In Strictest Confidence
POST OFFICE LTD BOARD
Branch Support Programme
1. Purpose
The purpose of this paper is to:
14
2. Background
24
Update the Post Office Board on the Branch Support Programme.
POL00027454
POL00027454
The Branch Support Programme was initiated in July 2013 to review the level of
support the Post Office provided to subpostmasters to operate their post offices
and to introduce improved levels of support having taken feedback from
subpostmasters.
2.2 As the findings of the Branch Support Programme unfolded it became evident that
the scope of this programme needed to be wider to ensure that the required
cultural change is to be embedded within the Post Office.
3. Branch Support Programme — Purpose and Scope
3.1
The purpose of the Branch Support Programme is to improve the
effectiveness and efficiency of the support we provide to our subpostmasters
and operators in the running of their Post Offices from an operational and
engagement perspective.
3.2
What is in and out of the scope of this programme is detailed below:
In Scope
Out of Scope
Cash, stock & stores management
Finance Service Centre (FSC)
NBSC & HSD
Training — design & delivery
Audit — design & delivery
Communications
Structure design for the network and admin
support function touch points
IT
Spmr/operator selection process
Spmr contract breaches
Sales support — delivery methods
Product design, delivery & Comms
Crown — where the touch points are the
same for the Crown network then these are
in scope
Refinement of network operating models
Crown network as an entity
Supply Chain as an entity
NTP as an entity
Wider business organisational design
4. Programme Outputs — Quick Wins
Branch Support Programme Update — Feb 2014 Kevin Gilliland
Page 1 of 7
20" February 2014
POL00027454
POL00027454
In Strictest Confidence
In the process of mapping the “As is” and “To be” processes “Quick wins” have already
been / will be implemented by end March 2014. Our focus has been on addressing the
key issues raised in the Second Sight interim report and some of the themes from the
Mediation Scheme cases (which is the subject of a separate Board paper), although a
number of these improvements were already in train within the Post Office.
41 Subpostmaster Contract Breaches - we have reviewed our approach to how
we respond to material contract breaches by subpostmasters and made the
following improvements:
« Where a potential breach of contract has occurred our approach is to
work with the subpostmaster to establish the facts and then take the
appropriate action, keeping the subpostmaster in post and the branch
operational, unless in the usually low number of cases where not to
precautionary suspend the subpostmaster would carry a high risk of
damage to POL’s reputation and / or a high risk to POL’s assets or where
a customer has been directly involved in a potential fraud by the
subpostmaster. This has resulted in a significant reduction in
precautionary suspension and termination cases as evidenced at
appendix 1. Examples of some of the cases are detailed at appendix 2.
These branches are then monitored so if the initial problem were to
reoccur we can respond quickly.
e If the precautionary suspension rate were to continue at the Q3 run rate of
14 i.e. 56 p.a. this would result in a reduction of c.900 process hours p.a.
This could increase to a saving of 1400 process hours p.a. if appeals
were to continue at emerging run rate of 12 p.a.
« Based on what we are seeing from recent cases, this new approach
should have a positive impact on the recovery of losses, as for the
subpostmaster to remain in post they would need to either make good the
loss in full or agree repayment terms. A sample check of seven recent
cases showed 60% of loss paid in total and repayment terms agreed for
40%. The net effect on P&L for former and current agent debt is a credit
of £235k at period 10 (cumulative position) and whilst there would be
other factors affecting this position the new precautionary suspension
process will be one of the contributing factors.
e In March we are introducing suspended termination, a new category of
action in dealing with material breaches of contract. This is where the
subpostmaster has materially breached the contract and would have
previously had their contract terminated. The new Suspended
Termination category is where mitigating circumstances are such that the
decision is to award a suspended termination is made; the subpostmaster
remains in post on the condition that if a further material breach of
contract occurs in an agreed period (set by the nature of the first breach
and typically a year) then the contract termination may be triggered.
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 2 of 7
20" February 2014
POL00027454
POL00027454
In Strictest Confidence
4.2 Early Identification Tool - this is a real-time data tool from Fujistu.
It will support earlier identification and intervention of accounting and
transactional anomalies which could be an indicator of non-conformance
or fraud.
The real-time element will enable analysis to be undertaken at the point it
happens rather than waiting for historical data to be gathered.
The pilot called HORice will be run in March and if the results are as we
expect this tool could highlight problems and associated losses at a
significantly earlier stage; there have been specific historical cases of
significant losses (for example £185k) where having this data would have
identified a pattern within one to two months rather than after 1 year.
4.3 Accounting Losses Support — we have refined our processes to react more
responsively to reports of unexplained losses from subpostmasters:
Where unexplained accounting discrepancies are raised by
subpostmasters either via NBSC or some other route e.g. flag case
these are passed to the Branch Support Team for resolution.
The Branch Support team will assess whether the case is satisfactorily
closed or whether further training is required.
If further training is required the Branch Support team will action this.
If further investigation is required the Branch Support team will pass to
the Mediation Case Managers for assessment and further investigation
as appropriate.
Longer term, calls to NBSC will be categorised and analysed
to establish root cause and resolution.
44 Training - we have improved the training approach by:
Introducing an introductory call to the new subpostmaster two weeks
before they take up post.
Having earlier contact with the Subpostmaster following their initial
training and replacing the month 1 telephone call with a branch visit.
Reviewing the effectiveness of the balancing work-aid to help
subpostmasters identify and hopefully resolve balancing problems
earlier.
Longer term, we are considering options on how best to optimise e-
learning in our initial training to subpostmasters and on an ongoing
basis.
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 3 of 7
20" February 2014
POL00027454
POL00027454
In Strictest Confidence
Programme Outputs - Longer Term
5.1 The Branch Support Programme has 9 work streams that capture all the
touch points the subpostmaster has with Post Office in running their branch.
These are: pre-appointment process; operational support; physical support;
performance management; training; communication; IT; early
warning/intervention approach; leavers process.
5.2 The milestone plan including costs and benefits for each of the workstreams
will be completed by the end of March 2014, with interdependencies
mapped.
5.3 The proposed ways of working for each workstream will include an ongoing
review mechanism that ensures continuous improvement is embedded
into business as usual.
Commercial Impact/Costs
6.1 The business case for this Programme is being developed and will be
presented to POLIC for consideration in due course. Indicatively, benefits of c.
£9m have been identified, to be realised over 14/15 and 15/16. However, as
the majority of the benefits relate to headcount reduction, plans and therefore
the associated cost of realising them (e.g. VR costs) are yet to be determined.
This will be worked through following the completion of the workstream
milestone plans at the end of March. As well as affordability, the
implementation of the Programme will also be subject to the plans of the wider
Business Transformation Programme.
Success Criteria
71 The Programme has two main key performance indicators (KPIs) — Agent
Engagement and Operational Cost Reduction:
« Agent Engagement - the formal measure is the subpostmaster annual
engagement survey and in particular the support category of the survey.
This will be supplemented with Pulse surveys undertaken at quarterly
intervals.
e Operational Cost Reduction - the cost of support to the network will be
baselined as part of this Programme. Headline numbers suggest that
40% of the current support to the network is spent on recovery support ie
correcting things that haven't been done right first time
7.2 Each of the nine workstreams will have performance measurements that feed
into the two main KPIs.
Interdependencies
8.1 Other business programmes identified as having key interdependencies with
this Programme are:
e Initial Complaint Review and Mediation Scheme.
Sponsor — Chris Aujard. Programme led by Belinda Crowe
¢ Network Transformation,
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 4 of 7
20" February 2014
POL00027454
POL00027454
In Strictest Confidence
Sponsor — Kevin Gilliland. Neil Ennis, Programme Director.
e Business Transformation.
Sponsor — Lesley Sewell. Programme led by Brian Deveney.
9. Key Stakeholder Communication
9.1 The NFSP — has been engaged on two fronts:
e Asa stakeholder in the Branch Support Programme and has input to the
gap analysis stage of the process.
e In the high level thinking on a revised approach to Subpostmaster material
breaches of contract.
9.2 Wider Communications — the development of branch communication plan is
underway to listen and respond across the broad business spectrum. This
includes:
«The link between the Branch Support Programme and the Initial Mediation
Scheme with any improvement opportunity being impact tested and/or
aligned with “The Scheme” before being implemented.
¢ The Branch User Forum
e The Agent Engagement Survey.
10. Governance
10.1 The Branch Support Programme will operate with a formal programmatic
approach supported by the necessary governance and resource. The rationale
for this is that a cultural change in behaviours will be required and therefore the
right support in each of the workstreams and business areas will be needed to
ensure that the changes are managed effectively and successfully embedded
within the organisation with pace.
10.2 The Programme Board will meet monthly with monthly updates provided to
ExCo and POL Board.
11. Recommendations
The Board is asked to:
11.1. Note the update and actions set out above.
Kevin Gilliland
20" Feb 2014
Appendix 1
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 5 of 7
20" February 2014
2008708
Bw
20
m@ ae
$0
re)
10
ot
2ont08 zoe
Be
aa
1
180
Ps
o. .
aero
‘toupee -_—
Sanveaty tesinaticn fa
sesignd in doi Teen 6
fetastied as
POL00027454
POL00027454
In Strictest Confidence
Agents suspended
a tes
as
u
Ne
EE AYR Pop trEed ‘WOENIA Periods 2 2014/14 Peringts 7
tos ie
oer suspertea
poo = eR wa 2
ina
woeyia
ye ast +e Ea
8 Ea Ed ie
a ae n te
4a sa re
Branch Support Programme Update — Feb 2014 Kevin Gilliland
20" February 2014
em Sse esuny Teva:
se esignerd to Avot Satenition,
Periods 110.6 Period 708
nom Rad
ANE
i
4
‘
2
Page 6 of 7
POL00027454
POL00027454
In Strictest Confidence
Appendix 2
Subpostmaster Contract Breaches —- New Approach Examples
No Precautionary Suspension Examples — these are where under the previous approach
precautionary suspensions would have happened.
Date of Audit I Decision in respect of Contract breach
Audit result was £1112.98 short. As this was over the £1K threshold this
Sept 2013 would have previously led to a precautionary suspension pending
Risk Based investigation. Three cheques totalling £800 were missing — the response from
Audit Spmr was vague in relation to where they were. Rather than suspend, upon
making good the full amount of the loss on the day the branch was re-opened
and service maintained. The Spmr later attended a meeting with the Contracts
Advisor in relation to the contract breach.
Audit result was £5401.44 short which would have led to automatic
October 2013 I precautionary suspension. Spmr claimed historic stamp shortage (2008) and
Risk Based part Transaction Correction had been disputed. The loss was made good on
Audit day. The Spmr was kept in post. The investigation and the interview with the
Spmr taking place at a later date. Written warning was issued.
Audit result was £17,818.42 short. It was clear from Field Support Advisor
November (auditor) on site that this was down to OIC who failed to appear with safe keys
2013 which would have previously led to automatic precautionary suspension. The
Audit Spmr accepted full responsibility and undertook to repay at earliest
following cash I opportunity in full (received within 7 days). The Spmr was kept in post and
check interviewed at a later date. The Spmr has since left as part of a commercial
escalation transfer.
Audit result was £36148.04 short. Staff member had been manipulating
December cheques within the account — these cheques were not being received by the
2013 processing centre. The staff member was son of the Spmr who had left him in
Special charge without proper controls. The Spmr accepted full responsibility for loss,
Request Audit I removed her son from the branch and entered into repayment arrangements
with us to repay the loss. Previously the Spmr would have been precautionary
suspended whilst the investigation was completed but in this instance the
investigation was but was done on the day. As the Spmr is a pluralist if
suspended she would have been suspended from both branches.
Precautionary Suspension Examples — these are cases that under the new approach
warrant precautionary suspension
Date of Audit I Decision in respect of Contract breach
Audit result was £33,388.14 short. During the audit the Spmr admitted taking
November £29k and giving it to his brother to buy a car. Precautionary suspension took
2013 place and following interview with Contract Advisor the Spmr’s contract was
Risk Based terminated. The debt is still outstanding. A temporary Spmr is running the
Audit branch.
Audit result was £7488.00 short. The Spmr admitted misuse of funds to keep
September business running as struggling to maintain. He was precautionary suspended
2013 because no reasonable explanation and funds would have continued to be at
Risk Based risk. He later resigned to avoid termination
Audit
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 7 of 7
20" February 2014