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Post Office Limited
Group Executive Tactical Meeting
5% May 2021, 10:30 - 12:00
Via Microsoft Teams
Attending:
Al Cameron (Chair) Ben Foat, Amanda Jones, Jeff Smyth, Richard Taylor, Owen Woodley, Dan Zinner
Other attendees: Veronica Branton and as shown under agenda items
Apologies: Nick Read, Lisa Cherry
Deadline &
5 a ; : ; Output (if Reporting
Topic (Decision/ Discussion /Noting) applicable) Requirements (if
applicable)
Pre-discussion
Dan Zinner would update the GE on the Starling mediation in due course.
Strategic Plan Discussion
Al Cameron introduced the discussion noting that this was not to reopen a conversation on costs
but we were deciding what to include in the Plan. The profit slide showed the position as £58m
lower on EBITDAS cumulatively.
A number of points were raised and questions asked:
e Dan Zinner reported that he had had a conversation with KPMG on Postmaster remuneration.
and he questioned whether we had included enough in the Plan for Postmaster remuneration.
Tim McInnes noted that an anecdotal view from Postmasters was that they were not seeing
much happening today. The focus was on fixing the past and changes to IT etc but these were
not due to come to fruition until 2023/24
e Angela Williams asked about our overall assumptions on pay over the next few years for the
employee population and whether this was aligned with Postmaster remuneration. DZ noted
that we needed to be clear that Postmasters were not employees. Max Jacobi reported that we
had included jassumption for employees with Postmaster remuneration increases
slightly higher. Owen Woodley asked what the rationale was for keeping the profit share fairly
flat. AC noted that the Shareholder had always wanted us to be able.to.pay for our own
investments and to do this we would need an EBITDAS of at least per annum. We
needed to be clear whether our ambition was to be able to do this after accounting for the
Postmaster share within the plan period. We could answer this question in different ways and
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Group Executive Tactical Meeting
5% May 2021, 10:30 - 12:00
Via Microsoft Teams
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with a spectrum ranging from this being our aspiration subject to funding requirements being
met through to not thinking that commercial sustainability was possible within this timeframe
e AW noted that last week we had announced the seven strategic areas we were committing to
and asked how our budget was aligned to this. AC noted that we only had funding agreed until
next year so our budget was not aligned but it was a good question and we could see how
much of our revenue we were spending on Mails and Cash
e DZ noted that our EBITDAS made it difficult for us to see how much was being spent on
Postmaster remuneration and what the Government was funding. AC noted that we could say
we wanted to spend £100m more over the period and that this would give us confidence that
we would to commercially sustainable by being able to right-size, outsource supply chain etc.
TM noted that we also needed products/ services to sell through the network as well as fixing
the infrastructure to be able to do so efficiently.
e AW asked whether the strategic decision had been made on our main area of focus e.g.
reputation, Postmaster remuneration, right sizing. TM explained that this discussion was
taking place and would be factored into the June Board paper
e Richard Taylor asked about the narrative for the Postmaster profit share.
¢ AC noted that the GE could recommend to Nick Read and the Board its view on whether we
would reach commercial sustainability or not during the Plan period and what funding we would
need to do so. DZ thought we should include more money for Postmaster remuneration and
did not think we could achieve commercial sustainability by 2023/24; however, before asking
for more money to right size etc. we would need to work through whether we had the change
capacity and capability. We knew that it would be unwise to change too much at once. MJ
noted that headcount reduction was included in the plan with a figure of 2,100 - 2,200 FTE at
the end of the period (working to a longer-term figure of 1,600 - 1,800). OW didn’t see why
we would not pitch for the capacity to do this work. AC noted that the main difference in
numbers was functional heads but we would need to be focussed on what technological
changes could be implemented etc. AC thought we could outsource supply chain without
disrupting the rest of the business too much.
e AW noted that to be able to deliver this Plan we would need the right capability, talent and
succession planning and that wasn’t referred to. Was this about FTE or costs? E.g. IT heads
would be costly. Was the key driver financial or to deliver a head count target? AC explained
that we were not fixated on a particular number and that this was about reducing costs and
achieving simplicity. If we franchised DMBs and outsourced Supply Chain we could have an
agile centre that then allowed Postmasters to profit more. We had a choice as to whether to
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Post Office Limited
Group Executive Tactical Meeting
5% May 2021, 10:30 - 12:00
Via Microsoft Teams
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build capability in IT, take out lower level roles that could be automated and so forth. AW
noted that her question was about sequencing. AC agreed that this had to be reflected on
e Amanda Jones asked about the reference to a 2% profit share. Organisations like the John
Lewis Partnership did not state a figure as this was linked to the success of the business and
driving aligned objectives. AC agreed that this was the desired approach and the figure
included was a planning assumption. AJ asked about funding for developing partnerships with
multiples. DZ noted that a number was included for planning purposes but we needed to
develop the narrative and proposition. TM thought there would be merit in stripping out the
Postmaster remuneration through normal activities and that earnt through performance. AC
confirmed that we would include both figures. TM noted that we needed to make clear what
the sharing element was and DZ thought it would be helpful to show the remuneration by
product lines.
e DZ asked whether the funding needed to outsource Supply Chain could be linked to
government demand for cash. The market was oversupplied but no provider had made a first
move to exit. AC noted that we had to be careful because the Bank of England was proposing
a collective approach and we were not sure that it would be beneficial for POL to be part of this
e DZ asked about the cost for automation, where those FTEs might be and where the capability
was in these areas. We needed to understand this at a high level and be able to understand
what we could do and why. AC noted that we could do this and had a high-level hypothesis on
With the range of issues we had to traverse it was hard to see the scope for reductions in
headcount over the next 2-3 years. We had to be legally and regulatory conformant in the 2-3
year timeframe and there was a risk that costs would be attached to implementing the
recommendations from the Public Inquiry. AC noted that if we included numbers but had
caveats attached those caveats tended to be ignored; however, we could add up all elements
of the budget associated with conformance and improvement work, see whether this was
sufficient and if not increase the sum included in the Plan
on MDMs etc. We also needed to consider Non-staff costs versus staff cost reductions. This
needed to be addressed because we had choices we could make around investing in capability
for SPM or not. We would have to take a position and explain that. AC noted that it would be
helpful to bring back the back office/ system costs and the drivers for change, noting that we
to prioritise. JS thought we needed to look at this from a control perspective and how it would
this issue. Ben Foat noted that he supported the aim but this was about timing and sequencing.
« Jeff Smyth noted that we needed to capture the costs associated with a number of investments
had a lot of manual processes in place and system dependencies. That narrative would help us
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Group Executive Tactical Meeting
5% May 2021, 10:30 - 12:00
Via Microsoft Teams
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affect Postmasters as well but he could provide the technology perspective. JS added that we
had to reflect in the notes to the Plan if we were proposing to postpone inevitable system
changes
JS noted that needed to take a view on Verizon where the costs would depend on the size of
the network. We needed to make an assumption on the replacement of PEDs as well. AC
thought that it would be helpful for JS to help us see these choices
AW noted that we didn’t have a strategic people plan designed to deliver these choices and
thought this work needed to be undertaken. A full people and capability analysis needed to be
produced. AC agreed that this view had not been refreshed recently and suggested that AW
discuss with Nick Read and then seek the funding required through the Investment Committee.
AW would take this work forward but noted that she would need support from other GE
members. DZ cautioned that a many aspects of the plan were likely to change over the period
because we operated in a political environment and we had to adapt our plans. AW thought
that we still needed a model but one that it was possible to flex.
AC noted that the plan assumed exiting all the DMBs by 2022/23 and asked whether this was
achievable or whether we should we allow 3-4 years. DZ noted that he had been reflecting on
that question and there was not a significant financial impact associated with retaining a
“rump” of DMBs and some DMBs were profitable. DZ would think about whether we should
extend the timeline for franchising DMBs. OW noted that it would be useful for the GE to see
the figures on DMBs and what activities could not go until all the DMBs had been franchised.
Dan agreed to bring this back. AC added that there was a question of the role POL would play
as a brand manager and product manager without DMBs and what that would mean for its
management structure and how that could change the position on costs.
AC summarised and set out the next steps:
we would bring back staff costs
outsourcing Supply Chain was a choice to be made if Government were willing to fund the
associated costs
the choices and approach to function cost reduction needed to be considered further and how
this might be that this was split across years. It would be helpful for AW to look at the options
with Max Jacobi and Daisie Jope. AW agreed to take that would forward but would need the
assumptions from the business end.
Action: JS
Action: JS
Action: AW
Action: DZ
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Post Office Limited
Group Executive Tactical Meeting
5% May 2021, 10:30 - 12:00
Via Microsoft Teams
MJ reported that Finance were undertaking individual business reviews and there would then be a
final submission next Thursday, with a paper coming to GE the following week in advance of the
Board meeting on 3™ June 2021.
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Post Office Investigations Review
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Action: AJ?
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Post Office Limited
Group Executive Tactical Meeting
5% May 2021, 10:30 - 12:00
Via Microsoft Teams
Jeff Smyth noted that he was fully supportive of this work and that it was important for
compliance with the Horizon Issues Judgment. We also needed to think about third parties and
our reliance on them in investigations (e.g. Fujitsu historically). We had discussed previously with
KMPG their ability to carry out forensic data checks.
The GE APPROVED the submission of a business case to the Project Review Board (PRB) to
provide funding for the project and the appointment of an external consultant.
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AOB/ Round the Table
Amendment to the Bank of Ireland (BoI) deal
Owen Woodley explained that the amendment to the deal with the Bank of Ireland would underpin
the.income we received over the next couple of years and would include a}
i I We thought it likely that we would exceed the income secured through the underpin but
ense to obtain the underpin.
The GE APPROVE
Office a minimu:
optimising margin and bala
significant downside risk for:
guaranteeing Post
porting them
iThis removed
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