When Royal Mail was losing £1m a day in 2002, due to a combination of increased costs and declining quality of service, few observers believed that, within three years, it would be making £400m a year profit.
But the organisation, which employs 220,000 staff, is fully confident of meeting the ambitious target set out in chairman Allan Leighton’s three-year ‘Renewal Plan’ this April.
Much of the turnaround can be attributed to widespread job cuts – 34,300 employees have left since April 2002 – and the controversial scrapping of the second daily delivery. But a complete overhaul in the HR function has also played a key role.
As Tony McCarthy revealed in Personnel Today (25 January), the first stage of the HR revamp has seen cost savings of £57m, along with the introduction of a more professional approach to personnel issues.
The size of the department has dropped from 3,700 to 2,400 people, while HR managers have been asked to be far more accountable, with weekly ratings and league tables on performance, in areas such as sickness absence.
But while slashing this level of spend in two years is no mean feat, the Royal Mail HR team is in no mood to rest on its laurels.
Removing duplication across the organisation and making process improvements were the vital first steps. The next stage, however, is where it really gets interesting, according to Kevin Green, who was brought into the organisation by McCarthy in October 2003.
“We have done the broad brush, now we want to get narrower and deeper,” he said. “We have done the low hanging fruit, and now it is about the cultural change – the clever stuff.”
However, it is important not to underestimate the importance of doing the so-called “basic stuff”, such as creating a shared service for repetitive tasks and cutting unnecessary roles, according to HR consultant Bruce Warman.
“You have to go for low-hanging fruit sometimes,” Warman said. “Getting rid of duplication allows you to become more strategic. In doing this, HR directors show that they are in tune with the business – able to ‘walk the walk’ as well as ‘talk the talk’.”
Mike Emmott, employee relations adviser at the Chartered Institute of Personnel and Development, who wrote a 2004 report on Royal Mail’s HR policies, agreed. “Establishing credibility in HR is key, although it takes time,” he told Personnel Today.
“You have to strengthen the relationship between HR and the employees.”
Green admitted that changing the perception of the function was a priority.
“Culturally, HR was very much viewed as police and industrial relations,” he said. “What we are trying to do is shift that culture, so HR is much more forward thinking.”
While Royal Mail’s HR team is under no illusion about the size of the task, Green said it had also created opportunities. “The amount of scope to improve things is huge,” he said. “But it has given us a chance to attract talent.”
However, McCarthy admitted that not everyone is so keen.
“It is interesting – some are attracted by the size of the challenge, while others are spooked by it,” he said.
Negative press is something that Royal Mail has become accustomed to over the past few years. In 2004, controversy surrounded the use of inadequately trained and inexperienced casual workers with low levels of English language who were struggling to deliver mail in London.
McCarthy admitted the move to appoint thousands of casuals, to cover job cut targets without redundancies, was ill advised.
“It was never going to work,” he said. “By the time we reached agreement with the unions on job cuts, we had 20,000 casuals. This meant longer-serving employees felt devalued. We had to put this right.”
The number of casual staff has now been slashed to 2,500 to help boost quality of service, while Royal Mail is working closely with the unions to set up a pool of experienced temporary staff.
A much tighter vetting procedure has also been introduced to weed out poor applicants and those with criminal records.
Further process improvements will be revealed during the next stage of the business strategy, currently being thrashed out by industry regulator Postcomm and the Department of Trade and Industry.
A successful strategy – in HR and beyond – will be vital as Royal Mail attempts to turn the operation into a customer-focused business by 2006-2007, when it will face rival bids for delivery contracts.
According to Green, the strategy “is pretty well defined”, and he is confident that it will be successful.
“We are the last great British institution to go through change,” he said. “However, the management team have staked their reputations on transforming the business.”
Kevin Green will be speaking at Personnel Today’s HR Directors Club event in London on 17 March. For further details, go to www.hrdirectorsclub.com