their
bank accounts. You highlight the fact that HSBC, Halifax Bank
of Scotland and Royal Bank of Scotland still refuse to let their
customers with normal accounts use the post office. Can you see
any way that more pressure could be applied on them? I suppose
we can name and shame them now. Post Office Limited is probably
trying hard to convince them of the commercial argument.
Dr Skyte: Yes. It has been a domino
approach of trying to secure agreement with the banks one by one,
but HSBC, HBOS and RBS are the three largest and account for 50%
of all the current accounts in the UK. We will do what we can
to try and highlight the effect of this and hopefully other people
will too. There is a geographical dimension which I think some
of you may be interested in which is that in Scotland and Northern
Ireland various banks came together to form these banks and there
is less of a choice and therefore these banks have much more of
a dominant role in Scotland and Northern Ireland than they do
elsewhere. What is also interesting is that at the same time as
these three banks have not been so far persuaded of the need to
offer their customers access to accounts through post offices
our understanding is that some of them are objecting to how Post
Office Limited is going into the sale of financial products. On
the one hand they are not allowing them to access services and
on the other they are complaining behind the scenes that this
is unfair competition at a time when there have been over 11,000
closures of banks and building society branches in the past and
there are another 1,800 that we understand will take place over
the next five years. It is critical that these banks are persuaded,
encouraged, shamed, into doing the same as all of their competitors
have done.
Q37 Linda Perham: Looking at operational
efficiency, one of your submissions says that you think DMBs lack
managerial resource and you mentioned 3,000 managerial jobs had
been lost within the Royal Mail Group. Are most of those in post
offices or are they spread across the group?
Dr Skyte: They are spread across
the group. There would be fewer within Post Office Limited than
there have been on the letters side because the letters side is
a bigger business. Our view, unlike First World War generals,
is that it is not about fighting the last battle, whether it is
over post office card accounts or it is over the change to direct
payments, although the way that has been handled we can comment
and criticise, but it is how you move forward to the future that
is as important if not more important. The role of managers is
critical in changing it from being a transaction based organisation
which is reactive in the main to one that is going to be sales
orientated and that is going to be proactive and the managers
are critical in that. Managers are paid less than £20,000
a year and they are under a lot of pressure. There is a need to
provide a more incentivised approach to managers and staff to
help that. The current reward schemes within Post Office Limited
are ineffective and that needs to change.
Q38 Linda Perham: You were talking about
experienced managers leaving the business and high levels of stress
and illness amongst post office managers as a result of working
excessive hours and you make the point that POL needs to invest
in its staff. If they are losing £70 million a year through
the Crown post office network, how do you reconcile that fact
with paying more staff which would improve efficiency and help
those already there with the need to save costs?
Dr Skyte: I think it is quite
possible to do that because the way to look at productivity and
efficiency is not to do it in the way too many employers do, which
is to look at what goes in, ie the cost and the numbers of employees,
but you should also look at what comes out. It is equally possible
to increase productivity and efficiency and possibly either have
the same number of staff or employ more staff if you are producing
more revenue and, in particular, move towards new products and
services which there are some signs that Post Office Limited has
been starting to be successful in, for example in foreign transactions,
e-top-ups and so on, because then you can actually improve productivity
and efficiency without necessarily seeing that as a slash and
burn approach of reducing the number of employees in general or
reducing the pay and conditions. It is a question of how much
comes out and it is increasing the footfall, the number of people
that go through the door and the number of people that buy products
and services rather than just carrying out transactions. One of
the important things is investment in the network of post offices.
We are opposed, for example, to going back to a five minute queuing
indicator as a measure of performance on its own because that
puts pressures on managers and that also discourages the opportunity
to sell and market new products and services. Some of the initial
thoughts need to be developed because they have not necessarily
worked in the right way. Some of the new offices in Luton and
in North Finchley in London may generate different ways of doing
that. For example, rather than just having a five minute queuing
time you could split the queues so that somebody queuing up just
to get some stamps or to post a package or something is not stuck
behind somebody that is getting his Lotto, you would direct them
in a different direction. You could increase the throughput and
possibly reduce the queuing time and try and become more efficient
and productive. There needs to be overall a more commercially-based
approach. Building societies' staff are clearly cross-selling
products more than the post office branches are and there needs
to be more of that.
Q39 Linda Perham: Do your views on management
of the directly managed branches conflict with those of the CWU
as far as you know?
Dr Skyte: The only difference
that I saw was that we are not into reducing the five minute queuing
time and we put some evidence in about improving efficiency and
productivity. I will just explain why there is a difference. When
there was this five minute queuing performance indicator it put
incredible pressure on the managers because the way in which the
Post Office had approached it was not that they brought in more
staff but that they had the manager spending more and more of
his/her time serving on the counter which meant that they were
not managing the office. It is important that the managers are
there to manage, which is their role, rather than spending more
time actually on the counter.
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