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Briefing for 1-2-1 with Tim Parker
12 January 2016
Potential Agenda
Bol
L300
PPNnNANPWNPE
Paddington
Industrial Relations
NFSP
Board Agenda
Mails
Sparrow
Visits to Flood affected Branches
1) Paddington (with Kevin)
See separate brief at end
2) Industrial Relations
Progress and timetable for ‘Big Five’ change activities
© Our ‘Big Five’ change activities are now all underway and on schedule as follows:
°
Pensions: Consultation on closing the defined benefit pension scheme to future
accrual starts on 2"¢ February following extensive union consultation.
Paddington/Crown: Colleagues in affected Crown branches are being briefed on
19" January about our franchising plans. Unfortunately the CWU has already
‘leaked’ the meeting invitation and speculate that it will be about franchising and
closures. We have deployed our leak strategy, issued Comms to all branches and
will continue as planned.
Support Services transformation: This is on track — Dearne is a ‘hotspot’ and the
union has a mandate for strike action following a ballot before Xmas.
Supply Chain: Our in-year savings activity is on track with the only sticking point
being the proposed closure of Leeds depot, which the CWU is opposing and has
held two local strikes over. We have amended our offer to staff (so they can take
VR rather than be compelled to transfer to Sheffield) in response to colleague
and union feedback. IRIS work continues and will not be briefed to colleagues
until it is far more certain. We took unions through the strategic challenge on
Supply Chain in September of last year and will continue to engage them.
Terms & Conditions (aka ‘Crescent’) — managing and reducing our cost base will
play in to the pay negotiations coming up shortly (see note below).
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Impending Pay Negotiations
Existing pay deals expire for all managers in June, and for Crown CWU grades in March.
The IR team is working with operational leads and Finance to develop our mandates and
negotiating approaches for both. For reference, the previous managers’ pay deal
covered 4 years and was a combination of transformational cash payments and a
consolidated pay rise of 3%. The most recent Crown CWU deal was a 1.9% consolidated
pay rise.
For reference, CPI inflation is 0.1% and RPI is at 1.1%. Public sector pay is capped at 1%
and the retail sector is forecast to see c2% pay rises in 2016.
Issues with CWU and our IR Framework
The CWU is ignoring important aspects of our agreed Collective Engagement & Industrial
Relations Framework (CEIRF), notably the Dispute Resolution Procedure designed to
avoid a rush to industrial action. The result was five separate strike ballots in the run-
up Christmas, three of which (Crowns regarding Christmas Eve opening, Leeds Supply
Chain depot regarding proposed closure and St Helens Call Centre also regarding
proposed closure) results in strikes on Christmas Eve. These were well-handled with no
loss of service at Leeds or St Helens and 87% of Crown branches open, with 48% of staff
on strike (considerably less than the union has secured in previous strikes).
We (PV) has written to Dave Ward (Gen Sec, CWU) making clear this is untenable and we
are meeting Dave and Terry Pullinger (Andy’s boss) in the next week or so. The objective
is to secure a commitment to respect the agreement so it works as intended. If this is
not forthcoming we retain the option of serving notice on it.
3) NFSP
Immediate Issues
Tensions arose at the beginning of December as a result of George’s presentation of the
NFSP Annual Plan (required to enable the annual grant payments) and subsequent
reluctance to agree to the suggested additional requirements
This has resulted in NFSP threatening to withdraw from the Grant Agreement unless POL
meets their demands of concessions on the agreement (membership levels, VAT) and
various business initiatives (ATM fee reduction, cost recovery for conformance training)
and requesting a £20m (£10m this year, £10m next) “stabilisation” payment to
postmasters
Our assessment is that George has convinced his EC he can achieve these demands and
therefore boxed himself into very difficult position, albeit this has been couched with
significant emotion from his EC around the wider relationship and challenges we are
facing
We have sought to resolve this in a cooperative manner (with an aspiration to help
George thought this by being flexible on meeting some of his demands but not the £20m
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payment) and without resorting to a confrontational approach in order to maintain our
preferred position of a collaborative relationship with NFSP. This has included several
conversations with George (including 121 with you) and culminated in a discussion with
the NFSP EC on 11/1 (PV, NH,NB) however it is clear that this is very finely balanced and
there is a risk that NFSP will withdraw — albeit they themselves recognise this would
probably mean their organisation only survive for a further 12 to 18 months
Should this arise they have advised they may challenge the NT programme around the
removal of fixed remuneration and the contractual restrictions policy that prevent
postmasters selling competing products in their branches. We believe we have a strong
legal position to defend these aspects but it could result in significant stakeholder
disruption.
They are discussing this over the next 2 days and we expect to be advised when a
decision has been made
Longer term
We believe a collaborative relationship with a representative trade association is good
for POL and remain committed to this being NFSP but in the event of this happening we
would look to establish an alternative organisation e.g. Postmaster Consultative Council
and/or work more closely with an existing organisation e.g. Association of Convenience
Stores.
We developed a high level view of the former during the Grant Agreement negotiation
and our starting point would be to dust this off and detail thoroughly. We would attract
membership to this by potentially utilising some of the funding already identified to
support the NFSP grants and membership would be drawn from the same range of
operator types we envisaged the NFSP representing. The role of this organisation would
be to provide, through a combination of (e.g. quarterly) meetings and working groups:
© a forum for discussion on Post Office issues
co information related to Post Office business change
co aplatform for operator input into relevant aspects of business design —
transaction, operation, sales, marketing
4) Board Agenda
Next week’s Board meeting will include:
A report on P9 performance — in summary:
o Strong performance in mails at peak (but risks for Q4 emerging)
co Recovery in some areas of FS driving performance beyond reforecast— notably
home and life insurance; and credit card; alongside continued strength with
Moneygram
o Mortgages and savings struggling
Oo. Travel insurance remains challenging
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e Anupdate on the Mails Strategy:
0. This will include an update on the potential acquisition of P2G, which GE
discussed yesterday and where work to assess whether this represents a
worthwhile investment continues; and
© Preparations for negotiations with RMG on the MDA.
e An Update on Supply Chain — which again was discussed by GE yesterday.
e An opportunity for the Board to input on discussions on the 2016/17 Budget and outlook
for the 3YP, ahead of decisions later in the year; and more strategic discussions in March
and June respectively
5) Bol
You are due to see Nick at 4.15 today for a substantive update, therefore may be premature
to raise. However, in the meantime, Henk reports that discussions with the Bank continue
on:
e ashort term deal covering an underpin for savings; and POL deriving greater value from
FRES; and
e the value of a 2-4 year run off period post 2023 as a contingency should a longer term
deal not be available.
6) Sparrow
The latest update is:
e Yesterday, Tim Parker received the draft report into the adequacy of the Scheme’s
processes from Jonathan Swift QC. Though we have not had sight of the report, Jane
MacLeod has a meeting with Tim this afternoon at 4pm, during which I would expect it
to be discussed.
e There is no further news in respect of a potential legal action.
e The escalation of our complaint, in respect of the August Panorama Broadcast, was sent
to BBC Editorial Complaints Unit last night.
7) 1300
e We are getting our top 300 managers together in a new leadership forum: to create a
drumbeat of communications and activity throughout the year.
e The aim is to drive leadership behaviour, empower and inspire colleagues and get them
passionate about the detail of delivery: and critically to engage their teams in both the
hard realities and the hearts and minds appeal of our change.
e First event takes place Jan 26: Paula keynote, business update, external speaker (Ellis
Watson, CEO of DC Thomson, ex-Greyhound turnaround), sessions on customer, IT
transformation, communications.
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e Follow up is critical: there will be a clear leadership proposition (our ‘covenant’ with
senior leaders) and materials (our transformation narrative, vision framework).
8) Visits to Flood Affected Branches
You may want to share some of your experience from Friday’s visits. Your notes are
attached.
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Paddington — High level brief
1. Project Paddington concerns the potential to Franchise 31 Crown branches and to Host
44 within WHS stores to add to their current 108 Franchise branch estate.
2. Hosting is where the Crown continues to operate within a 3 party retail premises with
the benefits being a better retail pitch for considerably less rent and other property
overheads.
3. The deal shape has been optimised; where Franchising is better financially for POL this
has been chosen and the same goes for Hosting.
4. Should Franchise become a better alternative once we have entered into a Host
agreement, there will be a clause within the contract allowing either WHS or another
Franchise partner to operate the branch as a Franchise.
5. The third aspect of the deal is to introduce greater brand prominence in all Post Offices
located within a WHS store (108 existing franchises and 75 new franchise / hosts), giving
us 50:50 facia branding. This is expected to both protect POL income following a move
of branch and build brand awareness where this has been lost as part of past deals.
6. The GE signed off a negotiating mandate in September and we are operating well within
this.
7. Both sides are ready to engage contract lawyers, and both negotiating teams believe
they can get to a signed deal before the end of March which will be worth c.£3m in
annual benefits to POL.
8. We need to advertise the franchise branches next week in order to hit a deal signature
in March. Advertising them gives the wider market 28 days to respond, and then time
for us to fairly assess any alternative applicants before March.
9. Advertising now means we must brief our unions this week and our staff in advance of
the advert going live. The IR response to this is expected to be robust and this may
include a ballot for industrial action once we move to formal staff and public
consultation which is expected to be in April 2016. This is reflected in the IR Heatmap
and I/A contingency plans are already in place.
10. If we do not advertise now, then we lose the chance to finalise a multi-branch contract
before the end of the financial year. Time is of the essence for four reasons. These are:
a. The benefits at stake.
b. Some procurement law changes which come into effect in April.
c. Our Crown break-even objective at the end of this financial year; and
d. Co-ordination of the deal with WHSmith’s half-year results in early April.
11. The changes in procurement law will affect multi-branch, large- scale, franchising deals
like this one. If we delay signing the deal beyond March, the procurement will become
much less flexible and would take an additional six months at least.
12. In our experience, WHSmith are the only national retail chain who can work with;
a. the low returns and large space requirements of franchised Crowns;
b. the need to provide high-street locations close to the vacated Crown;
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c. the risk of Crown staff transferring to them under TUPE; and
d. the public and political pressures which come during consultation
13. Although there will be delivery risks, this partnership is the best possible one for making
significant changes to the Crown network.
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Visits to Flood Affected Branches
Just a few quick reflections after the flood visits:
© Lesley McNulty (BAU regional Manager for 3000+ branches); v committed and has said she
will review our crisis response procedures. We responded and continue to do so but not as
well as we'd wish. I'd like you to encourage that review and best practice that should come
from it. (I'm sure she'll raise this: we need a best practice regarding safes - many different
models of course! - le., what to do with them before potential flooding/after.) « with banks
closing branches - getting a flooded PO reopened is even more important, we should know
which POs are now the ‘banks’ for their communities.
© Our own field teams are working long and hard: can we recognise some of the individuals
who are going above and beyond?
Hebdon Bridge - flood damage
¢ MOD (!?) grade 1 safe took two and a half days to get into. (Involving a hammer and a
stethoscope - I know - 'you could write a book".) ¢ PM Satnam Singh working till 10/11pm
every night with help from colleagues and townsfolk to clean a big PO (has a young family
and had to miss seeing them over Christmas and since) * Local butcher had deposited his
entire Christmas meat takings on Christmas Eve but because of Leeds depot strike, they and
the relevant paperwork were in the safe when the branch flooded on Boxing Day! Worried
butcher, his Slaughter house needed paying etc etc - anyway when our MOD safe was finally
opened courtesy of the hammer and stethoscope, whilst the money was ruined the
paperwork was dried out and thanks to Satnam's persistence on behalf of his SME customer
and another branch (Sowerby Bridge who remmed it in) and Chesterfield colleagues who
were looking out for it, we avoided the butcher getting into difficulty (he was about to
cancel a holiday!
© Part of RM building - they lost 12 vans in the floods
Hebdon Bridge - NT
© Hebdon Bridge is a fairly wealthy town and I'd be interested in understanding our views on
the PM, how successful the branch is and how much more it could do.
° Satnam has (just) signed to convert. And we will be putting in the NT refurb. However, as
the branch is high flood risk (he can't get insurance that covers flood damage), in my view
we would be better supporting his request to keep the (beautiful) solid oak counters, have a
qualified joiner fit a new top, make one of them DDA compliant, etc as we refurbish the
branch. It is a listed building and I'm sure it would go down well in the town.
If we don't, we'll get significant town opposition during the consultation, to removing
better and infinitely nicer counters; le., worth noting it will affect our reputation.
« My principle reason for supporting Satnam's request however, is that having seen the
devastation just up the road in Mytholmroyd, where all the MDF counters will need to be
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scrapped because they warped, buckled and disintegrated, keeping the flood-resistant oak
(which needed no more than a clean!), is likely to be the best and most cost-effective long-
term option.
Can you get this relooked at? And let me know?
Mytholmroyd
* Peter and Janet Brookes running a v small one counter PO, who clearly give good service
to their community. The floods were above the ceiling level of the PO and they have lost all
their stock (again no insurance claims possible) but with grit and determination are just
getting on with it. The building next door collapsed and half was washed away. Peter is not
completely well and you could see the strain; but his wife (Janet the PM) is a rock. They had
to abandon their flat above the PO, in a boat on Boxing Day; and she left clutching the PO
money in a satchel "I know were not supposed to ...but no looters were going to get the PO
money" she said proudly.
¢ worked long hours and have just reopened but the few fixtures that are still standing need
replacing * could have opened earlier but having taken the money from the safe (they'd
kept it upstairs in their flat anticipating the flood), they then closed the safe! - and it took a
long time to re-open full of sludge!
Just a few hours in the life of Post Office limited!