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POST OFFICE LIMITED BOARD MEETING (Strategy Session 2)
Strictly Confidential
MINUTES OF A STRATEGY SESSION OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON
WEDNESDAY 28 JULY 2021 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 08:55 AM
Present: Tim Parker Chairman (TP)
Tom Cooper Non-Executive Director (TC)
Ken McCall Senior Independent Director (KM)
Carla Stent Non-Executive Director (CS)
Lisa Harrington Non-Executive Director (LH)
Zarin Patel Non-Executive Director (ZP)
Saf Ismail Non-Executive Director (SI)
Elliot Jacobs Non-Executive Director (EJ)
Ben Tidswell Non-Executive Director (BT)
Nick Read Group Chief Executive Officer (NR)
Alisdair Cameron Group Chief Finance Officer (AC)
In attendance: Veronica Branton Company Secretary (VB)
Richard Taylor Group Corporate Affairs, Brand and Communications
Director (RT)
Tim Mcinnes Strategy and Transformation Director (TM)
Dan Zinner Group Chief Operating Officer (DZ)
Martin Edwards Network Strategy & Delivery Director (ME) (Item 2.)
Owen Woodley Group Chief Commercial Officer (OW)
Chrysanthy Pispinis Commercial Strategy & Planning Director (CP) (Item 3.)
Mark Siviter Product Portfolio Director - Mails, PUDO, Retail &
Government Services (MS) (Item 3.)
Zdravko Mladenov Director — Business Transformation Unit (ZM) (Item 4.)
Apologies: N/A
Action
1 Welcome and Conflicts of interest
A quorum being present, the Chairman opened the meeting. The Directors declared that
they had no conflicts of interest in the matters to be considered at the meeting in
accordance with the requirements of section 177 of the Companies Act 2006 and the
Company’s Articles of Association.
2. Session 2 - Network: Approaches to making the network more sustainable, and Post
Offices more sought after
Dan Zinner introduced the discussion. The Board’s endorsement was being sought on the
direction of travel and the team would come back to the Board with specific business cases.
DZ explained the background to the current position with Network Transformation, the
reduction in Government services and some Post Office Locals needing dedicated staff to
run the Post Office side of their business. Postmaster remuneration had declined while
he network was running at al
The proposals for increases in Postmaster remuneration still represented a standstill
position. The modelling work was not exact but it provided a reaffirmation of what we
already knew. Half of branches were loss making or marginal but remuneration increases
alone were not the full answer. There were a number of network stability measures,
including automation and simpler branch propositions, that needed to be made. The new
branch definition was not a panacea but it did help and getting the shape of the network
right was important. We needed to make changes to remuneration but also enable top line
growth.
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Automation and options, economics, and timing.
Martin Edwards reported that the MDA2 remuneration announcements would be made in
September 2021. Contractual change was a longer-term objective which would allow us to
move away from the Mains and Locals segregation. The shift in the shape and format of the
network was one of the biggest levers we had. Proposals for long-term remuneration
reform would not be until Q1 2022.
ME outlined the options for purchasing automation equipment and Postmasters’ use of that
equipment. We had to factor in the software costs, licence costs, maintenance costs, and
configuration costs in store and there were four economic approaches to Postmasters’ use
of the equipment: 1) rental charge/ reduced remuneration; 2) charges to Postmasters
netted off against costs; 3) cost sharing; and 4) fully funded by POL.
Dz explained the options under consideration for targeting increases to Postmaster
remuneration. This included differences based on geographical location, linked to products
or a mixture of the two. Targeted remuneration was having a positive effect on churn in
some instances and there was an argument for looking at targeted top-ups in some cases
but is could be divisive as some branches would not qualify for top ups. The feedback we
received most was that the return for deposit transactions was insufficient.
Anumber of points were raised and addressed:
© Zarin Patel noted that Strategic Partners needed to be part of the plan and DZ
confirmed that Katie Secretan would be including them in the plan
© ME reported that the automation measures would principally be staff facing tele-
recyclers and customer facing cash deposit machines. The latter Improved customer
experience but the devices were not inexpensive so we needed to test the business
case and carry out pilots
* Ken McCall asked about using equipment from banks which were closing and ME
explained that this equipment could not always integrate. KM thought that we should
at least explore this as an option to see if the equipment could be stripped down and
re-used. Tim Parker also thought it was worth being proactive in this area. Owen
Woodley added that it could tie into whether we could build strategic partnerships
with the banks for a longer-term agreement on the Banking Framework. Elliot Jacobs
noted that cash automation also provided another layer of security in branch
* ME reported that proposals on cash automation would come back to the Board in
November 2021. We would be looking to purchase off the shelf equipment and there
was a Government framework in place for procurement. SPM would provide a device
agnostic platform and we wanted to accelerate automation for Mails
© TP asked whether we had researched what was happening in Mails in other countries,
noting that Germany and the Scandinavian countries were often ahead of the market.
ME confirmed that the position in other countries had been reviewed but their product
journeys were often simpler
© Saf Ismail asked whether we were looking at the business case for acceptance only
SSKs, as well as fully functioning SSKs. ME confirmed that we were considering
simplified models and drop boxes for parcels. EJ asked how drop boxes would be set up
so they did not need to be emptied very regularly. This was a proposition that would
affect the configuration of branches. DZ reported that there had been some mock-ups
of the arrangements and the requirements would be different for different branches so
it would be important to pilot to look at issues such as this. Lisa Harrington thought
that the key to this was simplicity and avoiding multiple different formats. EJ added
that it was also helpful for customers to have one type of machine with which to
familiarise themselves
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¢ TP asked whether we were going to discuss RMG’s approach to pricing, as its complex
approach to charging would ultimately be undermined by competitors and the long-
term sustainability of this approach was questionable with the tariff structure and
acceptance requirements a driver of complexity. Al Cameron added that POL might be
able to offer a simpler product to other partners which would sharpen RMG’s focus on
the need for simplification
¢ — Ken McCall noted that the option of POL fully funding the automation equipment
depended on the overarching strategy, noting that we had an overall objective of
network stability. We could look at options like zero interest financing for the
equipment and could be creative and innovative. Tom Cooper thought that cost sharing.
seemed like the natural option. Automation in smaller branches could make running a
Post Office much more attractive and reduce churn and we could make a positive case
for BEIS funding. There might not be a direct return on investment (Rol) but
automation would help the sustainability of the network. TP asked whether the
complexity of the product set made automation difficult for smaller Post Offices but TC
noted that this would not be the case for the new model of Post Offices
. EJ noted that there was work to train the customer when automation was introduced,
though it would reduce costs in the longer term. DZ agreed and there would still be
back-office work to undertake and some intervention still needed to assist customers
in branches. LH and EJ did not think that the automation equipment should be entirely
funded by POL but it needed to help. We needed to look at the life expectancy of the
equipment and amortize the payments and installation costs over that period. AC
noted that we should be clear that we were not saying that we could fund these costs
across all of the uncommercial parts of the network
© Ben Tidswell asked why running the network of 11,500 branches had to be cross-
subsidised if Government paid a subsidy for the uncommercial part of the network. TC
explained the background to this and that the Government wanted to incentivise
management to reduce costs by not paying the full network subsidy. Carla Stent noted
that the different formats proposed for Post Offices were designed to improve the
sustainability of the network. TP added that there was a question of how many
branches we could get into a profitable position; we wanted branches to be profitable
in their own right or profitable in conjunction with their retail business
* TC noted that 50% of POL’s revenue came from Mails and the high 20s for banking;
therefore, it seemed unlikely that we could resolve remuneration issues by focussing
on banking transactions without looking at Mails transactions as well. ME explained
that the responses proposed to the MDA2 remuneration consultation were short-term
transition measures to address immediate concerns. EJ added that the labour and risk
associated with banking transactions were not being rewarded fairly currently. TP
noted that without understanding the totality of what was paid out to Postmasters we
could not understand fully the impact of particular transactions on particular branches;
therefore, we should revisit the fixed and variable payment structure. Every branch had
a handicap of some kind or another that had to be taken into account. We did not
know who was making excess profit and who was making below par profit. We could
not ignore the structure of the unit. CS added that we should at least be paying the
minimum wage equivalent for the time taken to process a transaction. LH noted that
payments could sometimes balance out between different transactions types but CS
thought we still had to consider the construct. DZ reported that there was information
in the Reading Room on the time it took to process particular transactions and what
POL paid for each transaction type. AC cautioned that it was difficult to look at
product-by-product transactions in isolation. Some transaction fees were in the
Postmasters’ favour so we had to look at the economics overall. CS recognised this but
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added that as POL was “doubling down” on cash and banking so we needed to pay
particular attention to those transactions
BT noted that there were some places where we would want to incentivise particular
transactions. AC noted that we had learnt from Network Transformation that while
variable remuneration ought to incentivise Postmasters to sell more it had only worked
in practice for the most entrepreneurial Postmasters and this was one of the challenges
posed by the model
TP noted that he would like to understand better the unit for the Postmaster and how
they could generate profit, including different models for different types of Post
Offices, and the different types of remuneration in place for different branches. We
needed to be able to see the most profitable Post Offices in the country, what profit
they were making and how. AC noted that not many Post Office were highly profitable
currently
Si noted that the top-up payments provided by POL had been limited and costs had
increased with increases to the minimum wage. DZ reported that we had mapped out a
package of measures which took into account increases in the minimum wage and so
forth. ME added that automation, remuneration increases and the response to Starling
would shift the profitability curve upwards and reduce unprofitable branches to c20%.
But a lot of work would be required to shift the profitability curve. DZ noted that this
fed into the longer-term changes needed to become a modern franchise business
TC noted that unlike other franchises, POL did not receive money upfront from
franchisees. DZ observed that franchises like Costa and Paypoint drove limited profits
for their franchisees though the products and services they were selling but drove
footfall. POL sat in the middle of the franchise proposition where at one end of the
spectrum limited effort was required of the franchisee and at the other end they were
running a full-scale business. TP asked whether we could demonstrate the footfall we
provided for those running a retail business and have a different conversation with a
Postmaster just running a Post Office. EJ noted that the latter model did not work but
that simplicity and labour costs were key across the network. S! noted that this would
still not resolve the legacy issues. TP asked whether we were we equipping ourselves to
close unprofitable Post Offices and replace them with profitable retailers. EJ added
that if we paid more to unprofitable Post Offices now we would keep needing to pay
more money to them in the future and it might be better to have a one-off exit
arrangement. DZ noted that we were in the process of setting up 400 Drop & Collect
branches to start changing the shape of the network
TP asked whether by looking at Post Offices in the top cities in the UK we would be able
to say how they differed from an optimally profitable franchise. In multi-site
operations it was usual to analyse how much profit you were making in the big cities in
the UK. For example, if you there were a DMB just offering postal services, could there
be a profitable option such as having two smaller outlets which had a retail business as
well?
Nick Read noted that we would not be making contractual changes now. The changes
to remuneration rates would be contract restatement, not contract reform. Contract
reform would not be happening in the next year. LH ask whether we would have to
recontract for SPM and AC reported that we had taken the view that this would not be
a requirement. DZ added that the principal objective was to deliver SPM successfully
and on time. EJ asked whether we could start consulting on contract reform in
advance of the roll out of SPM. SPM could be rolled out in 2024 and the new contract
could be aligned with the provision of new equipment. The potential advantages of
this approach were acknowledged but there were also significant risks associated with
trying to do too much at once
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¢ — CS noted her concern that some discussions, such as those on Post Office formats, had
taken place on a number of occasions. We would have to take some brave decisions to
move us forward or we would lose our relevance as a company; this was about what
the shape of the network overall should be
¢ TP noted that he had concerns about remuneration being linked to transactions until
we understood the position overall. CS noted that it should nevertheless be possible to
take some short-term “no regret” decisions. TP agreed that Postmaster remuneration
needed to be increased but we needed some comfort that the money was going to the
right places. AC noted that there would never be a perfect model and there would
always be some tactical shoring up requirements
¢ — TP noted that notwithstanding the challenges we faced, we should not underestimate
what we offered to customers. We had a totally different offer to every other
franchiser and we needed to remember to set out what we did offer for customers and
Postmasters. S! observed that the last 18 months had demonstrated the value of Post
Office clearly.
Session 3 - Commercial: Strategic options to expand in mails, and wider commercial
growth opportunities
Owen Woodley introduced the discussion, highlighting the consequences of the changing
Mails market and the measures we might take as a consequence. MDA2 had introduced a
different financial construct and had removed POL’s exclusive relationship with the RMG.
We needed to move quickly to establish our position in PUDO and recognised the risks of
RMG disintermediation (POL accounted for 21% of RMG mails volumes). Our PUDO focus
was on Click and Collect initially but we would be introducing returns and undeliverables.
Amazon and DPD both wanted to roll-out across much of the POL network.
The market was characterised but tight margins and the need to drive operational
efficiencies. We were handicapped by our legacy position. Amazon logistics and Hermes
had been the big winners in the development of the PUDO market, while DPD was
positioned at the premium end of market. However, POL was not competing with carriers
but with other network providers; we had 20% market share in PUDO but wanted to double
that over the next 4 years.
The Mails market was in decline overall. Market place sellers were increasingly moving
online. Acceptance only margins were low. POL’s Drop & Go was not competitive enough
currently. POL would have to make the shift online but we had to consider how much we
could move up the value chain in doing so and we did not have enough digital skills currently
to build a white labelled proposition.
Chrysanthy Pispinis reported that POL had the “right to play” in three parts of the Mails
market currently and these were described. We had an opportunity in the marketplace for
drop off. We would be enhancing our proposition by digitising our journeys and we were
prioritising this work by addressing known “pain points” for Postmasters.
Anumber of points were raised and addressed:
e Lisa Harrington asked who was likely to be able to compete with POL under option C to
become a White Labelled Mails carrier as this could influence how quickly we needed
to develop our proposition. It was reported that Collect Plus had scope to operate in
this space. Elliot Jacobs noted that the benefit of being white labelled was that you
could chose to switch providers. OW noted that we did not have the luxury of time
when considering the implementation of any of the options. Mark Siviter explained
that POL was in a unique position as we already had the volume and brand and it was
hard to see another provider being successful in launching a white labelled product.
Doddle had tried to do this but did not have the volume at the outset to be successful.
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We no longer had an exclusive relationship with RMG and needed to make use of our
ability to forge other partnerships swiftly
EJ reported that it took some time to explain RMG’s products to customers and POL
was required to offer those products. Under these proposals we would be adding in
more product options from more providers. CP noted that if we pursued option C, we
would not be pursuing option B (sell online as a parcels aggregator). There would need
to be a lot of processing in the background to make this a simple enough proposition.
OW added that we could not bring option B into the branch network, it would have to
be online. SI noted that the RMG product mix was quite complex and it took a lot of
time to train staff. Option C helped with simplicity. With Drop and Go options A and B
could not be integrated with other providers. Option C should drive income for
Postmasters but we could always revert back to options A and B. We needed to
simplify the RMG journey and it was noted that the CEOs of POL and RMG had
discussed this
Sl asked about the limitations on the product set POL could sell and OW reported that
the main issue was whether we could find a partner/s for whom the margin worked for
option C
Tim Parker asked what we would do if we wanted to maximise the long-term
profitability of the parcels business, noting that people did not ascribe a lot of value to
the other parcel shops. RMG still had a big share of the market so could we work ina
way with RMG to make this a worthwhile proposition for both companies? Could we
pursue options A and B and have white labelled product as well? Al Cameron noted
that this was an industry where market share was changing significantly. The key
question for us was whether entering a number of partnership arrangements increased
our market value, as had been the case with the Banking Framework. Acquiring market
share now did nevertheless seem to make sense. Nick Read thought that improving
the customer journey could make this a joint proposition with the RMG but it was clear
that we would need to take on other employees to develop this proposition
Ken McCall noted that we had to consider what the position might be in five years’
time and it would be important to leave ourselves with some optionality and avoid
being tied in with too partners so that we could adapt depending on their fortunes.
We would have to trial different activities in different places and the options set out
could apply differently in different locations. There was a question of whether we
could find the customers for option C but option B would be more profitable if we
could. We had to make the move online recognising that this was “cannibalising”
ourselves. OW thought that going online and PUDO would not be enough in the longer
term and he would look at KI’s points about applying the different options in different
places
EJ observed that in-flight deliveries would become a more common market service. It
made sense for POL to build the Drop and Go option and we needed to evolve this into
a service our customers would want to retain. We could consider a white labelled
option just in Drop & Go
KM noted that the complexity in option C was having to turn yourself into a carrier and
the issues associated with returns/ undeliverables. We needed to understand the
consequences of these changes, for example, someone coming into a branch would
hold us responsible for losing their parcel. EJ noted that this already happened for
RMG parcels
KM noted that the margins for RMG were high and wondered whether we should be
focussing on the international market with an aggregator. MS noted that RMG had
recently lost 50% of their international volumes and POL could play a part in that
market. KM thought we should be focussing on parcels internationally where the
margins were much greater. This should not just be the model but also the
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segmentation. International delivery fitted with us being in the travel market.
immediate delivery was also a growing market
¢ TP wanted to test a contrary view where we focussed on working with RMG to make
the service we could offer as partners more attractive. There were low margins in
PUDO although it brought some benefits for Postmasters but was it better to adapt our
network to be a better trading partner for RMG? KM noted that this situation had
arisen in the US and had marginalised its post office. We had to address the volume
shortfall and we needed more than one partner
© Tom Cooper noted that our core business was our network. Developing an aggregator
model for PUDO was akin to creating another insurance business. TP asked whether
that offered the chance for another provider to take a stake in Post Office. TC thought
that a core test was whether we were generating more business through the network.
EJ added that he thought this was more about value than volume and what gave us
more sustainability in the network. TC thought we needed to consider how we
increased the volume of international parcels through the POL network. AC thought we
should be less focussed on whether something went through the network than on
whether it was profitable.
© TP asked whether POL could set up its our own parcel business which was much
simpler then RMG’s and where the balance of power rested in the relationship with
RMG. It was noted that RMG’s value was being eroded by other providers and more
competitive brands would gradually take away more of its market share. OW said that
the executive would look again at the war-gaming we had been done before MDA2 and
TP noted that we needed to consider how that might now be different
* KM observed that other providers wanted to work with POL because of our network.
We did not want to become a parcels storage point but did want to offer PUDO. The
most successful part of RMG was GLS and that was international. If we were going to
offer a white labelled product it should be in this market. We would not have to
choose between the options but could choose a hybrid; however, we first needed to
understand the economics of the international market in more depth
* TP noted that the debate had focused too much on volume and not enough on value
and there were options that might be beneficial for Postmasters but not for POL. EJ
noted that if the options worked for Postmaster, there ought to be less churn in the
network
* KM noted that he would like to talk more about the charging model for PUDO, for
example, different rates for the city, the suburbs and rural areas which ought to make
some of the less profitable Post Offices more profitable. He was not convinced by one
flat rate charging model and thought we should either be looking at volumes or a
network access fee. A dual commitment would be important
¢ TP asked why we would choose to do a deal with DPD rather than a number of other
partners; he also thought it worth exploring whether we could make things work more
profitably with RMG. A relationship needed to be of some scale to be profitable
* MS noted that RMG expected that we would begin to sell other providers’ products.
Disintermediation was not just about moving to acceptance only. RMG could set up
with another partner if they wished to. The previous CEO had wanted to retain
exclusivity in the relationship with POL. There was value in the international market
but RMG was losing significant market share and while it was worth looking at moving
into this market and the premium market, we needed to be careful not to add further
complexity in branch. The Team would look at the suggestions made by the Board and
refresh the options we had looked at with McKinsey previously. There had been a
dynamic shift in the market with Brexit and with the inbound market the de minimis
issue had arisen, making it no longer sensible to look at single parcel deliveries
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¢ — TPasked what we had to offer DHL. MS reported that we were talking to DHL about
PUDO and the reseller agreement (access here was the costliest customer acquisition).
KM noted that we could take one global partner to keep things simple and DHL were
the best partner globally and had a premium offer. KM added that we needed to Action: OW/
understand the dynamics of the international market. SI asked whether we could Ms
categorise which providers were best for which parts of the world internationally
e — Zarin Patel noted that she would be interested in understanding our Shareholder’s
perspective on option C.
Commercial opportunities
OW introduced the discussion on product opportunities. We were still focussed on the core
but we also needed to assist Postmasters to run their businesses more efficiently and
promote their businesses better locally. We wanted to test the “ecosystem” proposal with
the Board.
A number of points were raised and addressed:
* KM reported that he had seen some procurement models work well and there were a
lot of common products used by Postmasters; however, we faced a challenging 18
months, responding to the Statutory Inquiry, working through MDA2 and Postmaster
remuneration while trying to grow our core business. We had concerns about
bandwidth and had to have a laser focus on Parcels, PUDO, the Network, Postmaster
remuneration and SPM. ZP agreed with this perspective, especially with limitations on
investment spend. KM asked who would progress this within POL. OW clarified that
were not suggesting that we had the capability to set up a service internally but neither
would it require investment funding
* J thought there might be some “quick wins” that did not entail significant work for
POL but the product proposition would need to be right
© LH thought the proposal seemed to be more about creating a benefit for Postmasters
than a commercial proposition. DZ asked whether we could ask the NFSP to do this
TP noted that he would be content to set up a provision that would be good for
Postmasters if this initiative did not require investment funding
e — Si thought it could be a good idea and reduce the workload for Postmasters. It would
also be good to have similar product lines throughout branches
* CS had reservations because of the potential to get the pricing wrong
* KM would support the provision of this initiative becoming an objective of the NFSP
with some support from POL. EJ noted that a simple set of core products could be
provided through Branch Hub.
The Board returned to the conversation on PUDO that had started on 27" July 2021. OW
reported that there would be a flat price for DPD transactions and a tiered pricing structure
for Amazon. Ken McCall noted that we should be seeking to have geographical pricing. TP
added that we did not want these arrangements to constrain our earlier discussions on the
potential for a deal with DHL in the international market. OW reported that DHL were
interested in running a trial with Post Office for international mails. KM added that we
needed to continue considering having a network floor and a network access fee.
The Board APPROVED Post Office Limited entering into contractual agreements with
Amazon and DPD for the provision of Click and Collect services.
The Board DELEGATED AUTHORITY to the Group Chief Executive Officer and Group Chief
Commercial Officer to finalise the agreements within the red lines set out in the paper
presented to the Board on 27" July 2021 and subject to all necessary legal assessments.
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4. Session 4 - Technology: Enabling business transformation with new technology (e.g. SPM,
Branch Hub and Data)
Zdravko Mladenov introduced the discussion which was seeking input on the strategic intent
for technical platforms and setting out what we were trying to achieve. We would need the
Board’s help to narrow down the scope of the solutions. We would be discussing how this
set of platforms underpinned the programmes that the Board had been discussing during
the strategy sessions. The platforms would enable PUDO to be delivered across the
network, integration with other providers and an improved day-to-day experience for
Postmasters.
The first decision needed to be taken in October 2021 on whether we built or bought a base
EPOS system. We could buy off shelf and customise, which would require us to buy licences,
or we could build our own system, which would require time. We had narrowed down to
five the EPOS systems we could buy and we were researching the costs of building our own
system.
ZM described the options on devices and the two main questions that would be coming
back to the Board about this and the drivers for these.
A number of points were raised and addressed, including:
© Zarin Patel asked whether most retailers would choose to buy or build an EPOS system.
ZM reported that most retailers would buy an EPOS system but for most it was a simple
proposition. ZP noted that it would be helpful to understand the criteria for the
options
* Tom Cooper noted that our uniqueness with Mails and Banking seemed to make it hard
for us to buy off the shelf
© Elliot Jacobs asked if we could buy a platform and add in our own components and it
was confirmed that this was already happening
* AlCameron thought we needed to think about the costs of future change which were
high under the Fujitsu contract. ZM reported that future change costs would be one of
our key criteria
e — Saf Ismail asked how Postmasters would receive their data and ZM reported that we
did not have an answer on integration yet
© ACnoted that we had been hearing about local supply chain problems for devices and
asked about the risk of waiting until January 2022 until taking this decision. Lisa
Harrington agreed that the longer we waited the greater the risk. ZM explained that
information on cost and Postmaster feedback were two things we needed before
taking this decision. Tim Parker noted that we could not risk the delivery of the
programme by taking too long to research this or getting feedback. Trade-offs would
have to be made we had a very tight delivery timeline. LH added that we might not be
able to procure our preferred option. EJ added that we did not need to have decided
on platform to choose the hardware and we should identify the options quickly. AC
noted that we could make a choice quickly to get a bigger device where parts could be
switched out quickly. TP added that what we were going to provide in the future
would be much better than what we had in place already
* Sl asked what the cost difference was between an off-the-shelf system and one you
built yourself and asked how it would integrate with the back-end system. ZM
explained that the options and costing would come to the October Board meeting
* — Carla Stent asked whether we had investigated leasing devices and ZM explained that
this was not a viable option at the scale we were looking at and with the requirement
to remove old equipment from Postmasters. LH noted that configuring the new devices
would be a major undertaking
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¢ TP noted that we would need to consider space requirements and how that impacted
Postmasters but his instinct was to avoid customisation and contain cost and
complexity
¢ ACasked whether we could proceed with purchasing larger devices for larger branches.
LH cautioned that this could introduce the need to test multiple devices. TP thought
that the Board should take the decision in October 2021 will a full understanding of the
risks and where equipment that could be demonstrated.
Sourcing Strategy
ZM set out the approach proposed to develop a Sourcing Strategy and the need for this. We
had “piggy-backed” on existing contracts but wanted a longer-term view of our preferred
partners. This was not just about SPM but also about operational delivery in all the
categories we needed to move across. We would be better placed to deliver with best-in-
class providers, a diversified supplier base and one or two strategic partners who
understood us well and allowed us to contain procurement complexities. The downsides of
lengthy lock-ins with strategic partners were that you tended to pay higher prices and they
had little incentive to build their capabilities. The Sourcing Strategy would be brought to the
Board for approval in March 2022.
Anumber of points were raised and addressed:
¢ TP thought that we needed real optionality to do deliver SPM ourselves if we needed
to. LH noted that this would be a major challenge for POL. ZM reported that there
were options if SPM did not deliver on time. If we had to we could in-source Horizon if
SPM were not delivered by 2024 and with the Fujitsu contract only extended until
2025. AC warned that only a limited number of Fujitsu employees understood Horizon
fully and many of these were close to retirement
¢ — EJnoted that pushing automation harder and faster should have a real benefit in
reducing churn rates. DZ noted that he appreciated that automation would be a real
benefit to Postmasters but we came back again to the need to avoid taking on too
many activities at one time. LH added that we were not yet at a stage to be able to roll
out automation and Fujitsu were already resource constrained so it would not be
advisable to take them off their current areas of focus
¢ LH noted that the “Plan B” proposed for SPM was feasible. Jeff Smyth had been
spending a lot of time with Fujitsu so had a good view on how that team operated.
Data governance
ZM explained that the work on POL data governance was nascent and there was a portfolio
of work to be pulled together in order for an end-to-end data function to be set up for POL.
ZM described the main components of that programme and the main options we had. Some
decisions had been deferred previously, for example, the version of the Credence system we
used had been released in 2007 and ZM had started work on a cloud-based replacement for
this.
ZM noted that most organisations had a self-serve approach to data and that was where we
should move to in the longer term and described the five options set out for our approach
to data governance.
CS asked how much of the data cleansing we would be able to do prior to migration and AC
asked how much data we would want to migrate across. ZM explained that we would have
to archive the legacy data. Cleansing of the underlying data would be hard as the data
quality was variable. CS thought we would need to set up a data cleansing programme and
have a “line in the sand” for what data would be migrated and the period of time this
applied to. EJ thought it would be prudent to move across as much data as we could from
Credence as soon as possible. Ken McCall noted that we could you use a collection criterion
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linked to when data were last used. The business had to make a decision about data it was
not using and also look at the recoverability of data. CS noted that there was also a
customer and cultural perspective on this issue. AC thought that it should be feasible to
stop producing data that was not really used but there was a broader issue around data
ownership and governance which needed to be in place for the longer-term and we needed
systematic systems for keeping the data correctly. ZP supported removing data that was no
longer used as long as we did not need that data for compensation purposes. TC asked how
we knew if the right data was in the data lake and it was explained that we could not know
this for certain but could rationalise our data set. TP thought it would be helpful to get
people to review the reports produced and then work out what reports were actually
needed based on whether the data was used and whether it added value. LH noted that in
some companies data had been cut off and an appeals process put in place for people to
argue for its reinstatement.
The options for data governance were discussed and the consensus was that an approach
between options 3 and 4 over a period of time would be sensible and it was noted that
funding was included in the 3 Year Plan for this work. Option 5 could be pursued on a slower
timeframe on a case-by-case basis.
Branch Hub 2.0
The direction of travel for Branch Hub 2.0 as the main portal for communication and
support for Postmasters was discussed. The Board supported to this proposition and the
discussion focused on prioritisation requirements which would in turn drive funding
requirements. ZM explained that Branch Hub 2.0 was forecast to cost £10m through to
March 2024 but the request now was for the first half of the funding in 2020/21. The
development areas drew on feedback from Postmasters including being able to access
branch data; making onboarding and training simpler; ease of access to information; access
to support; convenient access to IT support; and being able to use Branch Hub in branch.
Only 93% of branches were registered on Branch Hub and 36% of visitors only visited once a
week so further adoption was a priority. There would be a reduction in the “cost to serve” if
Branch Hub picked up all the functionality we needed. ZM described the components of
Branch MI that we wanted to be able to provide for our Postmasters.
Anumber of points were raised and addressed:
. EJ thought that having even basic data on Branch Hub would be a significant
improvement and a full suite of data would give people the tools they needed to
make their branches work better so it was important to get to a point where this
information could be accessed on a mobile device as fast as possible. AC agreed that
the provision of MI would make a huge difference to our Postmasters’ day-to-day
lives
. KM asked when Branch Hub had gone live and it was reported that the first version
had gone live in August 2019 and had moved to work on Service Now in December
2019. Registration rates had increased significantly during Covid-19. We had c1,000
Branch Hub users but were not sure about the extent of its overall use. KM noted
that other information channels would need to be closed to drive the use of Branch
Hub. NR noted that this had to be driven by content and EJ added that it also needed
to be possible to access Branch Hub on a mobile device. LH noted that we had said
last year that we would use the Area Managers to drive adoption. DZ agreed that the
concept of closing down other channels was right but that we could not do this until
we had more content and easier access
. TP noted that the business was cash constrained but the development of Branch Hub
was seen as a £10m priority over the next three years and it was agreed that this
should ultimately help take costs out of the business, make self-serve the norm and
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reduce calls to the call centre. It would also provide consistency in the help and
information provided. SI noted that it would be important to see who was using
Branch Hub and for Area Mangers to encourage and support Postmasters to start
using it. ZP noted that when the business case came back we needed to be able to
demonstrate the real benefits the investment would deliver.
Any Other Business
Tim Parker thanked everyone for their contribution to the discussions enabling the Board to
take decisions about portfolio allocations and to discuss the major options; this had been
supported by good papers and background material.
There being no other business the Chairman declared the meeting closed at 3.30 pm.
Chairman
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Voting Results for Strategy Minutes from 28.07.2021 (approved on 28.09.2021)
The signature vote has been passed. 1 votes are required to pass the vote, of which 0 must be independent.
Vote Response Count (%)
For 1 (100%)
Against 0 (0%)
Abstained 0 (0%)
Not Cast 0 (0%)
Voter Status
Name Vote Voted On
Parker, Tim For 14/10/2021 10:06