Present:
In attendance:
EXECUTIVE COMMITTEE
AGENDA
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for the meeting to be held on 16 October 2014 in Room 501
Paula Vennells (Chair), Gavin Lambert, Lesley Sewell, Chris Day, Kevin Gilliland, Neil Hayward,
Nick Kennett, Alwen Lyons, Martin George, Chris Aujard, David Ryan, Alana Renner (deputising
for Mark Davies)
Angela Van-Den-Bogerd, Henk Van Hulle, Giles Dunning
Apologies: Mark Davies
Start time : 09.15hrs
End: 17.00hrs
Time Item. ExCo Sponsor/Presenter
09.15 - 10.15 Risk Appetite Chris Aujard
10.15 -11.00 Project Titan Nick Kennett
11.00-11.15 I BREAK
11.15 -12.45 P&E Strategy Neil Hayward
12.45 - 13.15 Network update pre-Board Kevin Gilliland
13.15 -14.15 Digital i-clinic working lunch Giles Dunning
14.15 - 14.45 Team talk live planning session Alana Renner
14.45 - 15.00 EUC Lesley Sewell
15.00-15.10 I BREAK
15.10 - 15.40 Funeral Plan - Product sign off Henk Van Hulle
15.40 - 16.10 Q1 BREC Debrief Martin George
16.10 - 16.25 Verbal update on Sparrow Angela Van-Den-Bogerd/Chris Aujard
16.25 - 16.40 Verbal Industrial Relations update Neil Hayward
16.40 -16.45 Noting papers for the Board:
e Significant Litigation Report
e Health and Safety Report
e Cyber Security & Information Assurance
16.45-17.00 I AOB
17.00 CLOSE
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POST OFFICE LIMITED EXECUTIVE COMMITTEE
RISK SESSION (Risk Appetite)
Purpose
The purpose of this paper is to invite the Executive Committee to:
¢ Consider and approve the proposed risk appetite statements (appendix 1).
¢ Finalise the risk appetite proposal for subsequent discussion at the ARC.
Background
The Executive Committee received a presentation in August setting out the purpose of
defining risk appetite and outlining a high level plan for the development of a risk
appetite statement. This paper forms part of this overall development process.
The purpose of a risk appetite statement is to provide a framework for risk-taking for
the business which forms an integral part of investment and decision making.
Establishing a risk appetite statement is a key responsibility of the Post Office Board,
albeit informed by the executive.
The risk team have developed a prototype version which has been discussed with
Executive Committee members and subject matter experts within the Senior
Leadership Team (SLT). The resulting draft, attached for consideration, represents a
‘beta’ version which will necessarily be developed and improved over time as its
effectiveness and efficacy is tested in the context of ‘live’ business decisions.
The prototype risk appetite statement combined seven key categories of risk (see
appendix 2). These are consistent with best practice guidelines and should be broad
enough to cover most types of risk within the business. It is important that the resultant
tisk appetite statement provides a practical tool to support decision making and
therefore it is prudent to limit the number of risk categories; however, there is no fixed
rule as to the number of categories and the final set should be determined by business
need rather than arbitrary theory. For example, an additional risk category (Corporate
Affairs) has been suggested and should be considered for inclusion as part of this
discussion and evaluation process.
As part of the development process, data was gathered on potential metrics and
indicators that could be used to measure the effectiveness of the appetite parameters.
For example, under legal & regulatory risk we will use the number of occasions that we
are obliged to notify the Information Commissioner's Office of data breaches as a key
metric in evaluating whether we are operating within our parameters of risk appetite or
not. These indicators and metrics are not required for the initial phase of statement
definition but will subsequently be used to operationalise the statements.
Reputational risk has not been included as a discrete area of risk because the risk
categories focus on the causes of risk and reputational risk or brand damage is an
outcome or consequence of one or more of these causes.
Discussion Process
In order to give structure to the discussion the risk team have developed some
scenarios to enable the Exco to test the statements and refine them from a practicable
and operational perspective. The scenarios will be introduced at the meeting.
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Each scenario will be tested against the levels of appetite proposed under each
category to confirm or amend the level as appropriate.
Next steps
The redefined appetite statements will be submitted to the ARC for consideration on
21° October 2014.
David Mason
Head of Risk Governance
Appendix 1 - Draft Risk Appetite Statements:
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Category of Risk
Risk Appetite Statement
Proposed Owner
Market
Exposure to market
changes, competitor
activity, reputational or
brand damage
POL has:
© Receptive appetite to pricing to drive revenue growth; but not at the expense of profit. We expect POL products to be
‘top quartile’ but not generally to be the most competitive in class.
© Hungry to take on competitors in markets where we are mature (mails, government services).
© Receptive to acquire market share in markets where we are still relatively new entrants (e.g. FS / Telephony).
© Cautious appetite for business initiatives that may cause reputational or brand damage.
Martin George
© Nick Kennett
© Mark Davies
Financial
Exposures to credit,
liquidity, pricing risks or
external financial related
crime.
POL has:
° Averse appetite for not having sufficient financial resources to ensure the continuity and sustainability of the company.
This especially relates to ensuring that sufficient funding is always available.
e Averse appetite for financial crime to occur within any part of the organisation.
e Averse appetite for disruption to any credit facility
e Hungry appetite to generate profitable income over time.
e Receptive appetite for reducing dependence on subsidies over time.
¢ Chris Day
Charles
Colquhoun
© Colin Stuart
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Legal / Regulatory,
Compliance with
regulations, law, and any
other external oversight.
POL has:
© Cautious appetite for Legal and Regulatory risk accepting that in some areas there are conflicting imperatives between
100% compliance and commercial practicality.
Minimal appetite for higher profile and/or Financial Services matters.
e Averse appetite for legal or regulatory failings that lead to censure
¢ Martin George
Nick Kennett
© Chris Aujard
People
Capability and capacity of
staff. Ethical behaviour
including staff
misfeasance.
POL has:
* Averse appetite associated to the health, safety and wellbeing of POL staff in everything we do. [This is paramount to
every aspect of POL operation]. This includes loss of life, serious injury and non-compliance to [relevant]regulation and
policy.
e Minimal appetite for:
- Misalignment of people capability and capacity of staff.
- Unethical behaviour including staff misfeasance.
- Inadequate assessment of the necessary talent and capabilities identified in order to build the learning, development
plan and resourcing strategy (employees & agents) to drive business performance.
e Insufficient people capacity to enable PO to effectively deliver core services to customers.
© Neil Hayward
¢ Martin Lewis
Technology
Systems and IT related
risk; stability, design,
implementation. This also
includes information
security, hacking, and
POL has:
Minimal appetite for loss of key IT services beyond what is defined in the business continuity framework for incident
severity prioritisation and associated Recovery Time Objectives (RTO) and Recovery Point Objectives (RPO).
¢ Lesley Sewell
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unauthorised use of data.
¢ Minimal appetite for inaccurate and unreliable processing of data.
e Averse appetite for data loss/leakage that can lead to customer, commercial or reputational damage.
Operations
Internal processes and
operations including
financial reporting
processes, governance
and control processes
and oversight, supply
chain management,
physical asset
management.
POL has:
Minimal appetite for inefficient processes that result in: lost time, duplicated effort, and increased risk of financial loss
or errors in any part of its business or core processes.
Averse appetite for inefficient or failure of, governance and control processes, critical financial reporting processes,
critical supply chain and business continuity processes.
Lesley Sewell
Kevin Gilliland
Stakeholder
Major stakeholders
including:
e External stakeholders,
government, the
minister, consumer
futures, royal mail
¢ CWU & CMA
NFSP
POL has:
« Receptive appetite to lose the engagement of any key stakeholder in the process and for staying the course in face of
opposition if in the wider interests of the business and its commercial priorities.
© Neil Hayward
Mark Davies
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Corporate Affairs
The relationship of the
company to its
Shareholder
(BIS/Government) and to
the media, political and
environmental factors
that influence the
shareholders direction to
the company
POL has:
© Receptive appetite in taking forward its strategy in the corporate affairs environment- as it is recognised that there will
inevitably be opposition and adverse comment — but if POL presents a clear, cogent, confident case it can create the
right environment for change
¢ Mark Davies
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Appendix 2 - Risk appetite categories and attitudes
Categories of Risk Appetite
The categories of risk used have been updated to be consistent with the September
guidance to the Executive Committee (Exco) on ‘Articulating Risks Guidance for Reporters’
for reporting risks to the Board.
These are:
Category Definition
1. Market Exposure to market changes, competitor activity, reputational or
brand damage
2. Financial Exposures to credit, liquidity, pricing risks or external financial
related crime.
3. Legal / Compliance with regulations, law, and any other external
Regulatory oversight.
4. People Capability and capacity of staff. Ethical behaviour including staff
misfeasance.
5. Technology
Systems and IT related risk; stability, design, implementation.
This also includes information security, hacking, and
unauthorised use of data.
6. Operations
Internal processes and operations including financial reporting
processes, governance and control processes and oversight,
supply chain management, physical asset management,
7. Stakeholder
Major stakeholders including political, social, NFSP, CWU, CMA,
etc.
These risk categories / types are consistent with best practice operational risk types used
within ERM frameworks of non-financial firms.
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Risk Attitudes
The definition of risk appetite incorporate the business’ attitude to taking risk, e.g. how risk
seeking we intend to be to achieve our stated objectives.
The proposed ‘attitudes’ to risk are consistent with those outlined at the May Exco meeting.
This risk attitude scale seeks to provide guidance on the level of risk that the Post Office is
willing to take in its business operations. The Post Office will use a five point scale to denote
its attitude to risk in strategic, programme and operational processes.
The five point scale is:
4
Receptive
Hungry: Eager to be innovative and to choose options offering potentially higher
business rewards, despite greater inherent risk.
Receptive: Willing to consider all potential options and choose the one most likely to
result in successful delivery, while also providing an acceptable level of
reward and value for money.
Cautious: Preference for safe options that have a low degree of risk and may only have
limited potential for reward.
Minimal: Preference for ultra-safe options that are low risk and only have a potential for
limited reward.
Averse: Avoidance of risk and uncertainty is a key organisation objective.
Risk Metrics and Indicators
Once risk appetite statements have been agreed, identified metrics and indicators will be
used to track and report whether we are on track and within risk appetite. This will be used
for Board and Exco reporting.
For example:
Category of risk I Technological
Risk appetite We have averse risk appetite for data loss/leakage that can lead to
statement customer, commercial or reputational damage.
Metric Incident data log
Indicator Any recorded high risk event that requires reporting to the ICO or FCA
as per ICO/FCA guidelines
This structure reflects the Institute of Risk Management (IRM) guidelines on risk appetite
1. Purpose
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Post Office Limited Executive Committee
Project Titan Update
To update the executive committee on the next steps of the program, governance, what
agreements that Exco will be asked to appraise and contingency plans are in place.
2. Background
1)
2)
3)
4)
5)
Project Titan is due to launch on December 8" 2014, initially dealing with
renewals for annual travel insurance, moving to full responsibility for the
sales and administration of polices from January 2".
Following the negotiations for the administration elements of Titan, the
target cost reductions have materialised in line with the plan. Furthermore,
the underwriting solution has yielded 10-15% net rate improvement for the
costs of underwriting the product.
Titan program was budgeted to spend £4.9m and is on target to be brought
in on budget and on time.
FCA application was submitted on 15" August and is in train. No initial
concerns have been raised. Time lines are tight and the FCA is not
obligated to reach a decision within any specific time frame which creates a
risk to the program which we have mitigated (see below)
Aon (current broker) and Axa (current underwriter) are both fully engaged
with and are supporting with the transition to ensure a smooth program.
3. Governance
There are a series of activities and actions outstanding in order to conclude the program
1)
As an independent subsidiary, POMS Board will provide to the PO Board
(on a subsidiary to parent basis) the following documentation for approval
and noting.
i. POMS 3 year plan — which provides the business activities and target
outcomes that POMS will undertake to support the FS strategy as
defined within the 2020 Strategic Plan. This will be tabled for noting
and set the agenda for POMS;
ii. An independent overview of the contractual agreements between PO
and POMS (see (section 3iii)) and the commercial principles that apply
— this paper, which has supported by the PO Finance and Legal will
also be tabled to the POMS board. In both cases the support of the
Board will be requested, seeking a mandate for execution of the
agreements;
iii. An independent evaluation by Grant Thornton, conducted at the
request of the PO Board and managed by the Group Risk function, to
assess POMS' readiness to launch and that the risks identified in a
paper to the Board in June have been effectively managed/assuaged.
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2) These documents will be provided to October PO Board in which the following
outcomes will be tabled seeking authority to the PO Executive Committee to
finalise and agree the POMS / PO agreements
i. Master Services Agreement - PO supply of critical business functions
such as IT, HR and Finance;
ii. Licensing agreement - providing POMS with authority to use the PO
Trademarks and delegate this authority to other administrative
business who conduct activities on behalf of the group;
iii. Distribution agreement - PO commitment to provide access to the PO
channels; and
iv. Sub-ordinated loan agreement — agreeing the terms of the loan
provided to POMS to commence trading and secure its regulatory
funding requirements.
4. Risks and mitigation
The current arrangements with Aon/AXA expire as at 31° December. There are a
number of risks to the delivery of Titan including the continuation of customer activities
from 1° January. The following points highlight the risks and concomitant mitigation
strategies.
1) FCA approval is not given by 1" December 2014:
POMS will become the appointed representative of Thistle Initiatives
(Regulatory Consultants) until the relevant approvals have been received
(contingency contractual arrangements are in place);
2) Post Office board does not give approval for POMS to commence trading (for
example that Grant Thornton fail to provide sufficient confidence that POMS is fit
for purpose):
POMS will work with its new underwriting partner to establish an
operational environment. The commercial impact of this would be in the
region of £300,000 per month, until POMS could re-assure the Board of its
capability to trade.
3) Post Office unable to reach agreement with Bol to continue to provide regulatory
oversight of the insurance business:
Bol are obliged under conduct of business rules within the FCA guidelines
to ensure the continuance of service to insured customers. Bol and
POMS/PO discussions surrounding the regulatory oversight remain
positive. If however this changes, options exist surrounding gaining the
same oversight from either Thistle Initiatives directly or via POMS and its
underwriting partners.
5. Additional Opportunities
The launch of Titan provides Post Office with additional revenue opportunities — these
are primarily surrounding the securing of enhanced of net rates costs, lower
administration costs and an improved online journey combined with better rates leading
to improved click to sale rates.
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While these benefits have been included in the business, the better than expected
underwriting solution should generate up to £400-500,000 benefit in Q4 2014/15, versus
the budget of £200,000.
6. Summary
1) Titan is on schedule to launch in December 2014.
2) Commercial deals are significantly better than the prior model and de-risk the
business as control now sits within POMS rather third parties.
3) To conclude this program on time and budget Governance process needs to be
concluded
4) Where possible risks have been mitigated
5) Subject to the support of the services contract by the Post Office board, the
project will seek Exco execution of the contracts with POMS.
7. Conclusion
1) Exco is asked to note this paper and the actions contained.
Paul Havenhand
Head of Travel & Insurance
October 2014
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POST OFFICE LTD ExCo/BOARD
Post Office People & Engagement Strategy —
Plan for the next 12 — 18 months
1. Purpose
1.1. Since the June strategy Board meeting, the People & Engagement plan for the
next 12 — 18 months has been developed. This paper describes the short term
actions over the coming 12 - 18 months that will support the transformation of
the business in line with the requirements of the Business Transformation
programme, Winning in Mails and the FS strategy.
1.2 Progress against the plan will be monitored at the Transformation Committee,
with regular updates for ExCo and the Board. Actions are already underway,
some of which are described in section 3.
2. Background
2.1 All of the activities in the P&E plan have been aligned to the 10 accelerators of
the strategy defined by the ExCo.
2.2 There are some immediate actions that have emerged as a result of the
development of the Business Transformation Programme, the FS strategy and
Winning in Mails. These have been detailed in section 3.
2.3. Ensuring that the P&E team is ready to support managers through the
transformation period will be critical to the success of Post Office’s
transformation. The immediate, short term actions mainly relate to managing the
costs down across the organisation and to dealing with the implications of this
with key stakeholders, such as the trade unions and the NFSP. A deep dive into
the approach to managing these stakeholders has been included in the
supporting documentation to this paper.' Scenario planning, including
recommendations from a communications perspective has also been included.
2.4 The focus of this paper will be the next 12 - 18 months. Further development of
the P&E plan will be done in phases to align with the further refinement of the
business strategy linking to POL’s transformation. The process of which will be
iterative.
'The supporting papers are— P&E Strategy - Changing the way we work with our unions, P&E Strategy—
changing the way we work with the NFSP, P&E Strategy- stakeholder messaging & scenario planning,
critical issues and timelines (tbd)
Post Office People & Engagement Strategy — Plan for the next 12 — 18 months
Neil Hayward Page 1 of 7 16" October 2014
3.
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Activities/Current Situation
3.1 The People & Engagement team have been working closely with the business
since the June Board presentation to identify the people implications of the 10
accelerators and to ensure the P&E team are in a position to support these
activities.
The P&E plan is therefore set by the implications of Business
Transformation, Winning in Mails and the FS strategy. Sections 3.2 to 3.4 focus
on these 3 key business change programmes. All the supporting initiatives and
projects highlighted against the change programmes are shown in more detail in
sections 3.5 to 3.7.
3.2 Business Transformation Programme
Implication of BTr
P&E Action
Significant headcount reductions gaining
greater efficiency across the organisation,
specifically relating to wave 1 in the short
term.
P&E team ready to support line managers through
significant workforce changes, providing toolkits,
processes and supporting documentation, including
a defined approach to MTSF and the use of
compulsory redundancy.
Organisational design — review of the top
level structures across the business
(ExCo and 2 levels below) to gain greater
efficiency and clear accountabilities.
Cost savings identified and new structures
implemented. New talent hired against
organisational capability gaps and key talent
retained
3.3 FS Strategy
Implications of the FS Strategy
P&E Actions
Sales capability of Financial Specialists.
Refresh the FS population with c.30% churn in
workforce, supported by the revised Performance
Management process. Underpinned by the Sales
Capability working group.
Increase number of FSs, MSs and
introduce the CRM role in the agency
network.
Work with the FS team on the attraction strategy for
these roles based on ‘what good looks like’ with
targeted recruitment campaigns, utilising
innovative, digital methods of recruiting
3.4. Winning in Mails/Network Extension
Implications of ‘Winning in Mails’
P&E Actions
Talent. Reorganising and restructuring the
Commercial function in line with the
strategy is a priority, in particular the
product managers.
Identify new structure as part of wave 1 and identify
skills and capabilities required to drive the strategy
engendering a mindset of B2B2C in the way we
develop products and services.
Sales capability - short term goals of
increasing sales capability across the
Network. Longer term focus on Agents
and FS
The sales capability working group has been put in
place in line with accelerator 9. The purpose of
which is to drive in year income and develop the
longer term strategy to developing sales capability
across the whole network.
Revised Postmaster models,
and__reduced remuneration
contracts
linked__to
The proposed changes to models and network
development will face opposition from the NFSP.
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Neil Hayward
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simpler transactions. Scenario planning and recommendations are being
developed in order to manage the NFSP and
ensure we have Govt. and the minister aligned with
our plan.
3.5 Reshaping the organisation -
The implications of Business Transformation wave 1 and the target operating
model work will be a key focus for the P&E team. Ensuring the wave 1 structure
has been defined and implemented in year will be a priority.
There will be a requirement to upgrade in critical roles, improve the support to
our field based managers [particularly those supporting the Agency network] and
increase the impact of Learning & Development. This will be done alongside
identifying new skills and capabilities we will need and retaining our current
talent.
Date/
Activity 2014/15 plan Outcome Accountable
Put in place the right I Complete a review of the ExCo and SLT I Revised structure and Mar ’15 — Neil H/
leadership population I roles, structures and people in post. leadership in place. List FayH
Including immediate changes to support I of new hires agreed and
short term objectives then phase 2 appointed.
following the TOM outputs.
Upgrade the Review and refresh the following Changes implemented, I Mar ‘15 - Ann M
population in critical} populations;- increasing capability and
roles. FS/MS — Financial Services reducing costs as per
AM/BM — Network & Sales business plans, as
agreed with KG/NK
Branch Support Centralise L&D delivery and design to New structure in place Phase 1 - Jan 15 -
Programme - reduce I increase the impact of learning and cost savings Sarah M
L&D spend whilst interventions and maximise the utilisation I identified Phase 2 — Dec 15
increasing the of resource, whilst enhancing digital Sarah M
effectiveness of capability.
delivery.
Ensure the P&E Ensure the processes and tools are in All toolkits in place in Sept ‘14 — Fay H/
team is ready to place to manage;- readiness for impact of Tom M
support line Consultation for job losses (timelines changes.
managers through agreed to implement VR/CR - MTSF)
significant workforce I Managing people through change. Workshops developed Dec ‘14 - Fay H/
changes. and delivered to big Tom M
people leaders.
Workforce changes Mar ‘15 — Neil H/
implemented in line with David R
wave 1 (benefits
realisation).
3.5.1 P&E Team - change ready —
A significant amount of preparation has already gone in to supporting workforce
changes as a result of business transformation. The P&E team — working
alongside the programme - have developed detailed toolkits, processes and
supporting documentation, including line manager guidelines to support the
business through the transformation period. Workshops will also be set up for
line managers, enabling the HR Business Partners to talk the line managers
through their responsibilities and how they will be supported. The SLT
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population have also been engaged as a group to outline their leadership role
through the period of transformation. The P&E team are working closely with the
programme and have released members of the team to work full time on
Business Transformation, including the P&E SMEs, a lead for IR and an
organisational design lead. Alongside this, a project team has been prepared to
deal with the administration of all people changes and a cross functional ‘People
Change Governance Group’ has been set up to manage and monitor the people
implications of the programme. Underpinning this is a support team within the
HR Service Centre, with flex resource for peaks of activity. The team has an
integrated approach across People & Engagement disciplines, with particular
focus on union consultation and legislative responsibilities. This approach has
been designed and implemented in readiness for wave 1 activity and is already in
the process of supporting the business in developing their case for change and
designing their new organisational structures.
3.5.2 Leadership & Talent —
The work to define an optimised leadership team structure has commenced, and
working in partnership with the Business Transformation programme, this has
progressed over the last month. Wave 1 of these changes will be ready for early
November. The top line structure at ExCo —1 and ExCo -2 alongside the cross
business staff cost efficiencies are currently being validated with the relevant
ExCo members for implementation from November. We will therefore, shortly
address the issue of a large SLT with overlapping responsibilities. This review
will enable us to implement a structure with clear reporting lines and
accountabilities — providing the platform for better decision making and swift
execution of the strategy. We will enter the market place for new talent to
complement and build the leadership cadre as required (a number of hiring
needs have already been identified) — whilst supporting and continuing to nurture
and develop our retained SLT.
3.6 Focusing on our customers -
Whilst changing the way we look at our customers, we will also need to increase
the focus we put on the relationship with our Agents; as they are our customers
serving the end user customer of Post Office products and services. We will be
reviewing the way we recognise and reward employees and agents for achieving
sales success and working to improve sales capability across the whole network.
Date/
Activity 2014/15 plan Outcome Accountable
Review of the way Continue to review the way we reward Revised incentives and Mar '15 — Keith M
we reward our people I and recognise people to ensure focus on I colleague offers in place
to drive high the customer and deliver high for Q1 15/16.
performance and performance, underpinned by the new
increase customer performance management process. Revised performance Mar ‘15 — Ann M/
satisfaction management process in Tom M
place POL-wide
Improve agents sales I Guiding Coalition initiative extended ¢.200 mails coaches inI Mar 15 —Michael L/
effectiveness across the agency network to support the I place and targeted to Neil H
mails revenue shortfall for 14/15. 4000 agency branches
Invest in sales Drive in year income and develop the Plans agreed by Jan ‘15— Neil H/
capability across the I longer term strategy to developing sales I ExCo/Board for roll out. Kevin G
whole network (inc. I capability across the whole network
Financial Services)
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Review agents
remuneration and
contracts
In line with network expansion we will Revised framework ready I Mar '16 — Nick B/
review existing contracts, relationships for network roll out end of Kevin G/
and remuneration structures for agents - I 15/16. Keith M
linked to franchise model review resulting
from TOM.
3.6.1
3.7
Sales Capability —
Starting to change the way we work is crucial to the longer term sustainability of
the business, and this will require a much more rigorous focus on commercial
skills and the development of sales capability. A working group has already
been established to take a data-driven view of the current sales landscape in
order to inform a short term and a longer term plan for capability development.
In the short term, the focus will be on creating a coherent and shared set of
activities that will drive short term performance — focusing on both “good to great”
and “poor to good”. We will support the extension of the Guiding Coalition
programme and look at how we can transfer that level of energy and focus into
other sales channels. We will re-align our resource to support those branches
that have the greatest capacity to be profitable and, as guided by the commercial
strategy, gear up to support further transfers of Crown branches to Multiple
Partners. The recently agreed new Performance Management process for non-
managers reduces the time taken to manage the exit of poor performers — and
this will be extended to cover other roles and team (specifically, for example, in
Financial Services) to enable quicker exit of poor performance. The longer term
work has commenced to identify what it would take for Post Office to build a
world class sales capability — identifying all the levers to identify, source, develop,
reward and incentivise the right sales behaviour. An update on progress will be
provided to ExCo and the Board in January.
Changing the way we work -
One of the key enablers to changing the way we work is changing the
relationship Post Office has with its trade unions and the NFSP. The issues and
implications of doing this have been further explored in the supporting
documentation to this paper. The way we communicate with our people,
including agents will play a key part. We also have an opportunity to use the
move from 148 Old St to Finsbury Dials as a watershed moment, shifting the
relationship between the old style head office and front line colleagues, to one
which is seen as a support centre to the front line. Introducing new ways of
working, making better use of technology and encouraging collaboration across
different teams will help to change the culture within the organisation. This will
also be underpinned through the messaging in communications across the
business. We have already begun to change the way we communicate with our
employees and agents to increase their understanding of and engagement with
Post Office’s strategy.
Activity
2014/15 plan Outcome Accountable
Develop and
communicate a
compelling chang
narrative for our
employees and
stakeholders.
Develop a change narrative explaining Change narrative Jul 14— Mark D
the imperative and ensure this is developed and shared
je reinforced by a regular cycle of supported by Team Talk
engagement (through the revised Team I communication channel.
Talk suite), with a feedback mechanism
for accepting, validating and ‘Making it Easy’ crowd Aug ‘14 — Mark D
implementing colleagues’ ideas to sourcing tool in place
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accelerate business transformation.
Ideas implemented and Mar ’15 — Mark D
savings achieved
Exploit the move Use the move from 148 to enable new FD is seen as ‘Business Mar ‘15 — Neil H/
from 148 to FD in ways of working. #thinkdigital. Support Centre’ adopting Harry C
order to accelerate mutual ways of working
culture change
Revise the collective I Change the collective bargaining New Collective Mar ‘15 —- TomM
bargaining frameworks to a more collaborative Engagement framework in
frameworks POL has I engagement framework, whilst place.
with its unions.
increasing the pace of change within
Post Office. New Union representative I Mar ‘15 - TomM
structure in place
Ensure the NFSP Support the NFSP in its reconstitution NFSP new organisation in I Jan ‘15 — Nick B
reconstitutes as a activity and ensure the new organisation I place and funding agreed
trade body. (trade body) is one designed and on a value for money
‘structured to support Network basis.
Transformation.
3.7.1 Digital -
In addition to the initiatives described above, the P&E team has also been
developing digital solutions to optimise business as usual processes. E.g. we
are utilising video interviewing technology at the moment for Christmas Paid
Work Experience candidates. We plan to continue to use this method of
recruiting across other roles within the business, including recruitment for FS and
MS roles. We are also in the process of trialling e-payslips for employees in
People & Engagement, Commercial and Financial Services. Once the trial has
been completed successfully, we plan to roll out the approach across the rest of
the organisation, including Agents. Using digital methods for traditionally paper
based activity is both cost effective and helps change the culture of the business,
using innovative technology. In addition, the Branch Support Programme aims to
move much learning & development activity on line with plans currently in
development.
4. Key Risks and Mitigation
41
4.2
The changes to the workforce as a result of business transformation and network
extension could meet opposition from the trade unions and NFSP. This could
result in widespread industrial action and a negative PR situation, impacting on
the pace of change. There will also be potentially strong opposition to the
planned implementation of the collective engagement framework and changes to
the union representative structure. Mitigation: The proposed changes will be
difficult to implement with strong union and NFSP opposition. To mitigate the
risk, the business will need to show strong and united leadership. Appetite for
this will need to be gauged as without this support, it will not be possible to
change the relationship with the unions. Ensuring we have the support of the
shareholder for our approach in the lead up to Christmas and the general
election will also be critical to taking these changes forward.
Current performance and the communication of it has created a sense of
urgency and an understanding of the ‘burning platform’, however this will need to
be managed well to ensure the business does not dis-engage its people.
Furthermore, the impact of current business performance on our ability to invest
and how this is seen will need to be carefully managed — Mitigation:
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change narrative has been developed and shared across the business,
underpinned by further communications supporting the key messages.
Communications from the CEO have also been positioned much more starkly
based in the realism of the business’ financial position and the absolute need for
change. This will need to be balanced against a compelling vision of the end
game for the organisation to enthuse and engage our people in the change
journey.
Conclusion
5.1
5.2
5.3
A clear milestone plan has been developed to ensure pace and traction in the
delivery of the strategy. The next 12 months will be critical and needs complete
focus on core activities that deliver the business strategy. The P&E plan will
need to evolve over this time in line with Business Transformation, Winning in
Mails and the FS strategy.
A programmatic approach to managing the P&E plan has been implemented and
will be monitored by the Transformation Committee with regular updates
provided to ExCo and the Board.
The activities listed in section 3 are predicated on the current financial position
and resources available to the P&E team. Further investment could be required
to accelerate some activity based on business need and priorities.
Recommendations
The Board/ExCo is asked to:
61
To note the update and actions set out above.
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POST OFFICE LTD ExCo/BOARD
Post Office People & Engagement Strategy —
Changing the way we work with our unions
1. Purpose
1.1. This Post Office Industrial Relations (IR) strategy is based on raising capability and
confidence across our business in dealing with trade unions. It is designed to increase
our levels of direct employee engagement and accelerate the achievement of our
commercial objectives and strategy. Our default position is to adopt a collaborative
approach to working with our recognised unions, whilst recognising theirs are one set of
interests to be balanced against others. Our customers and colleagues come first at all
times.
1.2. Our unions, particularly the Communication Workers Union (CWU), are unlikely to
support our intended approach as it will reduce their historic influence. This reflects the
deep-seated industrial relations culture and arrangements across Post Office and Royal
Mail, which are at odds with best practice in the public and private sectors. To handle the
associated reputational and political risks, we will take particular care to be ‘pro-Post
Office, not anti-union’. Our stakeholder approach and key messages are already
established and tailored to each audience. '
1.3. We will implement this IR strategy as part of an integrated approach to transforming our
business and commercial network, which has its own, inherent industrial relations risks.
This requires us to show resolve in the interests of our customers and our colleagues.
The reward will be a leaner, quicker approach to industrial relations and change,
alongside a great, engaging working environment for our people.
1.4. Although we have started to introduce a new approach to industrial relations, notably
through the resolution of the Crown dispute in 2013/14 and the agreement of a new,
shorter and more robust Performance Improvement Process, our unions do not yet
accept this as a new reality, and our pace of delivery needs to increase. Only a new
strategic approach to industrial relations will achieve this. This strategy sets out the
context for change and the practical ways in which we will transform the relationship with
our unions and, as a result, improve employee engagement and business performance. It
represents a fundamental change in our relationship with unions.
2. Background
2.1. The Post Office has an ambitious commercial strategy specifically in relation to Business
Transformation, Winning in Mails and the FS Strategy. Creating the goodwill and high
levels of motivation required to successfully deliver this is a shared responsibility.
2.2. Without changing the way we work with our unions we will find it hard to deliver our
strategy and plans. This IR strategy is designed to add tangible value to the business by
making us faster at delivering change and by reducing the business cost of union
representation. It will support the ten ‘accelerators’ which guide our work, notably the
* See Appendix 3.
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radical reshaping of the organisation and the accelerators which involve ‘Changing the
way we work’.
Figure 1: Alignment with People and Engagement Strategy
People and Engagement Strategy IR Strategy
Acommercial, customer-focused culture Reduce the cost of union facility time & balance the needs
ofall stakeholders
An agile organisation that delivers faster I Reduce cycle time for implementing change
execution
Higher levels of engagement from ourI Embed a new modern partnership based ‘Collective
employees Engagement Framework’ — national in scope, local in
practice
The roles and skills in place to drive the I Establish IR/ER CoE; up-skilling managers and HRBPs
execution of the strategy Roll-out ‘Managing Change in a Unionised Environment’
workshop.
Remove duplication and complexity from I Re-work [and as appropriate remove] many of the c 300
our structure collective agreements to ensure they are fit for future
business purpose and legally compliant. Embedding
streamlined and simplified people policies.
3. Context
3.1. We are an independent business with recognised unions which are still organised for, and
wedded to, a pre-separation from Royal Mail view of Industrial Relations. We have made
significant progress in asserting that ‘the old rules don’t apply’, notably through the
resolution of the Crown dispute with CWU in 2013/14, but still have a long way to go.
3.2. Just under 26% of all UK employees are members of a trade union, and only 14.4% of
private sector workers belong to one.* Even compared to the public sector, which is
considerably higher (55.4%), union density at the Post Office is exceptionally high. Latest
figures show that 90% of CWU, or team, grades are paying members. The equivalent
number for Unite CMA (CMA), Middle Manager, grades is 40%.*
3.3. There are currently 38 individuals on full-time pay release for union activities within the
Post Office.> This equates to 1,767 working weeks, 8,835 days, or 61,845 hours per
year.© The total business cost of these individuals in pay, pension and expenses was
£1.27m in 2013/14.’ This is an unsustainable cost for the business and an unjustifiable
use of public money.
3.4. There is also the ‘known unknown’ additional cost to the business of time being taken off
from normal working duties by part-time union reps carrying out union duties and
activities locally and the associated cost in management time this brings with it. The IR
team is currently undertaking a forensic investigation into this issue.
2 “8. Lead change with the right people in the right places — we will ensure that colleagues have the skills and
authority needed to manage their areas of responsibility, and are held accountable for delivery of the right outcomes for
our customers
9. Inspire and engage everyone in our turnaround story — we will make a compelling case for change to our
agents, employees and stakeholders in order to drive performance and customer service
10. Manage our partners with purpose — we will build profitable partnerships informed by a rigorous analysis of
their position and our customers’ needs.” ‘Our 10 accelerators to deliver a commercially sustainable Post Office’
* Trade Union Membership 2013, BIS, May 2014
* Figures taken from Post Office payroll which administers ‘check off’ of union dues.
5 The Post Office IR Framework gives our unions 41 fulttime paid Reps. Three posts are currently vacant.
® Based ona working year of 232.5 days per year and a 35 hour working week for a Post Office employee.
"Taken from payroll figures of total employment costs and T&S spend of all fulltime Reps for FY 2013/14.
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3.5. We have also identified that there are a further 40 CWU Reps within Supply Chain, all of
whom are Royal Mail employees still influencing colleagues due to the previous, pre-
separation IR arrangements not having been replaced. These are at zero cost to Post
Office but it is clearly inappropriate and unhelpful to have employees of another company
playing any part in Post Office business and we need to serve notice on this arrangement
as part of our removal of the Royal Mail legacy from our IR landscape.
3.6. Notwithstanding, the combined total of 38 full-time union reps on paid release alone in the
Post Office versus the current number of management IR subject matter experts currently
employed in the business represents a ratio of over 10:1 in the unions’ favour. Union
reps also receive additional professional support and ‘back-up’ from Union HQ, including
training.
3.7. A ‘like for like’ comparison with BT Plc. which has a similar level of CWU membership
density as the Post Office (85%+), shows that applying the formulaic approach used by
BT, which is based on 0.8FTE per 500 union members, would realise cost savings to
Post Office Ltd of ~£0.8M pa.®
3.8. Fifty major collective agreements governing various workforce practices transferred to
Post Office under separation from Royal Mail. There are a further 200+ which exist
through custom and practice at varying local levels. These agreements are not reflective
of the business we need to become.
4. Key Outcomes
4.1. The capability and confidence of our leaders and line managers to improve individual and
team performance during a significant, challenging transformation is one critical success
factor for our business. Overcoming the current IR barriers to releasing more
discretionary effort from employees — and giving managers the ability to manage — is
another. We need to up-skill our front line managers and HR Business Partners (HRBPs)
so they can successfully own, lead and manage change in a highly unionised
environment, whilst simultaneously redefining that environment through new agreements.
4.2. This strategy will contribute towards commercial sustainability for Post Office by
delivering:
e Reduced cycle time for implementing change — by replacing many of the current
‘collective agreements’ with more flexible, commercial policies;
¢ Reduced cost of union facility time;
e Capable and confident managers & HRBPs empowered to successfully manage
timely change in a highly unionised environment;
e Improved service efficiency and customer satisfaction as we raise performance;
and
e Higher and sustainable levels of employee engagement as line managers are
enabled to manage.
4.3. We will deliver this by transforming the industrial relations landscape. Our default
position is to adopt a collaborative approach to working with our recognised unions while
recognising theirs are one set of interests to be balanced against others. Our customers
and colleagues come first.
® Based ona projection of the average cost of a Rep (£33,500p.a.) and the total number of Reps (12) which
would be required under the BT formula.
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Themes
5.1. Our work has four main themes which will underpin our ongoing work to account manage
our unions. These are set out below.
5.2. An explicitly commercial approach to all negotiations on pay to deliver affordable results
and change union and employee perception of the Post Office’s approach and ability to
manage unions effectively. We have agreed all Managers’ pay until 2016/17, on a self-
funding basis. In contrast, the CWU refuses to accept this approach.
5.3. A_step_ change _in_business_skills_in working with unions. Not all our colleagues,
particularly front-line managers, have the skills and support they need to work with unions
confidently and colleagues effectively. We will work to up-skill the business through
training, support and a wide range of guidance which we will produce to underpin our
engagement. See Appendix 2 for a summary of how this will work on a day-to-day basis.
This is designed to allow more decisions to be taken at the appropriate, local level.
5.4. A_new, modern approach _to_engagement_and_ change. Through a new ‘Collective
Engagement Framework’ and ‘Managing Organisational Change Framework’ which will
be the new rules for collective engagement. This will represent an extremely challenging
negotiation process.
5.5. A new, lean Collective Engagement Framework. Reframing the extant National Industrial
Relations Framework Agreements is critically important as ultimately these will set the
future context for collective engagement with the CWU and CMA over business
transformation generally and how Post Office will accomplish significant revenue growth
and reduce its cost base. This will result in a realignment and reduction in the number of
full-time union representatives.
5.6. In summary, the successful delivery of the strategy is designed to create a new, legacy-
free culture of employee engagement in the Post Office. It is designed to bring the CWU
and CMA on that journey so long as they are willing to accept that challenge. This has
significant implications for the People and Engagement agenda across the business.
Figure 2: Culture change — direction of travel in industrial relations for Post Office
As is To be
Sector norms POL Governing Principles and Values
Custom and practice Transformation
Over-emphasis in Comms on union collectivism Greater emphasis in Comms to individuals
Formal/fixed roles Flexible/agile working
Hierarchy Flatter structures
Central ‘command and control’ by CWU. Devolved empowerment of local reps
Engagement at national level with unions’ Greater engagement at local level
Indirect engagement with colleagues via unions’ Greater direct engagement with colleagues
Reactive/crisis management of unions Proactive/ planned engagement with unions
Delivering the Strategy — Resourcing, Priorities and Timeline
6.1. To address the current imbalance of influence over employees’ behaviours (e.g. industrial
action) away from the unions (CWU in particular), we must be able to demonstrate that
every colleague is valued, feels valued and is invited and trusted to participate in
meaningful and regular conversations directly with their line managers.
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6.2. Post Office line managers hold the key to improving the levels of employee engagement
— we need to up-skill & support them and the HRBPs to effectively manage timely change
in a unionised environment.
6.3. We need a lean, focused and expert team to deliver this challenging strategy. We have
already integrated IR and ER into one team. It needs to focus on a short list of priorities
which will underpin the themes outlined at Section 5.
6.4. A New Employee Relations & Engagement Team: Delivering this strategy requires
targeted investment in expertise and needs to be fully integrated with our work on
employee relations and employee engagement. This will be offset and, in time, funded,
through the reduction in paid union officials and facility time. It will have clear metrics
against which to judge success (see Appendix 1)
6.5. Notwithstanding the planned reduction in the cost of union facility time, there is a
compelling business case for investing in additional resource for establishing an
adequately resourced IR and ER capability to readdress the current imbalance of IR
resource/influence available to the unions. We will create a new Employee Engagement
Team, bringing together IR and ER which will work closely with Comms and HR. This will
be led by the Head of Employee Relations & Engagement as part of the People &
Engagement Team. Please see Appendix 1 for details.
6.
fey
. Priorities: To deliver the strategy we will:
e Produce and roll out a workshop — ‘Managing Change in a Unionised Environment ;
e Re-work, modernise (and, as appropriate, remove) many of the collective agreements,
policies and procedures ensuring they are fit for future business purpose and legally
compliant:
e Produce and embed a ‘Managing Organisational Change Framework’ to rationalise
and simplify collective agreements, policies and procedures;
« Replace the national agreement on trade union facilities and time with a new trade
union duties framework that will reduce the cost to the business;
« Produce and embed a robust ‘account management’ approach to the governance,
tracking, managing and authorising TU facility time; and
« Produce and regularly update a forward-looking IR ‘Heat Map’ to enable us to identify
‘early wins’ and pro-actively plan IR/ER team interventions for supporting managers
and HRBPs through change and transformation.
6.7. Timeline: Replacing the existing IR Framework with the new proposed framework — and
realising the associated savings — is a 6-month end-to-end process. We have already
completed two months of preparatory work which has included production, and ExCo
approval of, this Strategy. Work is now focusing on the introduction of a new structure for
engaging with our unions, and preparation for negotiation on a new formal framework.
6.8. The key decision point comes in November (month two of the six), at which point we will
need to formally table our proposal to the unions in order to deliver by March 2015. This
could be delayed (or, slightly brought forward) to integrate with broader business
priorities, notably Business Transformation. Assuming no change to the plan, the timeline
is as set out below.
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Figure 3: Timeline for implementation
Stage I Month Activity
1 November 2014 I Introduce new framework for union engagement — JCNC and
other fora
2 December 2014 I Seek union agreement for new Collective Engagement
Framework
3 January 2015 Mutually terminate/serve notice on current IR Framework —
dependent on business progress and union position on
Business Transformation and staff reductions
4 April 2015 IR Framework ends after 90 day notice period
5 April 2015 No. of Reps reduce from 41 to ~20 (target, subject to
negotiation)
7. Key Risks and Mitigation
7.1. This approach has a number of clear risks which we will seek to mitigate:
. Seeking to implement the Strategy could delay other business activity, particularly
Business Transformation — Possible if the unions chose to withdraw from all co-
operation. The changes needed to delivery Business Transformation, notably
compulsory redundancy, will be fiercely opposed by the CWU regardless of any IR
Strategy. This plan integrates with this key business objective — the union Rep
reduction element of the IR Strategy will not be implemented until we have
agreement or a definitive rejection of our proposals, specifically ‘Wave One’ of
Business Transformation;
. Post Office will be portrayed as anti-union — This is a certainty, the key is whether it
will be seen as such by colleagues and stakeholders. Our approach can fairly be
described as pro-union as our ideal end-state includes recognised unions with
agreements consistent with Acas best practice and a level of union representation
still above industry benchmarks. We will emphasise this point to colleagues and
Stakeholders, as well as to the unions themselves;
e The business will not have the resolve to implement the Strategy — this would be
highly damaging to the Post Office. If it is a likely outcome we should not take this
work forward. This is best mitigated through a strong and united endorsement of this
strategy, having accepted the challenges inherent in delivering it;
. Implementing the work will expose the current cost of Post Office industrial relations,
which will reflect badly on the business — it is possible that government or the right-
wing media would sensationalise the Post Office’s current IR Framework, which is
now significantly above the public sector norm. This is a risk with our present
situation and, if it was exposed as part of this work, could legitimately be portrayed
as Post Office taking action to address a legacy issue;
. Relations with the Royal Mail would be damaged — This is possible in the sense that
we would be pursuing a very different approach to RM in our approach to unions and
because we would be asking them to take back 40 CWU reps from Supply Chain.
This can be mitigated through effective stakeholder management at IR and senior
exec level, and also by making clear that this is no criticism of RM’s approach, which
is appropriate to their needs as a separate company.
. Union membership and support will increase in reaction to the Strategy — It is hard
for either to increase much beyond its current levels within CWU grades. This is an
employee engagement strategy and only by reducing union influence can we
effectively improve employee engagement.
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8. Next Steps
8.1. There is an urgency to start delivering this strategy. It will support our accelerators for
commercial sustainability. The ExCo discussed the following in August 2014. The
outstanding decision is when to deploy this, bearing in mind other business priorities. To
deliver this, we will:
. Continue with on-going work noted in this strategy;
. Integrate this approach with the business strategy to manage other key stakeholders
(including the NFSP and Govt.) to ensure a cohesive plan for engaging stakeholders
and communications;
« Work closely with colleagues, particularly those responsible for Business
Transformation, to keep these workstreams integrated; and
° Present this strategy, supporting analysis, and high-level delivery plan, to the Post
Office Board for discussion and approval.
Neil Hayward
16th October 2014
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APPENDIX 1: Post Office Employee Relations & Engagement Team
Proposed Organisational Chart
Head of Employee
Relations &
Engagement
1
f T T T 1
: Employee
IR Policy Manager We Rartnessnlns ER Manager ER Manager Engagem
Manager None:
[ IR Manager
{P/T)
Employee Relations & Engagement Team Commitments
The ER&E Team will:
1. Ensure that the IR strategy remains wholly aligned with ‘Post Office People and Engagement
Strategy’.
2. Focus on outputs/outcomes; measuring them and making them come alive rather than on
inputs / internal processes / checklists etc.
3. Build on the excellent work that has gone on in Post Office already.
4. Produce and maintain an organic IR ‘Heat Map’ to facilitate a continual line of sight to future
transformation change programmes.
5. Enable Post Office lines of business to better coordinate; risk assess and time the
implementation of change programmes to reduce the risk of industrial action.
6. Collaborate with directors, business managers, HR, internal and external communications
L&D teams etc. to maximise the power of the resources available.
7. Focus on relationship strategies that involve the right people at the right time in the arena of
industrial and employee relations.
8. Using targeted interventions of training/IR support for priority groups / individuals, as opposed
to generic and huge ‘sheep dip’. We will be guided by team feedback and the Employee
Engagement results.
9. Remain cognisant that anything we do in the arena of IR/ER and employee engagement must
‘fit’ within the framework of current POL initiatives, all of which have their own inter-
dependencies and sponsor.
10. Work smart.
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APPENDIX 2: Employee Relations & Engagement Team Success Criteria/Metrics
Sustainable positive climate of industrial & employee relations
Measured/Evidenced by:
The number of collective disputes raised by the unions
The impact on performance and productivity due to industrial action and organised non-
cooperation.
+ Examples of successful joint/collaborative initiatives undertaken in partnership with the
unions featuring positively in internal and external media/communications — i.e. ‘good
news’ stories.
Sustainable high levels of employee engagement
Measured/Evidenced by:
» Employee engagement index
Reduced levels of absenteeism
Retention of business critical talent
= Improved performance and increased levels of discretionary effort.
Removing IR barriers & out-dated collective agreements that militate against reducing cycle time
totime to implement change and which drive up preventable costs to the business
Measured/Evidenced by:
Embedding a new ‘Collective Engagement Framework Agreement’ containing a revised
collective dispute resolution procedure
+ Embedding a ‘Managing Organisational Change Framework Agreement’ (MOCF)?
+ Embedding streamlined and simplified people policies
* A reduction in cycle time and costs for successfully resolving collective (union) work
related disputes
A reduction in cycle time for successfully and cost effectively resolving cases of individual
grievance; performance management, conduct and capability issues involving union
interventions
The reduction of union facility time and associated cost to the business
The introduction of a trade union data base for tracking and managing TU facility time
Where agreement for the removal of IR barriers to change has not proved possible through
collective engagement it is proposed that the parties in dispute will adopt the revised and agreed
collective dispute resolution procedure annexed to the ‘Collective Engagement Framework
Agreement’.
Industrial Action Contingency Plans
Should the adoption of the revised collective dispute resolution procedure not result in the
avoidance of lawful industrial action, we will set in train robust Industrial Action Contingency plans
developed and very effectively deployed in Crowns, which will be revised as required. These will
involve Comms and Employee Engagement as well as operational requirements. These already
exist for the Crown and Supply Chain networks.
° The MOCE will spell out the context within which a specific number of change situations need to be played out, e.g
redeployment, relocation, surplus staff, VR, performance management etc
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APPENDIX 3: Stakeholder Assessment and Approach
1: Purpose
¢ Toensure stakeholders understand the Post Office IR strategy
e To gain support for the IR strategy and reduce the likelihood of stakeholders campaigning
for its reversal.
2: Summary of approach (detail at Annex A).
e Tier 0 stakeholders — will be engaged as part of consultation prior to implementation
(whether agreed or unilateral)
o CWU David Ward/Postal Executive, Andy Furey
o Unite CMA - Brian Scott
o Unite senior leadership (lan Tonks)
e Tier 1 stakeholders — engage shortly before implementation:
o ShEx and BIS Secretary of State and Minister to make aware and reassure about
our stakeholder approach
o Number 10 (to make aware)
¢ Tier 2 stakeholders — engage shortly after implementation to explain reasons for action:
co Key parliamentarians (Select Committee, All Party Group, CWU-sponsored MPs,
Shadow BIS ministers)
Labour policy team
other Government Departments
NFSP
Citizens Advice (Consumer Futures)
Royal Mail
Bank of Ireland
000000
e Tier 3 stakeholders — reactive approach with:
© media, moving to proactive if necessary.
o other parliamentarians.
3: Core messages
1: The Post Office is pro-union
¢ The vast majority of our employees are union members and unions will continue to have
an important role in the Post Office.
¢ Our employee relations culture needs to evolve from an over-reliance on indirect collective
engagement through our unions, to greater levels of direct engagement with individuals.
Both have an important role to play — we need to do both better.
e Our new approach will be consistent with Acas best practice and is designed to provide
better lines of engagement with employees and unions.
2: We need to manage our costs on union facility time just as with every other part of the
business
¢ As a beneficiary of public funding we need to take a responsible approach to reducing
avoidable spending.
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e The Post Office’s current Industrial Relations Framework is significantly more generous in
terms of paid release than comparable public and private sector organisations.
3: We need to be flexible in order to compete
¢ The Post Office has an ambitious commercial strategy that we need to deliver if we are to
survive.
e We need to raise engagement across the business in order to deliver our strategy.
« And we need to be able to increase the speed at which we make change happen
iphappen in order to compete in fast-moving markets.
4: The Post Office is now an independent company and needs its own IR approach
« Our current employee relations culture has been shaped by the history of Post Office
within Royal Mail.
e The Post Office is now independent from Royal Mail. We are very different businesses (in
terms of number of employees, business modelsester, sector) and we need our own IR
approach.
¢ The Royal Mail's approach to IR is entirely appropriate for it as a separate company.
4: Materials (to be based on the above)
e Script
¢ Reactive statement
« Q&A
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Annex A: Post Office IR Strategy — Stakeholder Approach
akeholde POL owne position and conte Approa
Government
BIS — Overall 1__I Mark Davies
ShEx (Richard 1 Mark Davies Supportive in principle but alive to political implications. Increasingly risk Proactive — before implementation
Callard and team) averse as election draws nearer.
BIS Minister 1 Paula Vennells Supportive in principle but alive to political implications. Increasingly risk Proactive — before implementation
averse as election draws nearer.
BIS Secretary of 1 Paula Vennells Supportive in principle but alive to political implications. Increasingly risk Proactive — before implementation
State averse as election draws nearer.
No. 10 1 Mark Davies Will support cost cutting agenda and curbs on union influence Proactive — before implementation
Treasury 2__I Mark Davies Will support cost cutting agenda and curbs on union influence Proactive — on implementation
DWP (as key client) 2 Kevin Seller Will support cost cutting agenda but will need reassurance about service Proactive — on implementation
DfT (as key client) 2 Kevin Seller Will support cost cutting agenda but will need reassurance about service Proactive — on implementaitenimplementation
Cabinet Office 2 I Gavin Lambert/Jane Hill Have pioneered radical changes to union facility time in central government. Proactive — on implementation
Likely to be very supportive but potential for being caught up in political
machinations as a result.
BIS Select 2 ‘I Jane Hill Some members are CWU and/or Unite sponsored. Proactive on implementation for:
Committee Potential to use to make helpful interventions. Chair Adrian Bailey (Lab),
Conservative Members (who would make
helpful intervention if needed), CWU sponsored
members (Paul Blomfield and Katy Clark)
All Party 2 I Jane Hill Varied as cross-party. NFSP acts as secretariat so Labour Chair will take Proactive on implementation for Russell Brown,
Parliamentary lead from them. Lab Chair, Richard Graham, Con (he would
Group make helpful intervention if needed), Alan Reid
(LD).
Opposition
CWU/Unite 2 Proactive on implementation for Jon Cruddas
sponsored MPs (CWU), Alan Johnson (CWU), Paul Blomfield
(CWU),
Katy Clark (CWU),
Peter Hain (CWU),
Kate Hoey (CWU)
Others - Reactive
Labour 2 I Mark Davies / Jane Hill Technically no influence at present but impending election and change of Proactive on implementation
Strategy/Manifesto government possible. Labour close to union movement.
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Team (Torsten
Hendriksen-Bell,
Stuart Wood)
Chuku Umunna
2 I Mark Davies / Jane Hill
Technically no influence at present but impending election and change of
government possible. Labour close to union movement.
Proactive on implementation
lan Murray
2 I Jane Hill
Technically no influence at present but impending election and change of
government possible. Labour close to union movement.
Proactive on implementation
Media
Media as a whole
3 I Nina Arnott
Dependent on tone of debate, may be a non-story. Likely lines are: ‘union
bashing’ / shocking cost of publicly funded union time / personal (eg. Alice and
the unions) / modernisation
Reactive, moving to proactive briefing if
necessary.
Unions and other representatives
CWU Dave 1 I Tom Moran / Neil Almost certain to be anti the proposal and will see this in the wider context of
Ward/Postal Hayward the CWU's relationship with Post Office
Executive
Andy Furey 1 Tom Moran Will be deeply hostile, strikes at his influence and power base.
CWU Reps Tom Moran Personal agendas here, particularly those who would lose their jobs. However
many could be keen on VR.
Unite Leadership
(lan Tonks)
1 I Tom Moran
Strongly defensive — but proposition for CMA Unite is an improvement on
current arrangements and does not attack facility time so an opportunity to
‘divide and rule’
CMA - Brian Scott
1 I Tom Moran
Strongly defensive — but proposition for CMA Unite is an improvement on
current arrangements and does not attack facility time so an opportunity to
‘divide and rule’
NFSP. 2 I Nick Beal Very sensitive to any sense that money is going to other bodies. Currently Proactive on implementation
trying to get close to the CWU so may make common cause.
CWU Sub- 2 I Nick Beal Very sensitive to any sense that money is going to other bodies. Currently
postmaster Division
trying to get close to the CWU so may make common cause.
Citizens Advice
(Consumer Future)
2 I Mike Granville
Not directly relevant but likely to have a view and comment.
Proactive on implementation
Suppliers & Clients
Royal Mail
2 I Martin George
Would be very concerned by any potential impact on the business and also
any exposing of different approaches to union involvement (RMG's ‘Agenda
for Growth’). However potential that they would want to see Post Office
succeed as the platform for their own, similar, action.
Proactive on implementation
Bank of Ireland
2__I Nick Kennett
Main concern is impact on business (and potentially any other relevant point.
Proactive on implementation
Other Suppliers (IT)
2__I Lesley Sewell
Not core but would need to be updated.
Proactive on implementation
Internal Stakeholders
Chair (Alice Perkins)
1 Paula Vennells
Crucial — must be briefed before we go public.
Proactive — before implementation
Board (1:1)
1 Paula Vennells
Crucial — must be briefed before we go public.
Proactive — before implementation
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POST OFFICE LTD EXCO/BOARD
Post Office People & Engagement Strategy —
Changing the way we work with the NFSP
1. Purpose
The purpose of this paper is to:
1.1. Update the ExCo/Board on the current position of the NFSP strategic relationship;
1.2. Agree actions required for discussion with the NFSP in light of the imminent
Network Development activity, Business Transformation proposals and wider (non
agent) IR landscape.
2. Background
2.1. Our assumption remains that Post Office wishes to continue to ensure that there is
effective engagement between its branch operators and the management
structures within the organisation — it is a very large, complex organisation made
up of more than 8,000 separate businesses, likely to expand. NFSP remain well
placed to be a strong and credible body that is the voice of the UK’s post office
operators which can reflect views that add value to the overall Post Office
customer proposition through effective challenge, contribution to
business/operational/product development and also provide a range of benefits to
operators. Critical to NFSP maintaining this position is their transformation away
from a trade union design to a new organisation similar to a trade association. Our
vision for this is set out in annex 1.
2.2. The approach to managing the NFSP strategic relationship over the last 12 months
has been framed in the context of agreeing terms for the revisions to Network
Transformation (NT2), gaining support for the implementation of the programme
and establishing a long term funding agreement for NFSP.
2.3. NFSP’s position was that NT2 would not happen (the compulsory element of it)
without their support and that there were 4 pillars to gaining this — additional
compensation for existing postmasters, additional transitional payments for
postmasters converting their branches to Locals, a one-off payment for provision of
retail information (in lieu of a wider remuneration increase) and securing a long
term funding arrangement for NFSP. Three of these four have been implemented.
The final pillar has not yet been completed — we have an agreed MOU and this has
been used as set of principles to develop the legal document (Grant Agreement
(GA)) that is currently under review by NFSP. Timescales for signing this have
shifted, driven primarily by NFSP needing to gain authority to sign this via a
Special Conference (originally planned for November, now slipped to at least
January), as a consequence of a version of the MOU being leaked by NFSP
dissenters prior to their May conference and subsequent debate at conference.
Publicly the NFSP have positioned that there are options for their organisation —
stay as is, merge with another body (e.g. CWU, National Federation for Retail
Newsagents (NFRN)) or contract with Post Office. Privately George Thomson
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acknowledges an agreement with Post Office is the best outcome for them and this
has been the main focus of his efforts.
2.4. Up to July that had been the route Post Office has also been assuming. However,
the recent developments and conversations relating to Network
Development/Extension and Business Transformation (BTr) have introduced an
uncertainty in this approach.
2.5. NFSP’s current assumption is that the previously agreed MOU is “banked” subject
to final negotiations. Our emerging analysis of future network design (based
around an expansion of access points), the differing role NFSP may play in this
and the apparent approach they continue to take to try to exert a price of support
for change (despite the stability and funding the GA would provide them), is
causing concern that the commitment for a 15 year funding deal is a higher risk to
Post Office than before, or at least signing the GA without agreement on Network
Development increases this risk. (Note that termination clauses in the GA do give
Post Office options in the event of NFSP not supporting NT, encouraging members
to breach contract and undertaking activity detrimental to Post Office, but to sign
the agreement with an assumption these are likely to be invoked would not be a
recommended course of action).
2.6. Whilst supporting the necessity of Network Expansion, recognising the inevitability
of it and proposing some initiatives to test it, NFSP effectively tabled a demand
position in order to support it. This position is structured around 3 aspects —
protection of existing postmasters’ income, protection of existing postmasters’
investment and additional funding for NFSP - and these have been tied into
seeking a further agreement described by NFSP as NT3. We achieved an interim
position with them for the initial trials — this set the maximum number to 200 and
the product range to that of the current Paystation, until mid-January — which whilst
attained with some tensions, is significant progress from their previous position on
extension.
2.7. This evolving landscape is causing the business to consider a hardening of its
position to NFSP (BIS similarly in dialogue with us), and challenging whether
signing the current Grant Agreement in isolation would be the correct thing to do.
2.8. However, implementation of such an approach inevitably has risks, particularly
with the proximity of the next General Election and the prospect of potential
disagreements with the unions happening in parallel. Whilst BIS may well position
being tough with NFSP as an approach they support, the likely objective of the
minister is for calm over the next 9 months. We need to be certain of the political
position before pursuing our objectives.
. Activities/Current Situation
3.1. The current GA has been under review by NFSP (including their lawyers) since
July. It is likely that NFSP will seek to finalise the agreement shortly as their
aspiration is to have it signed prior to any further agreement on Network
Development (ND). Our emerging preference is to re-set the agreement to take
account of ND, signalling this explicitly at this point could risk accusations from
NFSP of bad faith. However, it is anticipated that NFSP will in any event challenge
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aspects of the GA related to proposed controls of expenditure and therefore we
can stall any discussions whilst redefining our position.
3.2. As the access point trials progress and a more detailed programme design for ND
is established, we intend to work collaboratively with NFSP in shaping the
programme. The recent discussions relating to the trials have gone a long way to
establishing what NFSP’s position will be — both in terms of conditions and
potential consequences of failing to reach agreement.
3.3. Critically, it feels unlikely that NFSP will concede putting back the signing of the
GA for NT2 and providing support for ND without some form of additional deal with
an associated financial impact. The economics of any such deal need to be
considered in the overall business case for ND and Business Transformation
(which envisages reductions in agents’ remuneration arising from product
simplification). We therefore have a short timeframe to have our mandate.
3.4. A likely, though not certain, consequence of failing to reach an agreement would
be for NFSP to undertake negative action, some of which could have longer term
implications than simply causing near term disruption. Such action should be
suitably risk assessed (see Annex 4). Any such action could be in parallel with
industrial action from the CWU.
3.5. Mitigation of many of the potential actions identified in Annex 4 is already in hand —
irrespective of the NFSP’s position/action, it is highly likely that individual
postmasters (potentially with CVU support) could challenge in these
areas. Priority should now be given to consolidating our handling of these
reactions and determining our options for ensuring Post Office's desired outcomes
for this and the wider NFSP relationship are achieved.
3.6. It has been agreed that an equivalent to the IRSG will be established for the NFSP.
relationship. This steering group will initially meet every 2 weeks with the terms of
reference defined in Annex 5. The group will frame the mandate for discussion
with the NFSP.
3.7. The initial decision landscape and timeline has been defined (see Annexes 2 & 3)
by the NFSP Steering Group.
3.8. A critical decision will be to determine what the price for NFSP support will be,
consequences of non-support and therefore whether PO is prepared to fund such
support. This will be fully scoped in line with the wider stakeholder engagement
piece and communications strategy.
. Options to be considered
4.1. Option 1 - As Is — continue with current approach of finalising the GA in its current
guise, prepare ND case and negotiate with NFSP for an additional agreement with
GA signed.
4.2. Option 2 — integrate NFSP agreement into the emerging ND landscape such that
support for ND is explicitly coded into the agreement.
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4.3. Option 3 — integrate NFSP agreement into the emerging business landscape (ND,
BT,IR etc.) such that a business wide assessment is fully considered and support
for change is explicitly coded into the agreement.
4.4. Option 3 above is the recommended approach
. Next steps
5.1. Initial activity:
. Develop a framework for initial activities identified in the Decision Landscape
(annex 2) .
. Review/game plan potential NFSP actions and Post Office
preparation/responses (see annex 4) in conjunction with the wider stakeholder
engagement planning
. Review wider competitor and stakeholder landscape
. Determine action arising from above and structure governance of these
actions within Network Development programme
. Key Risks and Mitigation
6.1. NFSP/other stakeholder activity undermines NT delivery and Expansion.
Mitigation: we will have a proactive engagement approach for stakeholders and
handling negative PR noise.
6.2. BIS withdraw support whilst under political/election pressure. Mitigation: We will
work with BIS to gain ministerial support for our strategy.
6.3. Commercial plan undermined by lack of customer confidence in Post Office.
Mitigation: There remains an ongoing need to put the customer voice at the heart
of Post Office thinking.
. Long term considerations — horizon scan
7.1. Acceleration of NT/expansion/compulsion/implementation of cliff. Withdrawal of
support for NT is likely to have a mixed impact. In the short term, some converters
would reverse their decision and compulsory exiters would use this as a means to
try to avoid exit with NFSP support for this on the ground (though note that PO
have government policy backing for this). Design of processes to accelerate
compulsion could be easier if we do not take account of NFSP requirements.
Significant roll out of access points could encourage some existing postmasters to
leave.
7.2. Potential for NFSP alternative leadership. Currently no indication that George
Thomson's position is at risk but an aggressive stance that pushes for a merge
with CWU could be at odds with the more commercial part of his executive who, in
the past, have privately (to PO and in secret) demonstrated some concerns with
his attitude to change (this related to his lack of support for Mutualisation). This
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might emerge if tensions grow — though equally likely is that this faction remains
silent and exits after a CWU merge.
7.3. Alternative to current MOU NFSP funding model. Irrespective of the potential
NFSP actions, they have yet to respond to the Grant Agreement draft they
received in July. It is likely they will have issues with this that will require
negotiation - certainly POL will not concede initially and has the ability to elongate
the process (that is assuming NFSP wish to engage in one at this stage). Given
the evolving landscape and recent NFSP behaviour, we would want to potentially
tighten up termination aspects and/or alter the funding model. This has yet to be
scoped or discussed with NFSP as it has been seen as too sensitive in isolation.
The current environment with make justification of this much more tenable (though
not from the NFSP’s perspective).
7.4. Alternative to NFSP as postmasters’ representative organisation. Depending upon
the outcome of 8.3 and the impact of a merge with CWU, we should explore
developing relations with other organisations to function as a voice for the agent.
This would clearly be framed as a commercial/trade play and not be badged as
representation/recognition. This could include support grants based on the
numbers of voluntary members (rather than the NFSP model which includes
automatic membership). Examples include National Federation of Newsagents
(NFRN) and Association of Convenience Stores (ACS).
. Communications Impact
8.1. A Communication & Stakeholder engagement plan for the access points trial has
been established (see Annex 6). This will be refined as outputs from 5.2 above
emerge.
. Conclusion
9.1. Whilst NFSP’s position may present, in the short term, Post Office with additional
risk to delivery of its Network Strategy, it should be noted that gaining clarity on
that position and the subsequent outcomes in advance of signing the Grant
Agreement will enable PO a “true test” of the NFSP’s attitude to working with PO
within the MOU framework.
9.2. Whilst NFSP will argue that the agreement reached last year did not commit them
to supporting Network Extension, they clearly set an expectation that working
together within the MOU would not reflect past approaches of “deliver demands or
else”. Whilst their position has softened, it remains dependent upon conditions,
arguably inconsistent with such an expectation.
9.3. NFSP’s reaction has heightened tensions related to potential reactions from
stakeholders at trial launch — but it should be noted that there are many other
stakeholders (including individual postmasters supported by CWU) who are likely
to challenge our approach after launch and therefore a strong focus on this aspect
is necessary whatever our position with NFSP.
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10. Recommendations
The Board/ExCo is asked to:
10.1. note the update and actions set out above;
Neil Hayward
16th October 2014
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Annex 4
NESP/Agents’ Engagement — Vision and Engagement Strategy
Postmasters are critical to our future plans — 97% of our network is run on an agency basis.
If this population is not supportive of the Post Office commercial strategy, we are unlikely to
succeed overall. They, collectively, are our most important stakeholder and we wish to work
with them in a mutual way to accelerate the Post Office’s business transformation.
To support this, Post Office wishes to ensure that there is effective engagement between its
branch operators and the management structures within the organisation — it is a very large,
complex organisation made up of more than 8,000 separate businesses.
A mechanism for this would be a strong and credible body that is the voice of the UK’s post
office operators which can reflect views that add value to the overall Post Office customer
proposition through effective challenge, contribution to business/operational/product
development and also provide a range of benefits to operators. Our belief is that this will be
commercially beneficial to both Post Office and operators, by helping to drive the
development of products and services which are more attractive and relevant to our
customers and identifying opportunities to do things more efficiently and effectively.
The National Federation of SubPostmasters (NFSP) is currently an independent membership
organisation supporting operators of Post Office branches across the UK and is considered
to be in a unique position to provide benefits to these operators. For over 100 years, the
NFSP and the Post Office have worked closely together to help maintain the important role
post offices play in providing a wide range of services to the communities of the UK.
However, the NFSP’s ability to maintain itself as a member funded organisation is under
threat — membership numbers has declined significantly in the last few years, primarily as a
result of the reduction in the number of Post Office branches, and continues to decline as
Network Transformation exits many traditional members and replaces them with retailers
who are less inclined to join NFSP.
Recognising this, NFSP has explored a number of options to sustain it and intends to put
these choices to its membership:
1. Establish an agreement with Post Office that guarantees levels of funding for a period
of time (the MOU)
2. Merge with the CWU
3. Merge with the National Federation of Retail Newsagents (NFRN)
Expectation over the last 12 months has been option 1 — but this has become less certain in
recent weeks as discussions with NFSP relating to Network Extension have caused tensions
and threats from NFSP which would remove this option.
Notwithstanding recent weeks, over the last 12 months the tone of our relationship with the
NFSP has become more collaborative. Our intention was to build on this by helping the
NFSP complete its own transformation from a quasi-trade union to a representative trade
body.
NFSP also have ambition to be a provider of services to PO but we have to tempered this
with a realism that any such provision needs to be of a high quality and value for money,
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particularly in the context of our drive towards a digital future, and that there is probably a
gap in their organisation capability/capacity to do this. We see the future agreement
between us, with the associated grant payments, as the platform to support them in
developing their organisational capability that could enable such an approach which would
increase their income from us on a value for money basis. This could include secondment or
funding for business development resource.
Similarly, NFSP have a desire to represent additional access points and wish to work to
establish an agreement between us on how this will function, with NFSP seeking additional
funding for this.
NFSP are an important stakeholder who has the potential to add value to our business. We
have recognised that a collaborative relationship with them, as an organisation framed as a
trade body rather than trade union, maximises this; and we recognise the need to fund them.
The challenge now is how far further the respective organisations can go in order to reach an
agreement that takes account of an expanded network, business transformation and other
key business change activity, and the consequences of not agreeing.
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Annex 3
Timeline
Sep14 Oct14 Nov14 ODec14 = Jani5 Feb15 Mari5 Apri5 May15
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Business Transformation discussions
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Annex 4
Current landscape - Potential NFSP actions and PO preparation/responses
Action Current Position PO Action Required Owner
Withdrawal of Withdrawal threat Undertake structured impact assessment in I lan Kennedy
support for the only at this stage. NT.
compulsory Some minor
element of NT2_ I slowdown of Undertake detailed Multiples proximity
and any future voluntary exiting — analysis to determine both likelihood of
support for the though most decision to convert being reversed and
cliff postmasters in this opportunity for PO to use as lever to exit.
space are driven by
financial motivation Accelerate cliff and associated messaging
and in fact this could
increase as
perceived future
threat is seen as
higher. Conversions
may be more
affected as
messaging around
risk to new model on
variable
remuneration maybe
more effective.
Compulsory exit
likely to be
undermined.
Initiate an OFT Current access Restrictions review currently underway — Paul Williams
(sic)
investigation
into PO
restrictions
policy, on the
basis of whole
estate waivers
points contracts
include a restrictions
aspect, therefore not
technically an issue.
Public awareness of
challenge itself could
prove difficult for
update needed from PW
issued to POL to handle.
multiple partners
Initiate and Legal position sound I Test legal advice, manage comms issues. Tanya Dunbar
investigation by
the NAO into the
inappropriate
investment of
public funds into
PO branches
subsequently
undermined by
the introduction
of access points
in close
but public awareness
of challenge itself
could prove difficult
for POL to handle.
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proximity
Legal challenge
to seek
injunction to
stop programme
on the basis of
new access
points
undermining the
value of the
purchased
franchise/goodw
ill
Challenge not yet
tabled. PO advice is
that this is
defendable.
Additional advice required of implications of
NFSP seeking an injunction - how this
could manifest itself, what the
consequences would be for PO in terms of
having to engage in a legal case/process
and whether seeking an injunction would, in
itself and irrespective of the outcome, force
PO to stop rolling out or having to close the
pilots.
Tanya Dunbar
Lobby Current BIS line is Ensure regular briefings provided from Mike Granville/
BIS/Minister supportive to POL, Network Development including discrete Paul Brown/
though could be at focus on stakeholder/comms landscape. Nick Beal
tisk if
political/election/medi
a pressure were to
intensify.
Withdraw from Withdrawal of NT PO position is clear— no action considered I Nick Beal
MOU
process/join
support would
automatically mean
necessary — reminder of this could be seen
as provocative.
CWU/NFRN MOU would fall.
Refresh previous external advice on impact I Tanya Dunbar
CWU merge would with added focus on merge rather than just
open door for challenge for recognition, confirmation that
recognition and dependency on worker status.
collective bargaining
for postmasters, but I Clarify what obligation for collective
current advice is that I bargaining actually means — e.g. release
worker status is time of reps, would we be forced to
required. undertake annual pay reviews on product
payments, fixed payments etc., would we
Merge with NFRN be forced to meet them under certain terms
could be an and conditions etc.
acceptable
alternative. Their Identify actions PO could take to reduce
membership is membership e.g. force re-mandate of
currently 16k (vs 6k subscription deductions/remove check off
in NFSP) and they altogether.
are more
commercially
focussed than NFSP,
therefore union type
behaviours would be
less prominent.
Negative PR Highly likely NFSP See Annex 6, Communication and Mark Davies
campaign would gain exposure. I Stakeholder Plan.
Further consideration to be given to
aggressive PO approach.
Undermine NFSP position by indicating the
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situation, apart from Mails, is no different to
last year. Mails threat is recognised —
hence why we are doing what we are doing
which in fact improves the wider network’s
position as our market position is
strengthened.
Discredit Likely NFSP would Ensure up to date temperature check with Lillian Moshe
partners gain some exposure I key partners.
but unclear as to
partner's reaction.
Lobby Likely NFSP would Ensure up to date position clear with RM. Paul Brown
RM/failure of gain some exposure
privatisation but unclear as to
impact — similar lines
have been used
before albeit without
the wider context.
Discredit PO Risky strategy as this I Ensure our messaging focuses on Mark Davies
with customers I could affect customer benefits.
individual postmaster
and customer
relations.
Position risk to Likely NFSP would Ensure our messaging focuses on Mark Davies
closure of gain some exposure I customer benefits and reality of the market.
traditional which would play out I Business committed to Government access
branches in the criteria/network numbers. Additional
political/PR/partner access points mitigate closure risk.
impacts rather than
impact on NT. In fact
could increase
voluntary leavers.
Operational No indication this Ability for PO to withdraw payments to Nick Beal
action — would be a course of I branches — review current monitoring
segregation action but cannot process.
dismiss at this stage.
Risk to credibility for I Would constitute contractual breach and Tanya Dunbar
NFSP given they PO could take legal action against NFSP.
positioned last year’s I Refresh legal advice if prospect emerges.
settlement on
segregation as a
good outcome.
Would undermine
any opportunity they
might have to gain
support from RM.
Breach Risky for NFSP as a__I Review existing process for monitoring Paul Williams
restrictions clear contractual compliance to restrictions.
breach for members
and risks dilution of
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NFSP
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business in wider
network in the event
of an impact on PO's
client contracts.
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Annex 5
Network Development Stakeholder & Communications ExCo subgroup TOR
PURPOSE The role of the Network Development Stakeholder & Communications
ExCo subgroup is to regularly review the current landscape and determine
actions necessary to ensure the interests of Post Office are met.
ROLE JOB TITLE
CHAIR Group People Director
MEMBERS Commercial Director
Network & Sales Director
Communications Director
Chief of Staff
OTHER ATTENDEES General Manager Network Transformation
Head of Policy & Briefing
Head of Agents’ Development & Remuneration
SECRETARIAT tbc
QUORUM Two members and one Other Attendee
FREQUENCY As required, suggested fortnightly
RESPONSIBILITIES:
* Contributes to and agree the strategy to proactive & reactive actions arising from the
current Network Development stakeholder & communications landscape
+ Identifies the key stakeholder & communication risks to the implementation of the
Network Development Strategy and ensures that there are effective systems in place
to mitigate these
+ Provide support for work streams sponsored by this sub group: monitor progress
against milestones, remove obstacles, agree changes, resolve conflict and set
direction as required to ensure results are delivered.
SPECIFIC POWERS & AUTHORITIES:
+ Approval of decisions & actions necessary to ensure Network Development
stakeholder & communications landscape is as favourable to PO as possible
+ Approval of new workstreams as required. This means approving plans, timetables,
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resources, and governance for initiatives intended to improve the Network
Development stakeholder & communications landscape.
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Annex 6
Communication and Stakeholder Plan
176 live access points: Monday 22 September
1.
2.
Post Office remain reactive
Post Office go proactive
Post Office internal positioning
Q&As
Post Office remain reactive after go-live
e Mini Post Office address details searchable on Branch Finder emphasising Home
Shopping Returns only (no splash page)
e Share list of access points with PR and stakeholder teams
¢ Brief to NBSC/ NT Helpline/ Po-Ex
Reactive external (media/stakeholder) positioning
2.
¢ The Post Office offers nationwide access to a full range of Royal Mail products and
services and is established as the UK's number one mails retailer. This is a market
that is changing all the time - particularly with the continued increase in home
shopping - and one that is becoming increasingly competitive.
e In addition to extending opening hours in many of its 11,500 branches, introducing
special arrangements for business customers, self-serve options and competitive
pricing, the Post Office is exploring other opportunities to make life easier for its
customers and provide the best accessibility. This has involved discussions with
some of our suppliers and retail partners, and we are currently trialling ‘Mini Post
Offices’ in more than 100 existing retail outlets offering a basic home shopping and
returns service. We'll use the ‘Mini Post Offices’ to assess customer reaction and
retail fit over the coming months.
¢ The trial of Mini Post Offices will enhance and compliment the modernisation of the
existing network, while addressing those customers who would not ordinarily use the
Post Office.
Post Office go proactive
Internal — potential activities
« Remunerate postmasters closest to new access points with Home Shopping returns
trial payment
Identify postmasters who are advocates of Network Development (from TeamTalk)
Promote via intranet/ internal communication channels
Martin/ Kevin blog to business
.
.
.
e Share list of access points with PR and stakeholder teams
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Full briefing notes for NT Helpline/ NBSC.
External — potential activities
Mini Post Office splash page on website
Develop local media plans around the Mini Post Office locations
Martin/Kevin feature in trade magazine/ newspapers
Mark D — Huffington Post blog
Brief Parliament/ local MPs
Full briefing notes for PO-Ex
Social media promotion — easier to do business with/ ‘We're changing’ phase three —
Twitter/ Facebook/ blogger engagement
Proactive external (media/external) positioning
3.
The Post Office is changing.
We're making it easier for customers to do business with us over extended opening
hours often in more modern, open-plan environments.
And as the UK’s number one mails retailer we know this is a market that is changing
all the time - particularly with the continued increase in home shopping - and one that
is becoming increasingly competitive.
This is why we're trialling over 100 Mini Post Offices, offering customers a simple
Home Shopping Returns service in new locations across the UK.
The Mini Post Offices are based in existing retail businesses and will offer customers
a quick and simple way to return their online parcels.
Offering customer convenience is important to the Post Office, particularly in a
developing market.
We're constantly exploring other opportunities to make life easier for our customers
and provide the best accessibility.
Over the year we've also introduced special arrangements for business customers,
more self-service options in branch and competitive pricing.
The Post Office now has more than 1,000 branches open on a Sunday.
Many of our branches are now open earlier and later for customers — offering an
additional 60,000 opening hours a week.
Over the coming months, we'll monitor Mini Post Offices to assess customer reaction
and retail fit.
Internal positioning
Are you extending the Network? What does it mean? Why?
The competition has declared war on the Post Office.
Let me give you an example, Collectt has recently launched an aggressive
advertising and PR campaign where they clearly set a target of 12,000 access points
and said they were coming after us.
Right now - collectively the competition has more access points than us.
This is the first time in history this has happened.
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e We are the largest retail network in the UK and we have the largest network of any
single operator. We need to fight to retain this.
e The competition is after our market share and our revenue.
e It's our market, our profits and our business that we must fight for.
« To compete we must ensure that we have more access points.
Mini Post Office trial
e At July's TeamTalk event we committed to trailing additional access points.
« We've introduced 176 Mini Post Offices into existing retail businesses offering
customers a basic Home Shopping Returns services.
¢ Throughout the trial we'll monitor customer reaction and retail fit to assess our next
steps in this market.
e Were also trialling the name ‘Mini Post Office’ and the new brand to understand
customer reaction.
¢ This is about stopping the competition taking business away from us and addressing
new customers who would not ordinarily use a Post Office.
¢ The trial will complement the modernisation and maintenance of the existing network,
improving our ability to win new contracts in different markets.
¢ This is not about taking business away from existing branches, but will complement
the modernisation and maintenance of the existing network.
¢ Our priority must be our customers and what they want is convenience and ease.
« To survive we must meet this demand.
4. Q&As
Why are the NFSP opposed to your plans?
We have been in regular discussions with the NFSP to explore additional access points to
the Post Office network since July and we will continue to work openly and collaboratively
with them. Together we acknowledge that we need to explore ways to improve our offer to
customers and ensure the sustainability of our network in the future — the trial of Mini Post
Offices is an example of this.
How many access points have you opened?
We have opened 176 ‘Mini Post Offices’ throughout England and Wales that offer a basic
home shopping and returns service in existing retail businesses.
Are you looking to increase the size of the Post Office network?
The trial of Mini Post Offices will enhance and compliment the modernisation of the existing
network, while addressing those customers who would not ordinarily use the Post Office. We
constantly explore ways to improve our offer and accessibility to customers and ensure the
sustainability of our network into the future.
For example we are increasing customer convenience by introducing longer opening hours -
over 60,000 across the network in the last 18 months. Many Post Office services are also
accessible online and by phone, for customers who choose to interact with us that way.
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If you do open up more branches or access points won’t this take business away from
existing branches, some of whom are struggling anyhow?
The home and online shopping market is growing, so where we believe there are
opportunities to do so, we are looking to grow our business over and above the work already
carried out in our branch network. Ensuring the continuing sustainability of our network and
making sure we are accessible to customers, is central to our view of a growing business.
The trial of Mini Post Offices will enhance and compliment the modernisation of the existing
network, while addressing those customers who would not ordinarily use the Post Office.
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Industrial Relations Strategy
Key Messages Presentation
October 2014
Employee Relations & Engagement
STRICTLY CONFIDENTIAL - NOT FOR CIRCULATION
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Presentation outline
1. The case for change
2. Industrial Relations context
a) Union membership
b
is
Legal framework
Extent and cost of Post Office IR Framework
)
3. A new approach
)
w
)
Key themes
) Arenewed focus on direct engagement with employees
b
) From an IR Framework with 41 full-time Reps to a modern, leaner structure
) Improved, standardised engagement
e) Engagement and consultation as a process, not an event
4. Implementation
a) Risks and mitigations
b) Timeline and projected benefit realisation
aoa
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The case for change
Changing IR and improving employee engagement to accelerate our commercial success
« Post Office has an ambitious commercial strategy.
* ‘Buy in’ and engagement from colleagues is crucial to our success. Unions are currently a barrier.
¢ IR Strategy based on raising engagement across the business to act as an accelerator to delivery.
Pro-Post Office, not anti-union
¢ Unions should and must retain an important role in Post Office - our employees have chosen to become
members. In this context we must:
Support managers to listen, engage and lead their staff through change;
Equip managers with the training and confidence to work with unions - including knowing key agreements and legal
obligations;
Make change happen quicker (reduce ‘cycle time’) to deliver lower costs of implementation and realise benefits sooner; and
Try to get union buy-in - but be willing to implement change without union support if we are confident it is the right thing to
do for the business.
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Context
Post Office union membership
Union Membership in the UK 2013
100
80
60
40
20
@ Union
Density
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Context
Legal framework
Employees have a right to union representation...
* Through Trade Union and Labour Relations (Consolidation) Act 1992 and Acas Code on Time Off for
Trade Union Duties and Activities. Support of 50% (+1) of all employees needed for automatic recognition.
Terms &®
Conditions
. (including
HES)
Paid time off»
for trade
% union duties
‘(‘facility time’)
Allocation of >,
work and
s. _ duties
acas
aismussavana
Ss... detriment
...but there is no statutory minimum or maximum for the no. of union reps or collective agr
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Context
Extent and cost of Post Office IR Framework
The IR Framework accounts for 0.5% of total paybill
ee a a
(Actual) On-cost* Expenses* Total Average I Vacant I Total Potential Cost**
CWU Postal Exec 34,553 34,553 34,553 69,105
CWU Territorial Rep 8 236,731 ae 244,080 30,510 d 274,590
CWU Area Rep 20 551,553 55,341 606,894 30,345 0 606,894
126, 333.
1,04 es
111,724
126,333
4
CWU H&S Rep
171,884 0 171,884
03
3 155 222
82,913
wu Reps I 3s I 3.172.696
102,085 1,375,421 5
\ 1,274,780 I
* All figures taken from payroll for Financial Year 2013/14. Total pay bill was £255m.
**Maximum cost exposure based on current collective agreements
A new approach
Key themes
I eAffordable / self- Focus on direct —
I funding engagement
I eAs established in New legally
‘ compliant, best
~\_ practice standards
Explicitly New approach for collective
commercial to employee engagement
approach to engagement wt
pay and managing
negotiations
I Crowns 2014 and
I current Supply
© Chain talks.
Up-skilled
managers to
} deliver change
in a unionised
workplace
New, lean
Collective
Engagement
Framework
onfident, capable
managers
eEmpowered at
local level
‘e Replaces old IF
Framework
iG Fewer Reps
Quicker change
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A new approach
A renewed focus on direct engagement with employees
A consistent, integrated approach with a focus on local level engagement
¢ Direct comms to colleagues on all major change programmes and during any pay negotiations if necessary. We
showed the success of this in Crown Transformation and the ensuing dispute on pay. It will be BAU from now
on, with the IR team working very closely with Comms and our line managers across the country.
¢ Anew training programme for managers - ‘Managing change in a unionised environment’.
¢ Using our employee engagement survey even more than we do now, ensuring a ‘you said, we did’ approach
and working across Employee Engagement, IR, HR, Comms and our line managers to ensure a joined up
approach.
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A new approach
From an IR Framework with 41 full-time Reps...
CWU Postal Exec x2
Territorial Reps x9
T.T ~L ~L ~L ~L ~ U~ xX x CWU Area Reps x20
Health & Safety
Reps (CWU x4,
CMA x3)
CWU H&S CWUH&S CWUH&S CWUH&S CMAH&S CMAH&S CMA H&S
Ww w w Ww w wa Ww
aN “oN
on
NR NR NR
~~ Need ~~
CMA National Reps
x3
ay ay ay AN AN ay anes
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°
A new approach
...to a modern, leaner structure
Member if CWU Postal Exec x1 (-1)
Territorial Reps x10 (+1)
TR
(
(:
(+)
(:
(
ay ™® ™® TR
— Ne et a
A move from 41 to 19 full-time Reps and an annual saving of £580k
NB: This structure is illustrative - our target is a ~50% reduction and there are
alternatives to this solution which would also deliver our objectives
oN oN oN oN oan Health & Safety Reps x5 (-2)
CWU H&S CWUH&S CWUH&S CMAH&S CMA H&S (CWU x3, CMA x2)
Ww Ww Ww Ww Ww
tr aR tk + CMA National Reps x3 (-)
~~ ~ ~
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A new approach
Improved, standardised engagement
Practical steps to make our engagement with unions better
¢ Think - Why are we doing this and what benefits will it bring? What is the compelling business case?
¢ The IR team will provide a standardised agenda for all collective consultation meetings with unions:
¢ Business case;
¢ People impact;
* Proposed date for implementation; and
* Agreed schedule for on-going consultation - right down to date of implementation.
Forward planning for timely negotiation, consultation and information sharing
* Anew Joint Consultation and Negotiating Committee (JCNC).
¢ Monthly operational meetings of JCNC - scheduled one year in advance.
¢ Bi-annual strategic business meetings.
¢ All designed to secure agreement for change - and allow enough time to demonstrate consultation.
An IR ‘Heat Map’ to ‘horizon scan’ IR risks related to current and future business change. Owned by the IR
Steering Group (Chaired by Neil Hayward)
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A new approach
Consultation as a process, not an event
Consultation does not mean that
employees’ views always have to be
acted on since there may be good
practical or financial reasons for not
doing so. However, whenever
employees’ views are rejected the
reasons for doing so should be carefully
explained. Equally, where the views and
ideas of employees help to improve a
decision due credit and recognition
should be given.
Proposal &
Planning
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Implementation 2
Risks and mitigations
1. — IR Strategy implementation delays other business activity - possible
that union will withdraw co-operation, but limited ability to delay. Extreme 5
2. — Industrial action - unions have legal right to strike over this, our
approach must focus on winning hearts and minds of colleagues to 4
minimise support.
3. Post Office portrayed as anti-union - almost inevitable from unions
hence need for a solid, reasonable defence of our position.
4. Business does not have resolve to implement the IR Strategy - very
damaging if realised. Business sign-off needed prior to 2
implementation.
5. Implementation exposes current cost of IR to stakeholders/media - insignificant 4
possible but limited impact if Post Office is addressing the situation.
6. Relations with Royal Mail (which is not planning to make radical 1 2 3 4 5
changes to its IR Framework) damaged - mitigated through LIKELIHOOD
stakeholder management with RM and avoiding any criticism of its Very untikely , Very likely
approach (independent companies).
7. Union membership increases as a result of implementation - density
already extremely high for CWU. Strategy based on employee
engagement to address high levels of union influence on members.
IMPACT
w
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Implementation
Timeline and project benefit realisation
Our plan is stretching but achievable...
Introduce
new
framework Mutually No. of Reps
for union terminate/serve reduce from
Secure ExCo engagement notice on 41 to ~20
support for - JCNC and current IR (target, subject
IR Strategy other fora Framework to negotiation)
a : = .
Design new Seek union IR Framework
Collective agreement for ends after 90
Engagement new Collective day notice
Framework Engagement period
and socialise Framework
with unions
...delivering it will remove existing frameworks and deliver ~£580k recurring benefit by year end
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Questions 2
Thank you for
your time
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POST OFFICE LTD BOARD
Network Transformation, Model Performance and Crown Transformation
1. Purpose
1.1 To update the POL Board on Network Transformation, performance of the new models
and progress on Crown Transformation.
2. Network Transformation — converting mains and locals
2.1 The programme reached the end of Q2 ahead of target for contracts signed and
branches opened for both mains and locals. As at 26th September, there were 4,168
contracts signed (1,657 locals and 2,511 mains) and 3,134 branches opened (1,238
locals and 1,896 mains).
2.2 Branch opening rates throughout Q2 have been consistently strong, averaging 25
mains and 20 locals a week. A major milestone was passed in late August when our
3,000th new model branch opened. The forecast for openings remains strong, with
over 40 a week opening over the next two months. The programme is on track to beat
the year-end target of 3,708 openings. The programme is also on track to meet the
overall target of 4,800 contracts signed by year-end. The emphasis is on making sure
as many of these as possible are locals.
2.3 The transitional locals process started in late July. This involves substantial
engagement with the affected agents (branches modelled as locals with poor retail
facing compulsory exit). Evidence from the first cohort of 50 branches has shown that
this level of engagement has minimised adverse PR, although it is resource intensive.
In addition, more than half of the first batch have volunteered to take a course of action
as a result of the engagement — either to leave voluntarily or develop a plan to improve
their retail in order to convert — rather than wait for POL to advertise their branch
against their will. By November nearly 250 branches will have entered the process,
with the remaining 450 following on in Q4.
2.4 The Community Branch Fund continues to attract interest from agents. There have
been 170 applications so far (70 of which have been approved and 14 completed), and
103 expressions of interest to install open-plan working.
2.5 As planned at this half-year point, we are also completing detailed analysis and
planning work on the ‘cliff’. It is worth noting that more than half of the remaining
contracts needed to complete the transformation from next year will not require
additional compulsion: they are replacements for leavers that will already be in process
(either from volunteers or the transitional locals process above). However, the cliff
remains an important tool to complete the transformation. Although planned for
introduction in September 2015, it was always our intention to re-examine where we are
at this stage of the year and to engage with ShEx on planning for next year. It will also
be part of the discussions with the NFSP.
3. Network Transformation — performance of the new models
3.
Over the last nine months, we have made significant changes to the way we open and
support branches when they convert to the new formats, through improved training,
better processes, and more communication and promotion. The new models are now
performing well, with income growth continuing in Mains (+6% in September, up from
+4% in Jan) and improved income performance in line with expectations in Locals (0%
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in September, up from -8% in Jan). Customer sessions growth shows that customers
are using the branches more (5% in Mains, 12% in Locals). Furthermore, 21% of
customer sessions in Locals take place out of standard post office hours. For locals
open more than 6 months, this has now grown to 24%. For mains with a higher
daytime footfall, the figure is 9% out of hours.
3.2 We have developed a deeper understanding of model performance, by looking at
branches in more detailed cohorts and assessing performance by assigning them to
quintiles, and whether they are onsite or offsite conversions. This has helped reveal
factors which are masked in overall analysis: for example, where local offsites have
lottery already and do not take this through Post Office, this can lead to a significant
drop in income. We have subsequently strengthened our sales messages for this
product on conversion and are following up on any temporary waivers given post
conversion.
3.3 To improve the rollout of the models, training material has been made clearer and more
readily available earlier in the conversion process, including through new video formats
and refresher training prior to opening. Communication with customers has been
improved through better leaflets and the rollout of A-frames with a count-down to the
opening date. The monitored sample first using the A-frames showed 2% better
performance in their first quarter. We have also trialled increased marketing spend in
some offsite branches (through door-dropping), and prize giveaways for customers who
transfer to the new branch. Neither of these has shown significant uplift, but we will
continue to trial other promotional activity in concert with the Marketing team. The next
stage of improvement planned is to provide agents with a personalised monthly
scorecard that shows them their key measures, how they rank against performance
quartiles and the top 3 actions based upon their performance. This will be trialled with
50-100 branches this quarter.
3.4 Onsite local conversions are performing well ahead of expectation (5% up) after 12
months. Offsite conversions take longer to achieve target, but more recent cohorts have
shown better earlier performance as we improve the transition process (4%
improvement in performance 3 months after conversion), which will flow through to
improved longer term performance. The ‘recovery period’ for Locals branches has
therefore improved, with branches on average now achieving steady-state performance
after 8-9 months compared to 11-12 months at the start of the year.
4. Crown Transformation- Programme delivery progress
4.1. The main programme of property transformations began in September 2013. By the
end of September 2014, 248 branches had been transformed, against a target of 230.
All retained Crown branches will have undergone transformation works by the end of
the financial year.
4.2 Over the same time period, over 3,000 staff from the transformed branches have
undergone the two-day CTP training programme focused on sales and customer
hosting. This is in line with target and the training programme will complete in
November.
4.3 Income performance in those branches that have completed transformation has
consistently outperformed that of non-transformed branches. On average, income in
transformed Crowns has been increasing 4.2% year-on-year (YOY), versus a 1.1% YoY
decline in non-transformed branches. A particular highlight is the 17.5% YoY growth in
Financial Services income in the transformed branches, a growth rate that is 2.3 times
faster than in non-transformed branches.
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44 Significant progress has been made to deliver the staff cost savings required in the
retained Crown branches. The equivalent of over 440 full time counter staff positions
have been removed from the network template over the same period of time, with a
further 60 signed up to voluntary redundancy with end dates before the end of
November. This is against a target of 503 FTE. A voluntary redundancy (VR) exercise
has also been run amongst branch managers, with acceptances received for exits this
financial year. Staff savings benefits totalling £16m have thus either been delivered, or
secured for delivery, during FY13/14 and FY14/15. Together with the flow-through from
savings made in FY12/13, this means CTP will have delivered a reduction in the
Crowns’ staff cost base of £20m, in line with target.
4.5 Alarge proportion of the staff saving benefit has being enabled through the rollout of
over 500 of the new generation self-service kiosks, which the programme has
developed with our partner, NCR. The first kiosks began operating in Harpenden
branch in February 2014 and since then rollout has continued at pace, with over 430
kiosks in live operation across 155 branches by the end of September. Branches with
the kiosks are, on average, conducting 60% of their mails and retail sales through the
devices, as opposed to requiring customer interaction with a counter clerk. This
performance is on target.
4.6 New duty sets have been going live in branches, synchronised with both the
transformation of the branch and the exit of colleagues under VR. Customer
satisfaction has been closely monitored through Voice of the Customer feedback whilst
the new duties embed, with “rapid response” teams in place to resolve any teething
issues. September's overall satisfaction score was 83% in transformed branches, a
level marginally higher than before staff exits from the same branches began in April.
The “acceptability of wait time” score in the same branches was 85%, which is the
same score as in April despite the staff exits in the intervening period.
4.7. Work to progress the small handful of closures and relocations within CTP’s scope is
progressing well. Following the successful merger of two branches into one new site in
Islington during Q1, Wandsworth and Newport's branches were successfully relocated
to better value sites during Q2. Eviction notices have been served on the Post Office
this year at Albermarle Street (Mayfair) and King’s Walk (Chelsea) and in both cases
no commercially viable alternative sites have been found. This has resulted in plans for
redistribution of services in those areas, with Albermarle St branch closing for business
in September and King’s Walk branch now in public consultation over its planned
closure in February. The second half of the financial year will also see branch
relocations go live in central Manchester, Edinburgh, and Glasgow, as well as the
closure of High Street Sutton branch, with its services to transferred into Sutton Grove
Road.
4.8 The franchising project has moved slower than originally targeted. Potential operators
have been deterred by concerns over: Crown staff transferring under TUPE; public
campaigns in opposition to franchising; and the low income likely to be generated from
the significant space requirement in some sites. Numerous mitigations have been put
in place against each risk, and whilst these mitigations have yielded some results, it is
now certain that fewer than the 70 branches originally planned will be successfully
franchised:
¢ 29 branches have so far gone live as franchises.
e 22 further branches have credible applicants currently in the recruitment process
with viable premises. These are expected to move into contract signature and
complete public consultation this financial year.
© 6 further branches are in the pipeline with potential applicants but are not yet at the
recruitment stage, which carries a higher risk of dropout.
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¢ The remaining 13 branches will not be successfully franchised under CTP.
A number of mitigations have been put in place to reduce the Crown P&L impact of this
gap, meaning that despite the fact that not all branches will be franchised, over 90% of
the planned Crown P&L benefits associated with franchising will be realised (c£7.5m of
£8.0m).
5. Crown Transformation- Forecast P&L position
5.
Despite the programme's delivery successes and the outperformance of transformed
Crowns versus non-transformed, the rate of income growth required this financial year
is not being achieved. Full year Crowns income is forecast to be £5m to £7m below
budget. A £7m outturn below budget would broadly align to a whole-business outturn of
£880m. The primary drag is underperformance on mails, where income has declined
2% YoY in transformed Crowns and 5% YoY in non-transformed Crowns; against a
budgeted 9% YoY growth.
5.2 Looking at the bottom line, and our ability to achieve a breakeven run-rate, the current
tisks- if unmitigated- would leave a £6m to £8m gap against the breakeven objective.
6. Crown Transformation- Programme response to forecast P&L position
6.1 A number of mitigations are available against the P&L risk mentioned above, some of
which include new areas of programme scope being mobilised, and these are targeted
to deliver up to £4.8m of additional benefit:
¢ New product launches during this financial year provide a part-year income
increase. The run-rate calculation will assume the full-year value of the income
these products would generate; and similarly discount the full-year value of any
products ceased during this financial year. The net benefit of this treatment in the
run-rate calculation is expected between £0 and £4m, with the most likely scenario
being a £2m upside.
e A number of further property initiatives are being planned, which will deliver up to
£1m of P&L benefit. These include; a further review of property maintenance
spend, with associated budget reductions; a further review of cost allocations such
that any space in Crowns used by other parts of the business has its cost re-
allocated to that part of the business; and a proposal to create and sub-let a
separate self-contained retail unit within the available footprint of Trafalgar Square
branch.
e A further initiative is planned to generate additional counter staff cost savings,
which will deliver up to £0.5m of P&L benefit. The recent CWU agreement to a
package of new measures on performance management will enable a rolling
“Leaving the Business with Dignity” programme. This will exit under-performing
counter staff and hire in stronger replacements from the start of Q4. The lower pay
rate and lower pension costs of the replacement staff during their early years with
the business generate the saving.
e Asmall number of branch closures are planned to enable a further £0.5m
reduction in losses. These include the (already complete) closure at Albermarle
Street, the closure currently in consultation at King’s Walk, a merger of services
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out of Rye Lane Crown into the wider agency network in Peckham, and the
potential for a similar closure in Laindon, Essex.
e ShEx have confirmed their support that the activities of non-public branches such
as those in the UK and Scottish Parliaments and the Royal Household should be
removed from the Crown P&L. These branches lose c£0.5m per annum. Projects
for reducing the running costs of these branches are already underway, to
eliminate their burden on the wider business P&L.
¢ Up to four further branches are expected to move off the Crown P&L and be
transformed into Post Office Concept stores. This selection of branches will be
representative of different branch sizes and different customer demographics in
order to trial elements of the “Branch of the Future” blueprint- such as new
technologies- before they rollout to the wider network. These branches will be
sponsored by the Commercial directorate and will mean c£0.3m of losses removed
from the Crown P&L.
6.2 In the event that the breakeven run-rate is not achieved by March 2015, CTP has
nonetheless demonstrated over the last twelve months that retained Crowns are able to
grow income once their transformation is complete (+4%) whilst operating on a staff and
property cost base that has reduced by c25% over the same period.
6.3 Although the programme team is doing everything within its power to achieve
breakeven by March 2015, consideration has been given to the programme response if
this objective is missed. Building back up from the worst-case income scenario this
financial year (£7m under budget), breakeven would be achieved by September 2015
under the following circumstances;
¢ the mitigations described in Section 6.1 above are successfully delivered;
¢ Crowns income remains flat; and
¢ a further £3m of annualised cost savings are delivered during the first half of
FY15/16.
6.4 At the start of FY15/16 the business will have greater freedom to make additional cost
savings and planning is now beginning for these. This would involve delivering new
projects to change the shape of the Crown network (through, for example, merging
services of two branches into one) and from mobilising new franchising projects. Whilst
planning work can begin this financial year, these can only go-live once the current
commitment to staff -which defined CTP’s scope of franchising and branch changes-
expires at the end of this financial year.
6.5 In terms of the longer term strategy for the Crown network, development work has now
begun; and a full recommendation will be made to the board in January 2015. The
going-in hypothesis is that significant additional franchising would provide greater
profitability than is achievable through a directly-run network. However this needs
strategic consideration in conjunction with the development of new Post Office models;
our ability to simplify customer journeys; our potential to create a more attractive
franchising proposition for our largest branches; our FS strategy; as well as the cost,
staff, industrial relations and PR risks associated with change.
Kevin Gilliland
October 2014
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8 September 2014 (V4)
POST OFFICE LTD EXECUTIVE COMMITTEE
teamtalk [virtually live]
1. Purpose
The purpose of this paper is to:
1.1 update ExCo on plans for the next teamtalk live event in November.
1.2 Gain ExCo agreement to proposed approach
2. Background
2.1 The last teamtalk event was the first to use live link up technology to enable Paula’s keynote
presentation to be heard simultaneously at all venues. It was also the first time we'd invited
branch managers and postmasters to a teamtalk live event. Feedback shows it was well received
and heralded a new era of straight-talking, tell it as it is communication.
3. Proposal
3.1 Over the past few months we've been building up the narrative for the business — we've a
strategy for growth and are building up proof points around this, but times are tough, increased
competition means we need to accelerate and to hit the numbers we need to think and act
differently. We've a key cost challenge ahead of us both in-year and long term if we are to build a
commercially sustainable business.
3.2 Teamtalk live needs to continue to reinforce and build on this narrative. We need to
acknowledge that things are feeling tough but we need to rise above the pain, seize the
opportunity to be bold and agile and recognise the current situation as an opportunity. We are in
a defining period for the business and that requires radical change.
3.3 We need to ensure we don’t fall into the trap of trying to deliver too much through the
session. The proposal is to keep it simple and focus on the following;
e Creativity — budgets are being cut/removed but that doesn’t mean we have to stop doing
things. We need to use this as an opportunity to be more creative in what and how we
deliver things
« Customer — must remain at the heart of what we do, delivering quality products through a
great customer experience is critical to our success. We need to be winning in mails and
challenging in Financial Services — these pillars should be our primary focus.
« Christmas — we're all aware of the opportunity Christmas offers. From fighting the
competition to ensure Post Office is the natural place to visit to giving confidence to our
once-a-year customers that we deserve their consideration across a range of products
they don’t know we offer. Success this Christmas is vital to us getting closer to our targets
this year and every single colleague across the business has a role to play.
e Care — We're going through change and times are hard and for some it will soon become
even harder. We have a good track record of care and consideration for colleagues and
we need to ensure this continues and we don’t get side-tracked from this in our quest to
deliver the numbers.
* Costs — updating colleagues on how we're performing against our scorecard and what
the impact of the cost challenge has been
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3.4 Colleagues will likely have been updated on cost reduction initiatives early in September.
3.5 In delivering teamtalk live, we need to build on the use of technology but take it one step
further to show
«we're thinking digitally,
¢ doing things differently
* recognising the cost challenge by reducing costs
3.5 The proposal is therefore that:
* We change the date of the November event to 18 November (19/20 currently being held).
This will allow us to run the teamtalk live session as part of the scheduled Crown teamtalk
session
e All the presenters will be studio based and we stream the content to laptops/focus tv /
Subspace Online, so no-one need travel and leave their office environment
« We make viewing of one of the keynote sessions/Q&A sessions mandatory
« We use text/twitter/email to allow colleagues to submit their questions throughout the
session
Proposed timings
« 8.30am Keynote presentation from Paula (45 mins) — this could be live or pre-recorded
¢ 9.30am re-run of keynote (45 mins)
e 10.30am re-run of keynote (45 mins)
e §11.30am Q8A session with first three ExCo members (45 mins)
© §12.30pm Q&A session with next three ExCo members (45 mins)
e = =§1.30pm Q8A session with final three ExCo members (45 mins)
* 2.30pm re-run of keynote (45 mins)
e 3.30pm re-run of Q&A session (45 mins)
This schedule has been developed to allow Branch Managers to hear the keynote during the
local teamtalk allotted Tuesday morning session in Crowns, equipping them (supported by a
subsequent briefing note) to deliver a follow up session to their teams the following week. It also
allows all colleagues and Postmasters and their teams to view and take part in the Q&A sessions
over the lunchtime period, through a variety of channels including Focus TV, intranet, Subspace
Online, accessible through the branch equipment or via their own devices i.e. smartphones,
tablets.
Benefits
« We get to as many people as possible by bringing the event to their desktop/office
e We connect with all Crown colleagues live via Focus TV and Agents via Subspace Online
— key frontline audiences who have the biggest impact on customers
« We signal a real change in how we're doing things
« We minimise the time used for both presenters and audience
e We allow Paula to be heard consistently across the business
« Colleagues can ask questions from the comfort of their normal surroundings using a
variety of methods
« We dramatically reduce cost
e Post event activity can focus on impact and forward planning rather than cascading the
message.
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Costs summary
July 2014 November
2014
Venues £22,000 £500
Production £102,000 In house
Video £20,000 £20,000*
Travel Unknown as £0
absorbed in
BAU
Bandwidth N/A TBD
increase for 148
*if required
Although we still need to determine any costs to increase the network bandwidth at 148 (which
will ensure a better video experience and handle any bottleneck), the overall saving by taking this
approach as opposed to a normal teamtalk live event is in the region of £120k.
3.6 Ongoing activity
Teamtalk live plays a key part in the ongoing communication and engagement activity in support
of accelerator 7 (Inspire and engage everyone in our turnaround story — we will make a
compelling case for change to our agents and employees in order to drive performance and
customer service). Over the coming months we'll continue the rhythm and routine of the teamtalk
suite
Teamtalk lite — this will continue to be our weekly opportunity to talk to teams about the
important things happening in the business. We've changed the format slightly to enable the
session to have a clear focus on a single topic. This has been supplemented with leadership
blogs and drop-in sessions to allow us to communicate the key topics in more depth, raising the
visibility of key business leaders. We've already held sessions on Winning in Mails and
Challenging in FS and leading up to teamtalk live we'll cover thinking digitally, delivering
Christmas for our customers and building on the doing things differently message.
Teamtalk plus — a monthly session which will focus on our business scorecard and how we're
performing as a business. This will be supplemented with news from around the business in the
key areas of growth, modernisation, customer excellence and our people.
Teamtalk leaders call — A new introduction to the mix, this will allow us to update our key senior
leaders on developments around the accelerators. It replaces the current adhoc SLT calls and
will be extended to include direct reports to SLT. The plan is to hold these prior to the teamtalk
plus sessions to allow better context/positioning of the key messages.
Teamtalk live will continue to run quarterly (the next due in January) however we'll look at how
we better use technology to do more live streaming of key leaders during the intervening months
4. Recommendations
ExCo is asked to:
4.1 note the proposals set out above and agree the over-arching format of the event and ongoing
activity, subject to further updates.
Mark Davies
8 September 2014
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Strictly Confidential
POST OFFICE LTD EXECUTIVE COMMITTEE
End User Computer Tower Procurement: Contract Award Recommendation
1. Purpose
For ExCo to approve:
1.1 EUC Contract award to Computacenter and to support presentation of this
recommendation to the Board on 29 October 2014.
2. Background
2.1 The EUC Tower will provide a range of technology and support services to Post
Office users; taking on directly c35,000 users who are branch-based and c4,200
who are admin based and currently supported by Royal Mail.
2.2 Following a comprehensive procure process Computacenter were identified as
the Preferred Bidder for a 6 year (4 +1 +1) contract.
2.3 A 10 day standstill period (Alcatel) has been completed without challenge from
the unsuccessful bidders.
24 Work on finalising the contract with Computacenter is expected to be completed
on 13 October 2014. A verbal update will be provided at ExCo on 16 October
2014.
2.5 The contract outcome remains aligned with the emerging thinking from the
Business Transformation (BTP) and Network Extension (NE) programmes, and
provides flexibility to amend as required.
2.6 The process has been subject to a legal and financial review, and a full risk
assessment.
3. Activities/Current Situation
3.1 The contract has the following features:
e Aminimum spending commitment from Post Office of £70m over the initial 4
years;
e — Aligns with the requirements set out in the Post Office OJEU;
e It provides the flexibility to support the requirements of the BTP and NE
programmes;
¢ It enables new services to be deployed, e.g. Common Digital Platform;
e It enables the replacement of aged and proprietary Horizon branch counter
equipment;
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¢ In addition, the minimum spending commitment has been stress tested
against worst case scenario, including the removal of 50% of the branch
network.
4. Commercial Impact/Costs
41 Moving to Contract Award with Computacenter represents a ‘no regrets’
investment for Post Office, supporting and enabling our 2020 Strategy:
¢ Contract negotiations continue positively, with the final position to be
delivered in-line with the overall business case, which includes a reduction in
operating costs, from £16.5m to £10m per annum;
¢ Includes a minimum capital spending commitment from Post Office of £70m
over the initial 4 years;
¢ — Has flexibility of contract in financial commitments and device selection;
¢ Has acontract term (4+1+1) which provides mid-term options for Post Office.
5. Key Risks/Mitigation
The following risks have been presented and discussed in detail at the IT Transformation
Board.
5.1 Unable to provide legacy branch counter support (Engineering Services)
(Operations Risk - Controlled)
Computacenter will not be able to transition legacy POS services by 31 March
2015 when the incumbent Fujitsu service expires.
Mitigation Actions:
¢ Initial feedback from Computacenter is that an interim operational solution will
be in place by the end of March 2015.
« Seek to secure an option for a reduced extension to support the engineering
services.
5.2 Relationship with incumbent (Fujitsu)
(Stakeholder Risk - Uncontrolled)
Announcement of Computacenter as our Preferred Bidder has challenged our
relationship with our incumbent supplier. This could impact the speed of
incumbent exit and may have wider operational impacts.
Mitigation Actions:
e Enhanced Executive level engagement.
¢ Execution of effective contract management.
« Setup dedicated Post Office team to address risk.
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5.3 Procurement process challenge received from other bidders -
(Legal/Regulatory Risk - Uncontrolled)
Post Office may be subject to a procurement challenge from one or more of the
losing bidders, post Alcatal which could result in a financial exposure if justified.
Risk would be triggered by actions of one of the unsuccessful bidders over the
next month.
Mitigation Actions:
e External legal counsel has confirmed that a robust procurement process has
been followed and has reviewed the resulting outcome / documentation.
They have also classified the risk as low, but this cannot be completely
excluded.
¢ Continue to execute effective communications.
5.4 Failure to achieve minimum spend for hardware devices —
(Financial — Controlled)
Due to change in business demand Post Office fails to spend the minimum £70m
commitment, resulting in a financial exposure as the minimum spend will be
contracted.
Mitigation Actions:
« There has been significant engagement with both the BTP and NE initiatives
to ensure hardware requirements are appropriate, and that the resulting costs
meets the minimum commitment.
e Volumes exclude the devices required to support the new ‘access points’.
6. Conclusion
The proposed contract with Computacenter represents a value for money outcome for
the Post Office; it is aligned with the BTP and NE requirements, and has the flexibility to
support Post Office emerging business requirements.
7. Recommendations
ExCo is asked to endorse contract award with Computacenter, and to approve the
presenting of the contract to Post Office Board for award on 29 October 2014.
Lesley Sewell
October 2014
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Confidential
POST OFFICE LTD EXECUTIVE COMMITTEE
Post Office Prepaid Funeral Plan
1 Purpose
1.1 To update Exco with regard to a recent addition to our Life Insurance portfolio.
2 Background
2.1 Post Office has successfully launched a number of products aimed at the over 50s
customer segment.
2.2 Our Life Insurance products generated £3m income for POL during 2013/14.
2.3 Last year an opportunity was identified to provide a credible and stable solution for those
customers wishing to pay for their funeral arrangements in advance, through a specific plan.
2.4 PPFP fills a gap for those who want to secure the costs of their funeral in today’s money
with existing savings, rather than buy an Over 50s or Life insurance product which may not
be sufficient when they eventually pass away.
2.5 Our joint venture partners undertook a substantive tender process and Dignity plc was
selected to provide our Prepaid Funeral Plan and supported by the Joint insurance
committee.
2.6 Bank of Ireland has procured an agreement with Dignity to supply the new product.
2.7 POL change processes have been observed and all relevant gating concurrences attained .
3 Post Office Prepaid Funeral Plan — Key Features
3.1 Our Essentials plan guarantees a cremation, coffin and transport each of which are
enhanced for the Standard and Premium plans.
3.2 Three payment options are available - a single lump sum, 12 month payments (charge
free), and 24 months (6% charge).
3.3 Customer Funds are held in the National Funeral Trust, the assets of which are entirely
separate and independent of Dignity plc and associated companies and audited by KPMG.
4 Distribution
4.1 Prepaid Funeral is available to purchase through our on-line channel and the Dignity call
centre.
4.2 A network launch through both Crown and Agency branches will be undertaken in the
coming weeks following significant improvements in VMS scores re life insurance.
4.3 A comprehensive communications plan will be deployed to support the network launch .
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4.4 Acquisition channels:
e Direct Mail
¢ Online application
« Web journey for Financial Specialists
* Contact Centre
Targets for combined sales of Life Insurance, including PPF, had been agreed for 2014/15.
These will be reset for the remaining months of the financial year.
4.5 Once the product is embedded through all channels, 75% of sales are targeted to be
delivered via the network through a mix of lead generation and branch completions, the
share of direct sales will increase in subsequent years.
4.6 Financial Specialists will be the primary focus for branch acquisitions, following launch,
delivering circa 3k sales during the first year. Lead generation sales via Crown and Agency
branches are estimated at 1,800 initially.
5 Market
5.1 The current market size in the UK is circa 120,000 sales per annum contributing to 900,000
plans awaiting draw down, the majority of these are with the three major providers - Dignity,
Co-operative Funerals and Golden Charter.
5.2 Post Office will target a 5% market share, within 12 months, equating to sales of circa 6,000
policies per annum.
6 Commercial profile
6.1 Post Office Prepaid Funeral is expected to deliver £7m income for POL over five years.
6.2 Each Prepaid Funeral Plan sale generated through one of our branches or online will
contribute circa £200 commission income for Post Office Limited
6.3 Dignity will fund Direct Mail campaigns from which Post Office Limited will receive circa £58
per sale
6.4 As Prepaid Funeral is not a product subject to FCA regulation, it has been agreed that this
will not form part of the potential buyout of the insurance business by POL and therefore
does not increase our cost of doing so (Project Hawk).
6.5 Dignity and Bank of Ireland will fund the marketing costs.
7 Recommendation
1.1 The Executive Committee is asked to note the addition of Post Office Prepaid Funeral Plan
to our Life Insurance Portfolio.
Paul Havenhand
Head of Travel Insurances
7" October 2014
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Appendix
Financial Benefits
Year Sales Basic Profit Share (£) Total
Commissions (£)
2014/15 1,050 85,000 127,500 212,500
2015/16 6,000 427,730 661,907 1,089,637
2016/17 6,000 451,349 1,040,613 1,491,962
2017/18 6,000 475,563 1,103,598 1,579,161
2018/19 6,000 501,719 1,168,168 1,669,887
2019/20 3,450 285,715 1,110,417 1,396,132
Total 28,500 2,227,076 5,212,203 7,439,279
Note: the supply contract with Dignity plc has a 5 year term.
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ExCo customer update
16" October 2014
Prepared by the Insight team
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The business is not on track to meet our customer
performance target and our “Easy to do business E>
with” performance is well below target
Pé Actual
3mth Rolling I previous
(JuL-Sep ‘14)
13/14 14/15
Actual Target
YTD progress
against target
Customer Satisfaction 87% 89% 86..4% -0.3
ee eee ee eee)
Cue 4 be aeca.
! Easy to do ; : 3 oo
I business with 41% (47% 21.3% 3.5
Pe onan conaecoe
Net Promoter Score -11 -0.7
er =i September
Actual Target only
Queue Time (<5
. S244 80.7%
minutes)
Source: BREC Experience Sep 13- Sep 14 and Mystery Shopping 2013 and 2014
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Context - declining footfall and
reduced frequency of visit
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Declining revenue and footfall continue to negatively impact
our business
* Annual footfall (unique visitors) has 4
dropped from 18.5 million to 16.9 I
million since 2012 - that's a 9% I peters
decline. I 16.9
* Over the past 4 years, weekly visits bs C=YoY growth/decline
have reduced by 14% I 8.2% -#—Average number of unique visitors per
week
* Our branches continue to be our LN MHI DD DYDD YS YO Dw YY » ~
mY
a” Ss a SN
only touch point for the majority of “© PEEP LEA II ELE EEL EE ELE NS
customers. (55% have visited branch only)
Customer Session data also shows YoY declines
* Rise in online visitors does not Branch visite
offset the drop in branch footfall ssocnnce Branch Netwroric Customer Sessions
and is largely non-transactional. 1 vonees I
million unique weekly visitors. pot
Fsoooosee
Main reasons for visiting website:
Week
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If people are not visiting branches regularly then they are
not experiencing the changes we are making, causing long-
held perceptions of ‘hard work’ to remain
Branch visits are becoming more ... but those who visit a branch more
infrequent with fewer people visiting frequently are more likely to think we
branches monthly or more frequently... are ‘Easy to do business with’
Frequency among those visiting branches % Easy to do business with score %
75 4
70
m4 Wisi Weekly ce 40%
65
Visit fortnightly/monthly oo 26Y
60 + 60 °
Visit every 2 months = 17%
50 4 ——Visit at least once /3-4 times a year
a month
45 Hardly ever Bod 9%
40
55 4
Q210/11 Q211/12 0212/13 213/14 Q214/15
To encourage people to come back into branch, we need
to communicate the changes we are making
in our network.
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Realising our
ambitions
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The Ease measure has been in steady decline through Q1
and Q2 14/15, but also from a peak in Q1 13/14
50% Q3 is a critical period to
45% anes demonstrate to our
once a year’ branch
40% customers that we are
35% ‘Easy to do business
30% with’
25%
21%
20% 23%
15% 3m rolling ———- Im data
10%
5% I
0% I t 1
Q2 13/14 /Q3 13/14} Ia4 13/14 Qi 14/ Q2 14/15)
Jul - Sep I Aug - OctISep - NovI Oct - DecI Nov 13 -I Dec 13-I Jan 14- I Feb 14-I Mar 14-I Apr 14 ay14- I Jun-Aug Jul-Sep 14
13 13 13 13 Jan14 I Feb14 I Mar 14 I Apr14 I May 14/ Jun14 I Jul 14 14 I
¢ The 3 month average rolling score dropped further in P6 falling to 21%.
¢ Improvement seen in August has not been sustained, with the score returning to levels seen in July.
¢ More people are rating us as high effort with fewer people saying we are low effort.
¢ Performance on drivers hasn't moved significantly across the 3 month period, Although we did see a drop in ‘Staff
providing a warm welcome at the counter’ during September (down 3 percentage points compared to last
month)
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®
When customers compare us to other retailers, Post Office is
seen below the average as a brand which is “easy to do
business with”.
& TESCO John Lewis the co-operative ees
Evang latte balps
Brand is easy
to do
business
with
Brand is
hard work to
ax 8% vail deal with
% Significantly higher/lower
than the average
S304A_ - Dealing with [the brand] is hard work
S305 - The brand is easy to do business with . All using the brands in the last last 12 month
Bases: Post Office 486, Tesco 455, John Lewis 164, The Co-operative 299, M&S 329, B
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And we know that Ease is a big focus across the high street
“We want to make it EASY for our customers to shop whenever and
however they want and ensure that every experience with us leaves
them feeling good...change to a more truly customer centric
From big, established brands with
very regular customers...
TESCO culture. How to make things EASIER for our customers - a focus on
SL ABT AT A OT customer missions to ensure they are as simple as possible”
To established competitors... “Send, collect and return your parcels Early ‘til late, 7 days a week.
CollectPlus is the largest store-based parcel service in the UK,
collect+ designed to make your life EASIER. No more wasted Saturdays or
lunchtime queues, just the freedom to get on with your day.”
parcels made easy
Making it EASY - We know you are busy people so we have decided
to open 7 days a week, early until late so you get to choose exactly
To newer competitors... how, when and where you send and receive parcels. We are all
about making it EASY for you - that’s what makes us special
D ele(@ils You will be served in less than 2 minutes - It takes less than two
minutes to Doddle, either face-to-face with one of our Doddle tea
or using our smart, EASY-TO-USE self-service pods :
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Being seen as high effort to deal with creates barriers to
improving brand perceptions and growing our bottom line
* Those who think we're low effort/easy (47% of population) are:
2.4x she
more likely to be
1.7x
more likely to be
2x
more likely to think
POL is a credible
FS provider
more likely to
recommend the
Post Office
very open to
taking out
additional
products, like FS
think the Post
Office is a brand
‘on its way up’
¢ But...
53%
of the UK population do NOT think Post Office is easy to deal with
Source: BREC Experience Q1 2014/15
In order to grow our business, we need to understand and
deliver to the needs of the most profitable customer
segments
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Early indications from the segmentation model indicate that the Work Hard Play Hard
\ segment could represent a combined revenue opportunity of up to £12m
1
Socially
responsible
87% ETDBW score
32% very open to
products like FS
in FS, Telecoms and Travel
However currently these customers are more likely to think we are ‘hard work to deal with’
SY HU
See
-47% ETDBW score
Quality
Hunters
Work Hard,
Play Hard
-43% ETBW score
Minus score indicates more people in
this segment think that we are high
effort than low effort
Minus score indicates more people in
this segment think that. we are high
effort than low effort
9% very open to
products like FS
8% very open to
products like FS
Prosperous &
Discerning
71% ETBW score
20% very open to
products like FS
Source: Post Office segmentation and BREC experience Q1 2013/14. Target segments were
developed by Mindshare. Segment opportunity = Segment size x propensity to
purchase/switch product x Propensity to buy from Post Office x Value of sale to Post Office.
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Improving the customer
experience by focusing on key
drivers of ease
Focusing on improving performance on the drivers of ease will improve
performance across our brand metrics. The top drivers of ease centre
largely around customer experience, as well as modernity (via
technology) and the product offer
Share of impact
on ‘ease
Top 10 priorities (out of 32)
+ ce
> a
2 Ss
Drivers Research 2014. Base = 2,027.
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Focus required
Staff go the extra mile to provide a good service
Staff are genuinely interested in assisting customers
Staff provide a warm welcome at the window
Their service is more efficient to others on the high street
Their customer service is better than other organisations
They use technology to make things easier for customers
I can deal with them through whatever channel I want
Dealing with the Post Office is hard work
They have the highest quality products
They offer very competitive products
The products and services they offer meet my needs
Their products come with great customer service
The time I have to wait is always acceptable
The queue moved quickly
They always make me wait too long to be served
Staff are quick at getting the job done
They make me wait too long, no matter how I choose to
contact them
Staff are knowledgeable about what they offer
I feel confident that staff know what they are talking about
The website is easy to use
I can find all the information I need on the website
Marketing communications will help change perceptions of “hard work” in
the lead up to Christmas. By focusing on the three key service drivers of
ease (customer service in branch, queue management, and queue times) we
will provide credible proof points for customers visiting branches.
BREC Experience
Driver Theme I _
Competitive
ptreet
1 month rolling
Jul-14 Aug-14 Sept-14
[n=335 [n=336In=337I n=1007 I n=2008I I
heir service is more efficient to others on the high
Difference
3 months rolling
May - July Jun - Aug Jul- Sept
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Difference
benchmarks
heir customer service is better than other
rganisations
Technology and
hey use technology to make things easier for
ustomers 39% 27%
29%
+2h
34%
33%
32%
-1%
multichannel
can deal with them through whatever channel I want
hey have the highest quality products
hey offer very competitive products 27% 27%
30%
+3%
28%
28%
28%
0%
Product offer
he products and services they offer meet my needs I 32% 32%
35%
+3%
36%
34%
33%
-1%
heir products come with great customer service
Efficient service
(multichanne
he time I have to wait is always acceptable
wl a> I op
Staff knowledge
hey make me wait too long, no matter how I choose
o contact them 23% 19% 21% I+2% 18% 19% 21% I+2%
Staff are knowledgeable about what they offer 55% 57% 58% I+1% 56% 56% 57% _I+1%
es that staff know what they are talking 54% 57% 66% 1+9%1 & 57% 56% 59% +3%l
he website is easy to use 61% I 53% I 58% I+5%I # 62% 58% 57%
can find all the information I need on the website 59% I 55% I 54% I-1% 58% 56% 56%
Increase of 5 percentage points or more
@ B Change of 3-4 percentage points Q Decrease of
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Where do we need to
improve?
Immediate activity for long term
gains
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Delivering a great customer service
R Customer Service - No1
Communications to branches to embed
service expectations for the Q3 Christmas
Staff go the extra mile to provide a good service period - Mark Davies and internal
communications team working to
=> communicate to branches.
Staff are genuinely interested in assisting customers
Christmas makers in branch Q3
Staff provide a warm welcome at the window
Improving mails basics in Q3. Trained frontline
staff going into 4900 branches, accrediting
££E = limited investment branches with level 1 being customer service
Use existing staff as an asset Rewritten job descriptions in Q3, putting
customers at the heart, including 1215, PDRs,
‘leaving the business with dignity’ and
‘recruiting for attitude: all now far more
customer focused
VOC satisfaction scores Reward and recognition in Q3. More customer
range from 96% to 54% focused on Agency sales team scorecard - 40%
demonstrating the of bonus is ‘customer’ (weighted to Voice of
Customer)
inconsistency of customer
service in branch
Working on improving Out of Hours a
performance in NT branches (on-going)
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Changing perceptions of hard work
Dealing with the Post Office is po ANY =e
hard work Tell people how the Post Office is making it
easy in Q3 - Christmas campaign (filmed in a
Dealing with the Post Office is hard work => a A a ial
On-going ‘We're changing’ campaigns
Xmas campaign in Q3 demonstrating Ease for
mails purchasing and Royal Mail parcel
discount
Prospecting activity in Q3 to SMEs in the
network
;
Now open Like a bank. sat iia
. Post Office Money launch in Q4
pre-porridge. But open.
New brand guidelines in Q3
2015 campaign activity
2015 launch of SME proposition
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®
Delivering an acceptable wait time
Activity
TI? Efficient & quick service/Queue
Communications to branches to embed service
management
expectations for the Q3 Christmas period -
Mark Davies and internal communications team
working to communicate to branches.
=> Thank customer for waiting (on-going)
Proactively manage the queues (on-going)
The queue moves quickly
They always make me wait too long to be served
Staff are quick at getting the job done
Queue hosts/Meeter Greeters (on-going)
Christmas makers in branch in Q3
~ — Roll out of self service kiosks (on-going)
I've only been I've been waiting well
We know that the longer customers wait, the more they
overestimate...
r ) Rolling out Access points from Q3
e128 e \e @
Y Q2 average wait time 03.29mins
ga 4 In 1 in 5 branches the wait was over 10
minutes
Actual wait 3 min 4 min
waiting a couple over 5 minutes - . . .
minutes, probably closer to 10! Fast drop options (online mails) from Q4
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For many customers, Christmas is our once a year opportunity to .
get it right and to improve perceptions of the Post Office into
next year.
We are entering a key
period for the Post Office
to have an impact on
customers’ perceptions
and deliver the proof that
We Are Changing
19
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What are we doing?
We need to deliver initiatives with
Consistency, Scale and Impact
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This has to be about more than just Christmas. To change
perceptions, initiatives need to be delivered with
Consistency, Scale and Impact.
anon Gane ince avon rnd However other factors (some beyond our control)
y HB us will impact on how long it takes to change
Scale - Every customer experiences it perceptions of Ease
Impact - Making a difference to customers
Within our influence Beyond our influence
Even with 100% reach across the network in will take at least 4 Competitor
months for customers to experience an initiative. Network Product performance
Reach experiences & initiatives
In actuality it will take longer to change perceptions, Customers will
need to experience multiple initiatives, multiple times Footfall and Staffing © People’s
frequency of levels consciousness
visits to branch of changes
CHANGE
i i ! i i >
I i T T T
Seen once lif 100% reach)
+ week — +2 weeks +1 month +2 months +4 months
Industrial Channel
Communications action preference
and PR
October 2014
Strictly Confidential
POST OFFICE LIMITED MATTERS — DISPUTE RESOLUTION
PRIVILEGED AND CONFIDENTIAL — CLAIMS OVER £500K OR THOSE OF A SENSITIVE NATURE
PART (A) - CIVIL LITIGATION
Horizon claims POL/RW Belinda
(aka “Project Angela
Sparrow") Bogerd
Crowe
van
/
den
POL has received various claims from
subpostmasters (SPMs) alleging defects in the
Horizon system and POL’s internal processes.
These allegations were initially made in 5
claims brought through solicitors Shoosmiths.
Similar allegations have been made by the
“Justice for Subpostmasters Alliance” UFSA)
and advanced through SPMs’ MPs.
Following discussions with James Arbuthnot
MP and JFSA, independent investigator Second
Sight Support Services Ltd (Second Sight) was
appointed in July 2012 to carry out a review
into these allegations.
On 08.07.13, Second Sight published a Report
finding shortcomings in POL’s internal training
and support to SPMs on the Horizon system,
but no systemic problems with Horizon itself.
Following the Second Sight Report, on
27.08.13 POL launched a Mediation Scheme
(Scheme) aimed at resolving _ individual
complaints made about Horizon.
This matter will be the subject of a separate
update to ExCo.
The Scheme received 150 applications,
which are being progressed under the
direction of a Working Group comprising
retired Court of Appeal Judge Sir Anthony
Hooper (as Chair), POL, Second Sight, and
JFSA. 131 cases are still being progressed
through the Scheme or are being scheduled
for mediation.
Mediations have been held for the first 3
applications. A further 9 mediations are
currently being scheduled. The POL project
team continue to handle the applications in
line with the Board’s direction to take a
firmer position, informed by its legal position
and tighter control over timescales and costs.
To date, no claim has been made against
POL in the civil courts, and no appeal has
been made against any conviction in the
criminal courts, following Second Sight’s
Report.
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Significant Litigation Report
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Employment POL/NM Colin Stretch i Eversheds
_ Legal Privilege
_ Legal Privilege I
Significant Litigation Report
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_ Legal Privilege
Employment POL/NM Colin Stretch
"I Weightmans
Legal Privilege
PART (B) - CRIMINAL LITIGATION
PROSECUTION CASES
There are number of cases which could have been prosecuted (e.g. those with full and frank admissions to theft /fraud), but prosecutions were not
commenced to avoid adverse judicial comment.
Several cases have also been terminated while POL obtains an independent expert report on the Horizon branch accounting system (see below).
There are currently 14 cases which are being kept under review as to whether a prosecution (supported by an expert report) can be commenced.
EXPERT REPORT
New experts from Imperial College London have prepared a scope of work on which formal instructions and a protocol for requesting and receiving
information will be based.
Appropriate individual confidentiality agreements will be prepared for both for the experts and POL employees involved in preparing the report.
It is envisaged that meeting/s to progress the report will take place with the experts, POL and Fujitsu in September and October 2014.
PROSECUTION POLICY
Former First Senior Treasury Counsel Brian Altman QC has drafted a proposed prosecution policy for POL.
Comments from POL stakeholders will now be sent to Brian Altman for review.
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POST OFFICE LTD EXECUTIVE COMMITTEE
Health & Safety Report
1. Purpose
The purpose of this paper is to:
A Provide an update on safety performance.
1.2 Outline risk reduction activities.
2. Current Situation
2.1 The majority of accidents fall into three main categories lifting and handling,
stepping and striking and outdoor falls. These are higher frequency events with, in
the majority, relatively low severity. The lower frequency types of incident can carry
the potential for very high impact, for example, assaults and road traffic collisions.
2.2 Performance during the first five months of 2014/15 indicates that despite the slight
adverse performance in absence accidents and days lost there is no current cause
for concern that further reductions by year end are achievable and in line with the
5% year on year reduction target.
Table 1 All Injury accidents and those resulting in absence (Cumulative)
300 Bo]
250 aes
a —+— 2013/14 All
€ 2014/15 All
S 150
3 2013/14 Absence
2 400 2014/15 Absence
50 =
of
P1 P2 P3 P4 P5 P6 P7 P8& PQ9 P10 P11 P12
Period
2.3 Personal injury compensation claims have fallen significantly in line with the
reduction in accidents that result in sick absence. Claims involving members of
the public have also reduced. Comparison with a similar retail organisation
indicates that the Post Office claim rate is significantly lower in both public and
employer's liability and of those claims the ‘denial’ or ‘defence’ rate is
significantly more successful.
2.4 The number of days lost due to accidents is marginally adverse against target
however it is anticipated that the year on year reduction target of 5% will be
achieved. (Table 2 below refers)
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Table 2 Days lost resulting from injury accidents (Cumulative)
600
500
400
300
Days
200
100
Pi P2 P3 P4 P5 P6 P7 PB PO PIO P11 P12
Period
2.5 The total number of road traffic collisions (RTCs) for the first 5 months is up 23
on last year. While this is of concern it is believed that there continues to be a
more robust approach to the reporting of incidents, irrespective of severity, and
what appears to be an increase in minor damage incidents e.g. broken mirrors
and minor scrapes The number of incidents where the Post Office driver is ‘at
fault’ is showing an increase of 17 compared to last year. (Table 3 refers) Road
risk reduction opportunities continue to be the subject of analysis at the Road
Risk Forum with a view to identifying improvement activities in addition to those
already in place. (3.1 below) Reversing incidents are currently a cause for
concern and will be the subject of additional attention. Injuries as a result of
road traffic collisions are extremely infrequent. Road traffic collisions account
for less than 3% of the overall number of injury accidents, however they have
the potential for high impact in terms of injury and loss. Currently the majority of
incidents involve low speed — less than 25mph.
Table 3 Road Traffic Collisions (cumulative)
250
200
8
/
E150 —+— 2013/14 All
5 2014/15 All
5 2013/14 ‘at fault’
2 100
£ 2014/15 ‘at fault’
2 50
[e)
P1 P2 P3 P4 P5 P6 P7 P8& PQ P10 P11 P12
Period
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26 Robberies on Post Office Cash and Valuables in Transit (CViT) crews are down
two on last year from 16 to 14 for the past 5 months. Physical injuries during
robberies, of which there have been 4, 1 more than last year for the same
period, remain relatively minor in severity. The level of use of firearms remains
consistent with last year with 2 of the 14 robberies enabled by the presence
and/or threat of use of fire arms and on no occasions were the firearms
discharged. Support for those affected by robberies is provided by trained
trauma supporters and professional support resources available through the
occupational health service provision. Risk reduction activities are identified at
3.2. (Appendix 1 — Significant Incidents refers)
2.7 The robbery risk assessment was fully discussed at the ExCo Sub Committee
for Health and Safety and the conclusion that body armour should not be issued
was endorsed. The full risk assessment is attached for noting.
Robbery Risk
Assessment 2014-15
2.8 Robberies and attempted robberies on the Post Office network, for the past 5
months, are down 3 on last year of which 60% were successful. Injuries
sustained during robberies are down from 8 to 2. Robberies take place
predominantly at sub post offices leaving Crown branches largely unaffected
although Wandsworth Crown Branch suffered a robbery on 1° October 2014.
Supporting activities have been introduced to continue to mitigate the robbery
risk and are identified at 3.2. (Appendix 1 — Significant Incidents refers).
3. Activities
3.1 Road Risk
Current activities to mitigate road risk are:
¢ Road risk forum in place to scope and develop road risk reduction initiatives
and activities supported by the risk management division of our insurers
« Analysis and deployment of interventions for reversing incidents to mitigate the
increased incidence rates, including yard assessments and technical accident
reduction interventions on new vehicles e.g. Reversing aids to reduce accidents
¢ Analysis and evaluation of data including risk profiling to identify drivers who
need additional support and to determine further generic accident reduction
interventions
¢ Safe driver of the year award to encourage and reward responsible driving
e Weekly case conferences to ensure consistent approach to accident
investigation, follow up activity and sharing of good practice
¢ Programme of driving and road risk communications to raise awareness of
current and emerging risks
3.2 Robbery/Burglary Risk
Current activities to mitigate robbery and burglary risk are:
¢ Active liaison activities with the police to understand ‘at risk’ areas and to
deploy surveillance teams
e Increased use of ‘advertising’ on vehicles of new deterrent technologies e.g.
DNA taggant — a solution that contains a unique identifier that is released
automatically in the event of a robbery, spraying those involved and enabling
identification of the individuals involved in the robberies
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Trialling new point of transfer arrangements to reduce exposure at Post Office
counters - the majority of robberies take place at the point of transfer which in
Post Office’s is the counter where there is ready public access. The new
arrangements allow for the cross pavement protection box to be emptied / filled
in a secure location.
Significant reduction in opportunities for duress type robberies linked to the
introduction of single person vehicles — single person vehicles eliminate the
opportunities for Supply Chain employee duress type incidents which
historically have been the most violent and likely to involve injury.
Health and Wellbeing
Healthcare interventions:
Programme of visits to Crown branches, Supply Chain units and Admin offices
to offer health checks using equipment that provides a wide range of indicators
on physical wellbeing. The anonymised data will be used to develop future
health and wellbeing campaigns.
HEALTH CHECKS — Admin Crown Offices I Supply Chain Total Checks
Phase 1
Male 267 792 505 1564
Female 286 1674 157 2117
TOTAL CHECKS 553 2466 662 3681
3.4
3.5
The programme of visits is supported by an online ‘Wellbeing Zone’ health
check tool as a ‘self- help’ option
Plans in place to re-visit all Post Office Crown Branches and Supply Chain
sites within 18 months
Ongoing campaign of communications to promote a range of different wellbeing
issues
Wellbeing events to promote general health, exercise and dietary initiatives
Safety
The Post Office occupational health and safety management system (OHSMS)
is certified by external auditors to the standards required by British Standard
OHSAS 18001.
Asbestos Management
Transfer of the ownership of asbestos management following separation has
led to a programme of actions to ensure that up-to-date surveys are available,
defined responsibilities post-split are clear and that an asbestos management
‘action plan’ is in place to ensure that these issues can be managed effectively
and in line with legislation. Legal Services have been engaged to advise on
responsibilities, particularly in relation to the agency network, and to ensure
arrangements for on-going management of asbestos are robust and risks
mitigated.
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4. Residual Risks
4.1 Driving activities have the potential for high impact/loss and therefore remain as
a significant residual risk. However, the actions identified in 3.1 above are
aimed at mitigating that risk and improving performance.
5. Recommendation
The ExCo is asked to:
5.1 Note the overall safety performance
5.2 Note the outcome of the robbery risk assessment
5.3 Note the risk reduction activities.
5.4 Note the residual risks
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Appendix 1
Significant Incidents (Period 5)
Crowns and Network
Location Loss Circumstances Physical Injuries I Any further details
Horsebridge SPSO, I £13,017 I Thur 14/8/2014 Four men entered the PO, one threw I None One previous incident robbery May
North Street, a can of dog food at the screen, outer screen broke 2014.
Hailsham, BN27 and they smashed their way through to the secure
4DH area.
Town Centre SPSO, I £537 Tue 19/8/2014 9:14 Male entered the PO and None Two people were arrested, a male
Talbot Terrace, handed a note to the clerk demanding cash and & female, the male has been
Chester Le Street, implying he had a gun, the clerk filled his bag with charged & is attending court 20th
DH3 2PQ. cash, she handed it to him and he left the office. Aug 2014. No previous incidents.
Supply Chain
Location Loss Circumstances Physical Injuries I Any further details
Nil
Health and Safety
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CYBER SECURITY AND INFORMATION ASSURANCE
1. Purpose
The purpose of this paper is to:
Update ExCo on Global UK and Industry Cyber Security and Information
Assurance (CSIA) initiatives.
Update ExCo on key Information Security and Assurance Group (ISAG)
activities.
Outline risk reduction activities being implemented at Post Office in Cyber
Security.
Agree onward submission of this paper to the Board.
2. UK and Industry Cyber Security and Information Assurance Initiatives
2.1.
General Data Protection Regulation
The proposed new European Union (EU) data protection regime seeks to
support Data Protection legislation by providing a consistent framework across
EU countries and to make it easier for non-EU countries to comply with the
harmonised regulations. It should be acknowledged that this will introduce to EU
countries an expectation of greater controls on the processing, storage, retention
and consent to use personal information.
Further areas of change are likely to be, but not limited to:
. Easily accessible details of Data Controller, and a suitably qualified and
experienced Data Protection Officer (DPO), the latter is a requirement for
any organisation processing more than 5000 data subjects within a 1 year
period;
. Privacy by design and by default in business and IT strategy and change;
. 72 hour rule for notifying any breach to the Information Commissioner's
Office (ICO) also referred to as the UK Data Protection Authority (DPA);
. Sanctions for a breach could be a fine up to 100 million Euro or up to 5%
of a corporation’s worldwide turnover.
Jean-Claude Juncker, the new EU Commission President has recently stated
that he wants General Data Protection Regulation (GDPR) ratified by May 2015,
which generally will give our business(es) 18 — 24 months to prepare.
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. We are preparing for regulatory change to put the foundations down for the
necessary Policy changes to include the likely technical requirements of Data
Loss Prevention, Data Management and training.
2.2. I CERT-UK and CiSP
. Sponsored by our Government clients, we have applied to join the Cyber-security
Information Sharing Partnership‘ (CiSP), part of the UK National Computer
Emergency Response Team (CERT-UK). CiSP allows members from across
sectors and organisations to exchange cyber threat information in real time, on a
secure and dynamic environment, whilst operating within a framework that
protects the confidentiality of shared information. Membership will greatly benefit
Post Office.
. CiSP was formed in March 2014 in support of the National Cyber Security
Strategy’. This organisation demonstrates the Government's focus on the
importance of strengthening the UK’s response to cyber incidents and its
intention to share anonymised information with its international allies.
. CERT-UK has four main responsibilities that flow from the UK’s Cyber Security
Strategy:
. National cyber-security incident management;
. Support to critical national infrastructure companies to handle cyber
security incidents;
° Promoting cyber-security situational awareness across industry,
academia, and the public sector;
. Providing the single international point of contact for co-ordination and
collaboration between national CERTs.
. All relevant information will be shared with our Security, Financial and Regulatory
colleagues. They will be advised where any overlap or intelligence has been
received that may impact the fraud aspects of their remit.
. It should be noted that there is an increasing focus on reporting breaches; the
European Directive on Networks and Information Security (known colloquially as
the Cyber-Security Directive) was accepted by the majority of MEP’s in the first
quarter of 2014. It is part of our strategy to plan for the likely reporting
requirements within this Directive.
‘CisP is part of UK National Computer Emergency Response Team (CERT-Uk), is a joint industry and
Government initiative to increase overall situational awareness of the threat environment and therefore
reduce the impact on UK interests.
? National Cyber Security Strategy 2011
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2.3.
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Cyber Security Profession
The Cyber Security profession is subject to a great deal of scrutiny across
industry both from an acknowledge shortage of skilled people in the profession
and from a perspective of a distinct gender bias (less than 10% of the profession
are women, and less than 7% are 29 or under)’ 40% of ISAG are female.
Further to this, the Head of ISAG has been asked to participate in a Business,
Innovation and Skills roundtable discussion on women in the profession.
3. Activities/Current Situation
3.1.
3.2.
ExCo and SLT Business Impact Assessment
It is recognised that threats to the confidentiality, integrity and availability of our
information presents one of the business's top risks. In view of this, Business
Impact Assessment (BIA) activities are currently underway throughout the Post
Office. As a team, we are engaging with all business areas at ExCo and SLT
level to understand what they consider to be main objectives, information worries
and key information assets.
There were 65 supporting BIA’s to complete and at this stage we have ten
outstanding. The outstanding work will be completed by mid Oct and a detailed
overall findings document will be presented to Risk & Compliance Committee
(R&CC) and will provide the principle information feed for the Governance Risk
and Compliance (GRC) tool.
This exercise will allow us to better understand the risks to critical information
throughout the business, and therefore to provide more meaningful reports to
R&CC.
Management of Information Security Incident Activities
Information Security Incident Management and Digital Forensics are strategic
components of the Post Offices’ CSIA capability. Cyber-attacks are constantly
evolving, becoming more frequent, more diverse and far more damaging and
disruptive. Preventative controls and activities based on Risk Assessments and
BIAs can lower the number of incidents, whilst understanding that not all
incidents can be prevented. Responding to vulnerabilities which were exploited,
recovering services to their previous known good state, developing preventative
controls and maintaining compliance with our legal, regulatory and contractual
obligations are one of the essential components of our CSIA capability.
. We have completed a review of our Incident Management procedure
which included the key process and accountabilities, defining scenarios to
test the end to end design and reporting on recommendations to all
stakeholders. The review identified a number of risks and issues. Of
note, the process focused mainly on availability of IT systems and
provision of service to customers, to the detriment of confidentiality and
integrity. A new procedure has been deployed to assist in the triage of
3 Cyber Security Skills — Business Perspectives and Government's Next Steps— March 2014
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any CSIA event in a more consistent way, show how to deal with it and
who should be involved. We are working to embed across Atos
helpdesks, feeding outputs across our business as regular incident and
breach activity.
. There are currently six active incidents that we are aware of; five involve
the incorrect handling of personal data; one, reported previously, relates
to the incorrect direct mailing of 92.5k customers as part of a Marketing
campaign. A further three incidents are awaiting closure at the next
Information Security Committee meeting.
3.3. Data Protection Complaints and Data Subject Access Requests
. Since August, we have responded to two ICO requests and a Data Subject
Access Request (DSARs). We received a response from the ICO on 3” October
2014 that the complaint for one of the cases has not been upheld. Detailed
briefing notes have been sent to Risk and Compliance Committee.
. During the submission process we have engaged with all the relevant
stakeholders and where appropriate sought specialist Legal Counsel:
. On 1 July 2014, Post Office received a detailed request for information in
relation to the Southport incident. A response was delivered on 18
August and to date, the ICO has made no further comment.
. On 2 September 2014, the ICO made a request in relation to a complaint
they had received from Mr Alan Hyam, Sub Postmaster of Thorngumbald
branch. A response was delivered on 1 October 2014. We were notified
on 3” October 2014 that the complaint against Post Office was not
upheld.
. On 13 August 2014 a Data Subject Access Request (DSAR) was
received from a Mr Thompson. Allegedly, on 20 June 2014, Mr Hugh
Thompson attempted to post a parcel in both the Poplar Crown branch
and Canary Wharf Network branch and received an unsatisfactory
service; he is siting Old Persons Abuse at both Branches. Awaiting
further information.
. The requirement to provide detailed responses to the ICO within relatively tight
timelines highlighted a need to second an external specialist. There is a
potential this situation may be a future necessity and therefore we are working
with HR to formulate a process.
3.4. Supplier/Joint Venture - Incidents and Events
. The Information Security Management Forum (ISMF) process was created to
manage the relationship between Post Office and its major suppliers. The
meetings are formally recorded and involve discussions on the state of their
Information Governance Risk and Compliance in relation to our business
requirements. Since the last CSIA paper; eleven such meetings have been held
with suppliers at the top of our fifteen heatmap index. Atos have taken over
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management of the Fujitsu Forum and are on course to manage another five
main suppliers once the Operational Working Agreements have been delivered,
although we attend these meeting since ultimately; it is risks to our information .
¢ The following significant Cyber Security threats have been reported:
. JPM Cyber Security Attack - On 28 August 2014, news began circulating
of a sophisticated cyber-attack on JPMorgan and allegedly four other US
banks. The initial assessment was that given the advanced attack
methodology, the threat actor would likely be State Sponsored. It was
reported that the attack did not result in a Denial of Service rather a theft
of data. We immediately sought a damage assessment from JPMorgan
who provide the banking engine for the Post Office Card Account (POca).
On 5 September 2014, they advised “the detailed investigation into the
reported cyber-attacks is on-going. We currently have no indication that
POca data is impacted and priority investigation is continuing. We will
provide further updates and will notify you immediately if we identify any
impact to POca.” No further updates have been received however as of
the date of this report, we continue to monitor the situation.
. ‘Shellshock’ — On 24" September 2014 a vulnerability was identified,
related to the ‘Bourne-Again Shell’ (BASH). Exploitation of this
vulnerability may allow a remote attacker to execute a number of attack
options on an affected system. A preventative fix is available to deploy
and we continue to work with the supply chain to ensure IT systems are
adequately protected.
3.5. Risk Acceptance Notices
. All Risk Acceptance Notices are reported to Risk Governance and are processed
through the Risk and Compliance Committee.
3.6. Marketing
. Marketing continues to be an area which needs a higher level of consideration
particularly in relation to the use, disclosure and handling of a vast amount of
personal data. The Common Digital Platform project provides an opportunity to
review their current practices and to ensure appropriate policies and procedures
are implemented to reduce the risk of non-compliance to the current UK Data
Protection legislation. We have already raised some issues with Marketing and
will present a proposal to with Chief Marketing Officer by the end of October
2014 to support the Marketing Strategy going forward in anticipation of proposed
Regulations and Directives and to include the following:
. We are currently working on a new project that will address some of the
concerns raised in relation to marketing consents, new ways of collecting
personal data to provide opportunities for more targeted marketing (such
as geo-location and browser history data), updating Post Office’s Cookies
and Privacy policies and ensuring the customer journey onto partner and
supplier domains is consistent.
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° The Brands database will continue to be a high-level risk to the Business
and due to the substantial number of personal records held, will always
figure on the Corporate Risk Register.
3.7. HR and Vetting
. As part of a project to review the online recruitment process, it has been
identified that one element of vetting namely previous "written" verification of
employment history does not fully comply with the HMRC RMG BPSS guidelines.
This is in potential breach of a number of the Post Office’s client agreements,
including DWP and the DVLA. ISAG have discussed this with HR to establish
the current policy and to ascertain if the gap can be closed or mitigated.
. It is important to note our HR policy was agreed with our shareholder and the
regulator back in 2004 when Post Office was part of Royal Mail Group and has
been the practice since then, passing over to Post Office under separation.
. HR has investigated the HMRC BPSS (Basic Check) documentation following
the risk that was highlighted by the Data Protection Officer within ISAG. The
projected cost of undertaking the “physical” employment verification using an
external supplier for all stakeholders could be £400k per year which in the
current climate would be significant.
. HR has discussed the situation with colleagues in both our legal and compliance
teams on the way forward, in addition to the previous advice given. Advice from
legal counsel was also sought and ultimately whilst they believe there is a risk
they also stated that “it is not always possible to adhere to the guidance
perfectly, the balance to be struck is doing what can be done to satisfy the
guidance and code but seeking to be pragmatic.”
. HR are now investigating an alternative, which they believe mitigates the
highlighted risk, and are discussing further with internal stakeholders. This would
mean that potential employees authorise HR to request a DPU (Data Protection
Unit) printout from HMRC which provides evidence of National Insurance
contribution history (also containing previous employer name and dates and
dates of unemployment). This will provide supportive evidence of previous
employment to compare with the evidence provided at application/interview.
3.8. I Training and Awareness
. The Information Security and Data Protection e-learning annual training module
has now been completed by 97% of colleagues. Non-completers were escalated
to line managers and function leaders with HR suggested the remaining non -
completers are likely to be long-term absent.
. The Information Security and Data Protection Training and Awareness campaign
will be reviewed at least annually and spot checks will be undertaken to ensure
colleagues are adhering to various aspects of the e-learning to ensure that the
training is effective. Where incidents are caused by human error, individuals are
required to retake the training module.
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. This type of training is ‘good practice’ across all industries and is a mandatory
requirement for our information security certifications (Payment Card Industry
and Information Security Standards).
3.9. I Resourcing and Recruitment in ISAG
. Out of the six roles vacant, it has taken six months to recruit four roles, two were
replacements and two were new roles. Two roles are on hold due to the
recruitment freeze. See 2.3 Cyber Security Profession.
4. Request
4.1. ExCo is asked to note:
. The updates provided in this paper.
. The next and subsequent papers will be submitted at two month intervals.
. To approve forward submission of this paper to the Board.
Julie George/Lesley Sewell
6th October 2014
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