Royal Mail slashes HR budget by £57m

Royal Mail has reduced its HR spend by £57m in two years as part of a massive organisational overhaul, senior HR executives have revealed.

Speaking exclusively to Personnel Today, Royal Mail group HR director Tony McCarthy and people and organisational development director, Kevin Green, said that the HR budget has been cut from £173m at the start of 2003, to £116m.

As part of the overhaul, the HR team has been slashed from 3,700 to 2,400 people, through 1,400 job cuts and 100 new appointments. The HR to employee ratio has improved from 1:75 to 1:130.

Other savings have been driven by removing duplication and process improvements in areas such as sickness absence and training.

Former BAE Systems HR director McCarthy, who joined Royal Mail in January 2003, said he was brought in by chairman Allan Leighton to modernise the organisation and create “a world-class HR function”. He quickly realised the scale of the challenge.

“The size of the department did not make any sense and HR was not aligned to the business,” he said. “A vast number of senior HR people were accountants. This did not mean they were not able people, but it meant top-quality processes were not in place.”

The lack of a coherent HR strategy was illustrated by the disparate spread of HR professionals across the organisation, McCarthy said.

“The letters business has 200,000 employees in 31 areas and each area had people doing HR activity,” he said. “We had 1,000 HR people purely focusing on the recruitment of delivery staff.”

McCarthy and his new HR team put together a three-point plan to remove inefficiencies: Putting HR ‘business partners’ into each area; pulling out people doing repeatable tasks and creating a central shared service; and bringing experts into the head office HR team to focus on strategy.

McCarthy admitted that a lot of this was “basic stuff”, but he said that it had never been done before [at Royal Mail]. However, he was keen to point out that he was not being critical of the previous HR department staff, many of whom are still at Royal Mail.

“This is not to say HR was bad – it was just working under a different regime,” he said. “We have a lot of long-service people who are proud to work here.”

For more on Kevin Green and Tony McCarthy, see 1 February 2005 issue of Personnel Today

CIPD expert says ‘HR was isolated’

The Royal Mail’s HR department needed a major overhaul because the organisation was in crisis, with problems “staring it in the face”, according to a leading HR expert.

Mike Emmott, CIPD employee relations adviser, said: “HR was isolated from the business and had very little strategic input.”

But he congratulated the organisation on achieving the first part of the transformation, although he warned that there were still challenges ahead.

“It is not out of the woods yet, although it is on the right track,” Emmott said.

“Being strategic is the next challenge, making sure people are factored in to the big decisions.”

The most difficult part of the restructuring will be moving away from the traditional defensive mode of HR towards a business approach, he said.

Other large organisations have used a similar model to restructure their HR departments, with a focus on business partnering and change management, he added.

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