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POST OFFICE LIMITED BOARD MEETING
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MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON THURSDAY 27 JULY
2021 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 10:00 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 Financial Officer (AC)
In attendance: Veronica Branton Company Secretary (VB)
Max Jacobi Strategic Financial Planning and Analysis Director (MJ)
(Items 5. & 6.)
Tim Melnnes Strategy and Transformation Director (TM) (item 6.)
Angela Williams Interim Group Chief People Officer (AW) (Item 7.)
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.
The Chairman welcomed Ben Tidswell who was attending his first Post Office Board
meeting.
2. Minutes and Matters Arising
The Board APPROVED the minutes of the Board meeting held on 03" June 2021.
The Board NOTED the action log and status of the actions shown.
3. Appointment of Ben Tidswell as Non-Executive Director of Post Office Limited
The Board APPROVED the appointment of Ben Tidswell as a Non-Executive Director of Post
Office Limited for a period of three years from 27" July 2021 to the nearest Board meeting
three years from that date.
The Board APPROVED the appointment of Ben Tidswell as the Chair of the Historical
Remediation Committee of the Board of Post Office Limited.
4. CEO Report
Nick Read introduced his report. When the Board had meet in June 2021 the organisation
had been under pressure and subject to external scrutiny as well as experiencing the
effects of the shift from offline to physical retail on Mails volumes. Since then the brand
metrics had improved with customers’ focus on their Postmaster and their local Post
Office. Trading had been better overall in the last 3-4 weeks but we were still behind
target. Overall trade had been down 10% during lockdown and we were not yet sure
where trading volumes would settle with restrictions lifted. DMBs were still suffering a
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40% decline in business, with a footfall decline of 22-23%. Banking remained robust,
especially for deposits. We were trying get focus back on trading.
Progress had been made with Historical Shortfalls Scheme payments and it would be very
important to process interim payments promptly. Sir Wyn Williams was publishing his list
of issues for the Statutory Inquiry this week but this was unlikely to include the issue of
additional compensation for the 555 claimants with whom Post Office had reached a
settlement agreement in December 2019. This would mean that the Justice For Sub-
postmasters Alliance (JFSA) were likely to wish to the publicise the issue. NR and Tom
Cooper had met with the Minister last week at which the 555 claimants had been raised
and would be discussed with the Secretary of State.
NR reported on work to address the findings of the Horizon Issues Judgment (HU), the
Common Issues Judgment (CU) and organisational culture. The Improvement
Development Group (IDG) had initially identified 207 improvements but this had
developed into 407 in total. 75% of the improvements had been completed, with 30%
both completed and audited. 25% of the improvements still had to be to be completed
but we would be conformant with the Judgments by the time of the oral hearings for the
Statutory Inquiry, including on Horizon conformance issues.
NR reported that he had been involved in colleague listening groups over the last week. It
had been hard for some colleagues working remotely, such as those working in call
centres. Those still commuting, such as colleagues in Supply chain, had dealt with very
heavy workloads while others not commuting were working longer hours. There was
enthusiasm about working with people face-to-face again and there would be more office-
based working from September 2021.
A number of points were raised and addressed:
* Carla Stent asked what a good outcome would be for the 555 claimants. NR reported
that the JFSA’s main focus was on the circa £40m of the settlement sum that had been
used to pay the legal fees and funding fees and to a lesser extent sums associated with
the damage that had been incurred by the individual claimants. Ultimately, this would
be a matter for Government to consider but Sir Wyn could decide to comment on this
issue even if it was outside the terms of reference of the Statutory Inquiry. Tim Parker
thought that we should maintain a direct communication with Alan Bates of the JFSA,
notwithstanding that the funding would have to come from Government. Al Cameron
noted that the JFSA had also wanted to include Government's oversight role for POL
within the scope of the Statutory Inquiry
* Zarin Patel noted that Postmasters needed reassurance on changes made following the
publication of the Judgments and it would be interesting to know how they perceived
the changes POL had made to address the findings. NR agreed and we also needed to
engage and communicate better with Postmasters on these matters but had to be
thoughtful about communicating the material matters rather than minor issues. TP
added that there might be a difference between what Postmasters deemed to be
important versus our priorities for conformance with the Judgments. Lisa Harrington
noted that TFL had made a point of communicating what was working as well as what
was not to keep reinforcing positively what worked. Elliot Jacob cautioned that many
Postmasters were not focussed on the historical position so we needed to focus our
communications on issues that were of concern to them now. NR agreed that it was
very important to be able to return our focus to running the business which was
supported by initiatives such as “Back to basics” in Mails. Area Managers were being
active in the network and giving more support on upselling and so forth
* Ken McCall asked about preparations for the Christmas campaign, noting that he Action:
thought this would be the biggest parcels campaign on record, and asked how ready Executive to
POL was to meet this demand
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* Carla Stent noted that resourcing was being flagged as a risk and asked whether there _ report on
had been any damage to the employee proposition. We needed to think about this plans for
carefully, especially for major roles, and consider whether we needed a brand Christmas
campaign on employee proposition. Lisa Harrington noted that people followed campaign
people and that had been driving some successful hires recently. LH would like to see
POLs Diversity & Inclusion strategy. ZP noted that it was vital that we set Ben Foat up Actions: AW
for success in his expanded role and she wanted the Board to spend some time
considering that, including building trust in the processes followed by the Shareholder
« KM asked about the increasing interest of the FCA in our banking activities and thought
this needed to be addressed promptly, including through the Shareholder on our
behalf. CS agreed that this might need to be a conversation involving the Shareholder
and HM Treasury. Tom Cooper said that it would be helpful to understand the FCA’s
degree of interest and focus on POL. AC reported the internal concerns on this matter
because POL’s role was different to those commonly regulated by the FCA and he
thought it would be sensible to have a conversation at a senior level with the FCA. Elliot
Jacobs noted that these customers were the banks on whose behalf Post Offices
moved their money. CS warned that the shift might be the FCA requiring the banks to
extend their due diligence of POL
* KM asked about POL’s engagement with the unions. NR reported that he had held
useful discussions with Dave Ward of the CWU on the owner/ worker contract but he
was concerned about the pressure of activity required between now and the end of
September 2021. We needed to have an owner/worker contract which was acceptable
to the CWU by then or prepare for court in February 2022. We would be preparing an
owner/ worker contract in any case as we thought there was a need
* Saf Ismail asked whether we could incorporate the MoneyGram ID into the app being
developed. NR said he would ask that question. Si added that he would be happy to -—«- To. do: NR
look at a demonstration of the app.
5. Financial Performance Report
Al Cameron introduced the Financial Performance Report. We were not hitting financial
targets currently because we were not getting the Mails volumes required and the Travel
market had yet to recover. We would work through these issues over the next few weeks
and this might lead to changes in our recommendations on MDA2 remuneration. The
position could revive if we had a very successful Christmas trading period and the Travel
market returned. It was, however, positive that the network was operating with 11,500
branches again.
There were fewer people in Supply Chain and some other areas of the business because of
self-isolation requirements but we were restarting contracts with Loomis to be able to deal
with the increased cash volumes.
A number of points were raised and addressed:
© Ken McCall asked about the incentives for the banks to increase transaction volumes
and whether we were creating our own cash volume problems through encouraging
deposit volumes. KM also asked whether there was anything the banks could do to
ameliorate the position. AC explained that increased volumes under BF2 were positive
for POL, notwithstanding the costs of processing the additional cash. We would be
coming back to the Board in September 2021 for a decision about our participation in
the Note Circulation Scheme run by the Bank of England. In the longer-term there was
the potential to outsource the whole of Supply Chain but this was not proposed
currently
* Elliot Jacobs noted that one of the challenges faced by Postmasters was not having
equipment to count cash which had become more of an issue when handling higher
volumes of cash. KM asked whether we could acquire some of the banks’ counting
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machines as branches were closing and it was agreed that we would investigate Action:
whether this was an option executive
* Saf Ismail reported that he had visited the Cash Centre last week and thought there
were some “quick wins” that we could implement like counting cash over the weekend
and having a uniform approach to sending cash to branches (e.g. different coloured
bags for Scottish notes). AC explained that the opening hours were regulated by the
Bank of England and we had to provide an exact amount of cash by a set time; we had
sought some relaxation of these rules. The rules around the provision of cash to
branches were not always adhered to but it was a reasonable question to explore. AC
added that not counting cash on camera would be controversial for a lot of
Postmasters
* LH requested information on depreciation variances and staff charges Todo: AC/M)
* EJnoted that it would be helpful to have the variance in trading figures over a two-year 040: AC/M!
period rather than last year’s alone as this had been an abnormal picture because of
Covid-19.
6. Funding Submission and 3 Year Plan
Al Cameron provided an overview of the funding submission, our priorities, our
commitments, and the danger of the amount we requested being reduced. AC added that
our explanation of our longer-term sustainability, which would not be achieved during this
funding period, was likely to be disappointing for the Shareholder.
We faced significant issues on profitability for Postmasters and Postmaster remuneration
needed to increase by circa { Profit Share had now been deferred in
preference to increases in transaction/ product fees. The costs to run the business
remained high and a third of staff reduction costs were included in the Plan. The rest
would have to come in future years. Covid-19, Historical Matters and SPM required
resources. We had clarified better what comprised network subsidy costs and were asking
for more. We still needed to develop parts of the submission, including the strength of
proposition post 2024/25, and our explanation of branch definition. We were seeking the
Board’s views on whether we should be spending this money in the ways proposed.
Technology would be a key enabler across the plan. The seven business priorities had
been a useful way to help us prioritise. We were following a three-year budgeting process
and this was our view today.
The elements included in “Licence to operate” were necessary to spend to run the
business and comprise f the costs, while change and transformation accounted for
{ssc} We could spend finrevevant on re-procuring IT projects and this had to comply with
public procurement rules. AC described the main Change & Transformation projects,
noting that we had choices within this. We could spend less on certain improvements but
this had consequences.
We were prioritising support for our Postmasters and this included automation, principally
in Mails and counter cash. We had to achieve conformance with the Horizon Issues
Judgment (HU) but were also proposing further improvements to Horizon. AC was
concerned that we were being optimistic about some of these costs so was reviewing
them.
Network maintenance was not a negotiable activity and investment in new branch
technology was not entirely discretionary. Procurement spend was significant because of
the public sector procurement requirements.
A number of points were raised and addressed:
* Ken McCall queried whether some elements bracketed as prioritising our Postmasters
actually met this description. Tim McInnes explained the investment spend by area
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* Zarin Patel asked about automation and the leasing arrangements. Tim Parker asked
about the extent to which we could provide more equipment for Postmasters that
made running a Post Office easier even if that equipment were not funded by POL. TM
explained that we were trailing the cash and banking equipment in as part of the Drop
& Go pilots
* Carla Stent asked where we had increased Postmaster remuneration and Tom Cooper
asked what we would be delivering at a cost of fwaamper branch. TM referred to the
slide setting out Postmaster remuneration and the models for the automation pilots.
Elliot Jacobs noted thatiz==3 on a branch fit out was a limited amount. Saf Ismail
added that this also raised the question of the contractors we were using. Tim Parker
suggested that we consider the operational detail in the individual sessions being run
on 28" July 2021. SI asked how we would know how many Postmasters would be
willing to contribute to a co-investment and TM offered to provide more information To do: TM
to SI about this this offline
* Elliot James asked what the creation of value for the Shareholder meant and TM
explained that this was a mixture of creation of financial value, policy value and cost
savings
«Lisa Harrington thought that the Post Office Operating Model description would
benefit from greater clarity and we should be clear that SPM only accounted for a
proportion of the total IT spend; this felt like two buckets of spend. Carla Stent added
that there was also the issue of trying to deliver all of this work in a three-year period.
Tim Parker observed that we could state that this was our current best estimate and
take out projects subsequently if necessary. We were likely to be challenged on
elements of our funding request in any case. The obligations of running such a large
network and the changes required were likely to drive cost pressures. LH agreed with
the context described but noted that businesses could sometimes run with fairly basic
equipment and TP agreed that such an approach would be likely in a private equity
funded business
CS observed that our proposals on Postmaster remuneration did not take us toa
position where remuneration matched the position of several years earlier once
inflation had been taken into account. CS asked whether we should be seeking to get
to the right baseline after which we could move forward properly: under this plan
there would still be a delta. Tom Cooper noted that the Shareholder had heard this
argument on previous occasions and the answer was to remove costs from the
business overall. The strategic challenge was to take costs out of the business rather
than to increase Postmaster remuneration as the default. Elliot Jacobs noted that the
pressure on Postmaster costs had been caused by external factors such as increases to
the minimum wage. CS added that we still had to operate 11,500 branches which had
to offer certain products but this did not enable all Postmasters to make a reasonable
living. Ken McCall observed that these points were not mutually exclusive. We needed
to be able to operate a sustainable network, underpinned by the subsidy fee, enabling
increases in Postmaster remuneration but also cutting costs in the business
«KM noted that he was surprised by how little money was going into IT security given
the increased risk of ransomware attacks and so forth. LH observed that some of these
costs would be built into the SPM work. TM explained that we had programme of
activity on IT security set out for the next three years, excluding any additional
regulatory requirements. The Programme was linked to our current level of maturity,
moving to our future desired position. CS noted that some of this work was already in
train
* Zarin Patel noted that there might be work that we slowed down rather than stopped.
TP agreed that this could be an outcome but we needed to articulate clearly what had
to be done to keep POL running and we needed to understand the true costs of the
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network now. Remuneration was the total amount paid to Postmasters across the
11,500 branches when what we thought should happen was to have fewer full format
branches with better remunerated Postmasters and a lower cost base. NR agreed with
this but it was not a conversation we could have today. TP agreed that we were ata
transition state and had a limited degree of freedom
Al Cameron noted that could ask for less funding or undertake more cost reduction.
The Board had been risk averse about procurement risk and we could not cut costs and
be so risk averse. To run the IT team as discussed we would need to have the in-house
IT capability
KM noted that the previous Strategy Plan, pre-Covid, had envisaged a headcount
reduction from 3,000 + to circa 1,600 — 1,700 FTE and asked what the barriers were to
enable this. AC reported that franchising DMBs was a major element of this as there
were circa 1,100 employees in DMBs and we were also considering the workers’ rights
issue now. There were also circa 700 employees in Supply Chain. There were 1,300 -
1,400 employees in POL functions, including the field teams, and reducing these
requirements entailed automation, money and time. There had been 8,000 POL
employees in 2015. There was little optionality now with the Statutory Inquiry and SPM
and limitations on funding. TP added that the plans we had looked at in the past had
also been before the Judgments had been published. There were investments to be
made but there was a question of how and when you spent the money to create a
proposition that was capable of turning POL into a sustainable business. Parcels, cash
and the size of the network were difficult to square. We had to make choices. We had
to sort out the IT situation. We had to have a business that had a future of a least 10
years
CS asked what the costs of running the business would be with, say, 4,000 branches
and whether the Government was prepared to keep funding the current network. EJ
noted that Post Offices had to be a viable proposition if you wanted Postmasters to
lease equipment, co-invest etc. TC asked what costs sat with Postmasters now and
what the optimal branch network would look like. EJ observed that a lot of spend was
shown for branches that no-one would want to buy. TC thought that we needed to
show the cost of the political decision to maintain a large network. TP added that we
needed to be able to answer where the value lay in the business
ZP noted that we needed to think about being a digital business. TP added that we had
two businesses: Parcels and Cash. In five years’ time there would not be a profitable
market in labels and acceptance. The world was shifting rapidly online for initiation.
CS thought it would be a mistake not to make a funding submission reflecting these
changes and what a network of 4,000 branches would look like
AC noted that we could not discount the subsidy we received but to reduce costs of an
uncommercial network we would need to embrace the use of outreach and use more
Payzone outlets which would not be popular. The network was run paternalistically
but Postmasters could be allowed to make their own choices on certain matters and
pay for them. We could save money by being less prescriptive
TP noted that there was a question of whether we wanted to spend money on capital
projects or reducing the uncommercial elements of the network. KM thought we
should include a figure for what a sustainable network would be starting with a blank
sheet of paper and what was needed to run the network today. TM thought there was
a broader question of the cost of the Government policy but the shorter-term focus
was on matters like the costs of network churn. TP thought the key measure was
Postmaster remuneration per outlet and would like the submission to sharpen up the
existential problems we had identified that were unquantified. What we were trying to
do now was to keep the network running
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© LHnoted that she was anxious that we were not bringing the customer to the fore of
the debate enough
© TP thought that the tail off for using cash would happen quicker than currently
assumed. A significant change in consumer behaviour could be anticipated. People
would be less willing to use the RMG’s complicated pricing system for parcels and
Hermes was a serious competitor
* EJasked about profit share not being part of the proposal as he thought this would
drive engagement and give people “a stake in the game’. It was also about the style of
relationship between franchiser and franchisee. NR explained that BEIS had underlined
the need to get a return on their investments in POL. Our objective for profit sharing
remained clear but there was a timing issue given the current priorities, including
increases to Postmaster remuneration. AC noted that there would be a trade-off. We
could ask for what was set out in the Plan, less or more. We would be asking for more
than we had done in previous years but we genuinely thought the network was at risk
because of Postmaster remuneration and we had to deliver SPM. We had tried to
balance our approach. CS thought that we should at least signal the real cost of
becoming sustainable in terms of the size of the network, Postmaster remuneration
and so forth
* Ben Tidswell noted that the proposals did not seem to represent a transformation and
asked about the likely outcome for the funding requests. TC reported that the team at
BEIS had £50m in their minds for the network subsidy. The team had fought on POL’s
behalf for a substantial funding request last year. There had been a major
deterioration in the business’s performance from an owner’s point of view but the
constraints on the business were understood. TP agreed that this was a “ticking over”
proposition. We had talked about transformation over a period of time but had not got
to the point where the business was commercially sustainable
* TCadvised that we should be careful where we proposed spending money. We would
get a better hearing from Government on spending on automation to improve the
stability of the network than on Mails remuneration
«TP asked what the options were for cuts if the funding granted were less than
requested. AC explained that we had included a contingency for SPM, some projects
could not go ahead, and less could be spent on Postmaster remuneration; we could
also accept more risk by running more outreaches. Nevertheless, AC thought we
should ask for what we thought was the right amount of funding
* TP observed that a further question was whether the trading plan was optimistic or
realistic. AC noted that trading was not on track in the current year. To achieve the
stretch targets we had to believe that the travel market was coming back and that
travel cash was coming back. KM observed that POL had delivered nearly £90m of
profitability pre-Covid. TP thought that the classification of expenditure had been one
issue. Currently, SPM was a significant factor and this had been higher than it might
otherwise have been because of the need to respond to the findings of the Judgments
* ACnoted that we did not have a thorough churn analysis but it would be helpful for
Martin Edwards to take the Board through Postmaster economics. CS added that it
would be helpful to include some case studies in our funding submission to support our
case for increases in Postmaster remuneration and for a higher subsidy fee. TP noted
that the counter argument would be that the retail side of the business should be
driving the contribution. TP asked whether churn would be much greater if we did not
spend the money proposed and dealt with churn differently. EJ thought it was a
question of value per outlet more than value per transaction. Being able to use
automation and data would enable a reduction in overheads. You either needed more
customers or a cheaper operating model and you had to decide where your investment
would be. The overheads versus the remuneration needed to work. Saf Ismail added
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that we had to look at reducing the number of Mains branches and offering more basic
formats with fewer services. TP agreed with these points but added that we needed to
understand the shape of the network now. TM described the SGEI requirements,
meeting which included maintaining a network of 7,500 branches currently. TM
described where we had flexibility. Reducing the branch network would not be a
popular conversation with BEIS but we needed to discuss the true cost of running the
network and the subsidy required to do so; what we were doing or could do to
decrease costs had to be part of that discussion. The right size of network was as much
about the branch format as the quantum
* CS thought we needed to signpost that we were not asking for funding that would
bridge the delta on Postmaster remuneration now and this was intrinsically linked to
the size of the network. This was short-term view not a longer-term solution. TC also
thought we should define what was meant by sustainable. If we stripped out some of
the costs discussed the business could continue but we could not reach a trading profit
of £100m until the end of the period. Everyone agreed that the business needed to be
right sized
* ZP was concerned that we were not thinking enough about the future. We needed to
explain more the cost of the policy of maintaining a branch network of 11,500. KM
noted that the subsidy figure used to be a lot higher. This plan was “keeping the lights
on” for the next few years rather than representing a transformation and becoming a
digital business. TP agreed that this needed to be signposted. TM advised that we could
provide a covering memo for the Minister. TP added that Government would want to
know the cost of the next network transformation. AC noted that if our contention was
that we were struggling to retain Postmasters we should not need to pay them to go.
However, our proposition to Amazon and the banks was that Post Office was where
other firms were not. EJ pointed out that our modelling work helped with this
conundrum. The network of branches meeting the SGEls could be 7,500 but we would
still had a bigger network overall but with a simpler format for other branches
* TC thought we had to think carefully about the amount of subsidy we requested and
suggested keeping the request flat at £50m a year through the period while seeking
more through investment spend. AC noted that the cost of running the uncommercial
part of the network had increased through Covid but would reduce again over the
period which was reflected in the Plan.
The submission of the draft Funding Submission and 3 Year Plan was APPROVED subject to
reflecting the points raised by the Board regarding the submissions. The POL Team would
have a conversation with the BEIS team prior to making the submission.
People Strategy — Progress (including deliverables of OD strategic recommendations,
Culture Ways of Working, Talent/D& to ensure capability is in place to deliver 2025
vision)
Nick Read introduced the discussion. People Strategy had not been discussed at the Board
for some time although capabilities, stretched resources/ bandwidth, attracting talent and
Diversity & Inclusion issues had all been flagged. We would come back to the Board with
firmed up plans on these topics in the autumn.
Angela Williams introduced the paper, which was positioned as a thinking paper that had
relevance to the strategy topics being discussed over the next couple of days. All of our
strategy was dependent on having the right people in the right place at the right time. We
wanted to focus on total resource not just FTE. The paper included a “first pass” of our
strategy on a page. Our vision and strategic intent were described. This included the need
to think and behave like a retailer and deliver the service we needed to. We had set out
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our Ways of Working. We needed to consider what we wanted our stakeholders to say
about us.
Culture was referred to in the context of being an organisation that needed to act and
deliver like a retailer. We needed to build trust through the three promises to Employees,
Postmasters and Customers supported by a joined-up leadership approach.
The Organisation Design needed to set us up for the future. We needed to look at the
total cost base rather than FTE in isolation. We needed to address talent and capability
needs. POL needed to recruit scare digital skills and lacked people with retail and franchise
experience. We needed to be creative in our reward and recognition strategy. We had a
high number of open roles currently and this was a significant risk.
The work required on People Strategy was set out in the brackets of remediating past
errors, our present work and the future work needed to be able to achieve our 2025
vision.
A number of points were raised and addressed, including:
* Elliot Jacobs asked who our benchmarks were for being successful in hiring the type of
talent we needed. AW explained that this depended on what market sector we
wanted to look at. Amazon and Google had flexible reward and working approach;
their roles were well paid, highly competitive and they provided a good working
environment. Meanwhile, John Lewis had a strong employer brand and Timpson had
been progressive as a franchiser in the CSR space
* Zarin Patel thought the diagnostic was correct but that we had lost track of where we
were trying to get to on Organisational Design. ZP asked whether we had sought to.
review the reward approach taken by other Government bodies. AW thought this To do: AW
worth considering and added that our approach to reward was largely “one size fits all”
at the moment. We were unionised and subject to collective bargaining which
imposed some limitations on the approach we could take. We needed different
structures and approaches for different areas such as digital. We could tailor reward
more around job families
© Lisa Harrington noted that she had not seen meritocracy addressed in the paper. AW
explained that we needed to look at our performance management process. It was
traditional and rigid but this was somewhat linked to collective bargaining
requirements. AW would seek to highlight meritocracy more in the People Strategy.
LH agreed that job families could work and added that there were organisations like
the Ombudsman Service that were rated as great companies to work for that would
not be competitively remunerated. People valued the opportunity to get really good
personal development and re-skilling was valued by many employees. AW noted that
we did not have many people with digital skills and this drove the question of whether
we could retrain people already in the business or not and the approach we should
take in the Mails space. AW had not included much in the budget for retraining
individuals but would review the approach. LH noted that there was also scope for
bonding with other companies
* Carla Stent thought we needed to be cognisant of the risk of dilution of knowledge and
control when using contractors. We needed to look at what people's careers might
look like at POL. CS asked what metrics we needed to take a view on progress with the
People Strategy over time. AW explained that the three promises would need to
include the right engagement metrics which we would track against. We would use
industry best practice on trust measures
* Ken McCall noted that we needed to look at our Mails and Cash capabilities currently;
this was especially important as our core strategy was dependent on high performance
in these areas. In Mails we needed strategic leadership and technical skills. We had
To do: AW
To do: AW
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generalist IT skills in the business at the moment. We needed to assess the strength of
the core teams and the gaps within this in terms of capability, leadership, job roles and
skills gaps. We needed to strengthen Mails and Banking in particular and take out any
roles that we no longer needed e.g. certain generalist roles. NR acknowledged that
there was an imbalance at the moment with too little resource in these critical areas.
AW agreed that it was an area of concern and where the work would be product led
and technically enabled. It was agreed that these two areas would be pulled out and Action: AW
focussed on in the People Strategy. Al Cameron asked whether this meant were we
prepared to pay competitively for these roles.
EJ noted that it was better to have fewer highly skilled people than a larger number of
less skilled individuals. TP agreed and added that success was driven from the top
through a small number of critical roles. AW reported that this analysis would be
undertaken and we would come back to the Board with proposals. We needed more
breadth of leadership in some areas. TP noted that this was an issue we had been
articulating for some time and we needed to understand the cause of not being able to
attract the right people.
EJ noted that SPM was an exciting project to be involved in and there would be other
examples of this at POL. NR noted that POL was not necessarily seen as an attractive
brand for the markets in which we were seeking to attract candidates who were not
convinced that they would get the salary they were seeking. CS concurred that SPM
was creating something new and exciting which ought to be an incentive but POL often
seemed to attract people wanting to give something back at the end of their careers.
TP asked whether there was a remuneration issue and if so why. AW explained that
we needed to improve our Employee Value Proposition, we were affected by pay
compression at the top and we did not have job families in place. The SPM team was
largely in place and people were being paid highly but there was a sustainability issue
around this. A contractor environment also drove different behaviours. Culture took
time to shape. CS agreed that we needed to have some permanence and not be overly
contractor based. KM added that we needed to have people who understood what the
structure of, say, the Mails Team needed to look like. We needed to identify the roles
and people we needed and tailor our proposition to that
Saf Ismail asked about Zdravko Mladenov’ s motivation for joining Post Office and NR
explained that he felt a connection to the brand and the business. SI noted that this
was the case for many Postmasters. EJ reflected that people joined organisations for
the culture, experience, work/life balance and so forth all of which could be as much or
more important than money. Good people also brought good people with them
AC noted that the broader leadership team had been offered a deal where bonuses
were delivered if they delivered and they had lost trust in POL fulfilling what it said it
would. AC agreed that we needed to attract highly skilled people but we had to be
able to communicate clearly and transparently to the Senior Leadership Group on
bonuses. AW noted that we were now in a position to report on the bonus position and
we needed to be able to sustain that position
TP noted that it could be hard to fit people into an existing structure but it was
sometimes necessary to do this. We had to find the right people and find what they
wanted. There was also a question of whether the people you had at a senior level
were the right people. CS added that we needed to carry out proper testing of the
people being recruited. NR and AC added that we needed to build a pipeline so that
people were ready to step up into roles. AW reported that we wanted to produce an
organisation design based on the strategy agreed over the next couple of days. We did
not want to hire people randomly. AW added that we also needed to strengthen the
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People area to support this. Some people could be supported to develop and grow but
not in all instances
* AC noted that there had been consistent churn in the senior leadership team since
POL's separation from the RMG. The challenge kept getting harder so POL kept
needing a step change in capability
* EJreferred to the promise to customers. To be able to deliver this we needed to think
about the training we could give to Postmasters to help them run a great Post Office
and train their staff. AW added that this was normal practice for a franchise; it would
be a big shift for POL but AW was discussing this approach with Amanda Jones. EJ
noted that the standards and approach in Post Offices were very different. As a
franchiser, POL should have the right to say how customer service should be delivered
and set the standard. AC noted that there was a capability gap for us currently and
bridging it would be a major investment. Many of the Area Managers were not
retailers
* Ben Tidswell asked whether we had asked people what they thought about POL. AW
referred to the Organisational Health Index run by McKinsey in 2019; we wanted to do
a baseline check in October or November 2021 using the OHI or an equivalent. BT
noted that this was an important part of the diagnostic. NR reported that the Ways of
Working agreed were very important for us and other measures that addressed
imbalances of power
* Slasked what percentage of staff were not good enough to fulfil the requirements of
their role. AW noted that this depended on what criteria you applied but there were
considerable gaps. The capable individuals had been asked to take on more and were
consequently overworked.
8. Actions from Board Effectiveness Review
Tim Parker introduced the discussion and noted that independent Audit Limited had
produced a helpful report and this paper was seeking to implement their proposals.
Lisa Harrington asked if we could have a target for the maximum numbers of pages for
Board reports and Veronica Branton reported that this was a maximum of six pages and
four pages of appendices but it was not always adhered so we would reinforce the To do: VB
message.
LH requested that we include ESG on the Board agenda. To do: VB
Ken McCall suggested we set up quarterly talent discussions. To do: VB
The Board APPROVED the recommended actions linked to the Board review produced by
independent Audit Limited for 2020/21, which were that:
«a more structured Board forward plan would be produced for the September Board
meeting that built in the areas the Board wanted more focus on
* Board Directors would be asked to provide their feedback on papers at the end of the
next few meetings to help get the balance right on the information needed to take
decisions while avoiding extraneous material
* the Board would revert to the pre-Covid pattern of holding Board dinners before most
scheduled Board meetings
* sessions with the CEO and the NEDs to discuss senior team development, talent etc
would be scheduled (quarterly initially)
* NED only meetings would be scheduled around most Board meetings, and before the
Board dinner on the preceding evening where feasible
a specific slot on organisation culture would be included on the Board agenda
periodically in addition to regular updates
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* the Company Secretariat Team would develop a programme for the Board’s
consideration for NEDs to make branch visits and attend employee events etc. periodically
© a report back from the Committees would be built back into the Board agendas
© the appraisal process instigated for each Non-Executive Director to meet the Chairman
annually would continue.
Modern Slavery Statement
Carla Stent reported that the Modern Slavery Statement had been discussed at the Audit
Risk and Compliance Committee (ARC) on 26" July 2021 and significant improvements had
been made to our approach, including observations for any indicators of Modern Slavery in
branches and training for Postmasters and employees.
Elliot Jacobs reported that he was not aware of any changes to training for existing
Postmasters. CS reported that she thought this training was provided via the Area Action:
Managers but this would be checked. executive
The Board APPROVED the 2020/2021 Modern Slavery Statement and endorsed the
proposed commitments Post Office Limited would take forward in the 2021/2022 financial
year.
Strategic Platform Modernisation Programme (SPM)
Lisa Harrington requested that the Board have better visibility of delays in the SPM To do:
Programme as the timelines for SPM were so tight. Zdravko
Mladenov
Ken McCall asked whether Elliot Jacobs and Saf Ismail’s views on Postmaster engagement
on SPM would be sought. Nick Read reported that EJ and Si would be participating in a
video about SPM for Postmasters that would be filmed later in the day. KM noted that he
would be reassured if EJ and S! were content with the testing arrangements.
The Board APPROVED a drawdown of £12.35m for the SPM programme, covering the
period July to December 2021 inclusive. The drawdown was in accordance with the
overarching Business Case submitted in June 2021. The £12.35M was broken down as
£6.376M Capex and £5.974M Exceptional funding.
EUC Contract
Lisa Harrington asked about the value of the contract compared to today’s contract and Al
Cameron reported that it was similar. The parameters for the contract had been set
previously and we were not committed to buying the equipment.
Zarin Patel noted that we should make sure that the variable elements of the contract
were in our favour.
The Board:
* APPROVED delegated authority to the Group Executive to approve the EUC Services
Contract Award up to a value of £75m and for the Chief Information Officer to finalise
and approve the final agreement as Contract Owner. The contract would be executed
by an approved authorised signatory.
* APPROVED the standard liability for the Customer established in the Technology
Services 2 framework arrangements, which was set at one year’s fees in respect of
losses caused by Customer Cause.
Pension Assurance
Al Cameron introduced the paper noting that there would be a negotiation with the
pension trustees on the costs associated with the errors made by POL in its calculation of
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pensionable earnings. General allowances were made in the settlement scheme and there
were legal limits on what POL had to pay.
Tom Cooper asked if it could take a long time to resolve the matter if our expectations on
costs were unrealistically low and whether we should allow Angela Williams greater scope
for negotiation. AC reported that the Trustee had taken some time to respond to the
issue. A few existing pensioners were being overpaid and it was likely that we would need
to continue to pay at that rate but we would need to correct quotes for pension scheme
members who had not yet received their pension.
The Board APPROVED the mandate for the Chief People Officer to enter into discussions
with the RMPP Trustee to settle POL’s obligations to the RMPP in connection with errors
made by Post Office in its calculation of pensionable earnings. The mandate sought was to
reach a settlement that did not exceed ithout further recourse to the Board.
PUDO Update
The Board decided to consider the approvals sought on PUDO after the discussions on
Mails and commercial opportunities taking place on 28" July 2021.
Noting and governance items
Health and Safety Report
Al Cameron reported that two drivers had been caught driving illegally and had lost their
jobs as a consequence. We had started using CCTV in cabs on a random basis and we were
revitalising our approach on these issues. In response to questions, AC explained the
programme of compliance checks in place for properties and the recognition of the
increased dangers associated with handling more cash, noting that fogging and gas
suppression had proved the most helpful safety measures.
The Health and Safety Report was NOTED.
Starling Update
The Starling Update was NOTED.
Belfast Exit - Migration Assurance
The Belfast Exit - Migration Assurance paper was NOTED.
Sealings
The Board APPROVED the affixing of the Common Seal of the Company to the documents
set out against items number 2071 and 2072 in the seal register.
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10.5 Future Meeting Dates
The future meeting dates were NOTED.
10.6 Forward Agenda
The Forward Agenda was NOTED.
11. Any Other Business
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12. _Date of next scheduled meeting
28" September 2021.
I Tim Parker I
Chairman
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Voting Results for Board Minutes from 27.07.2021 (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
POL-BSFF-WITN-013-0000070_0014