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RMM(04)1st
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Royal Mail — Strictly Confidential
ROYAL MAIL MANAGEMENT BOARD
Minutes of a meeting of the Management Board hi in
Tuesday 20 January 2004
Elmar Toime (Chairman)
Paul Bateson
David Burden
Adam Crozier
Jonathan Evans
Mary Fagan
Vanessa Leeson
Tony McCarthy
David Mills (for RMMO04/10 to RMM04/17)
Paul Rich
Andrew Poole (Notes)
Penny Freston
Frank Schinella, Financial Management & Control Director, for
RMMO04/03 and RMM04/15.
John Lappin, Finance Director, for RMM04/04.
Derek Foster, Internal Audit & Risk Director for RMM04/05 and
RMM04/06
Martin Gafsen, Group Investment Director, for RMM04/08.,
Phil O'Gorman, Vehicle Services Director, for RMM04/08.
Alan Ellingham, Vehicle Programme Manager, for RMM04/08.
lan Bond, Head of Cash Based Rewards, P&OD for RMM04/10.
Steve Hodgson, Project Director, P&OD for RMM04/11.
Martin Hird, Talent Director, for RMM04/12.
Jon Millidge, P&OD Director, Royal Mail Letters, for RMM04/15.
Michael Moores, Finance Director, International, for RMM04/15
Apologies had been received from Marisa Cassoni.
MINUTES OF PREVIOUS MEETING RMM (03)8th
The Management Board approved the minutes of the meeting of
the Management Board on 25 November 2003 incorporating the
propased changes.
The minutes of a meeting of the Investment Committee held on
21 November were noted
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Royal Mail — Strictly Confidential
BUSINESS PERFORMANCE REVIEW
The Management Board reports for the period under review were
noted and Adam Crozier updated the Board on the short -term
deliverables, in particular:-
Headcount: work was progressing on Headcount reductions. The
priority areas to be addressed were the major change programmes in
Operations. Approval for funding of the Management VR exercise
would be sought from the Holdings Board;
Single Daily Delivery: progress on the implementation of Single Daily
Delivery had slowed considerably and that this was now a significant
area of concern;
CWU Pay deal: London offices were reported to be campaigning
against the deal, although the national ballot was still expected to
produce affirmative results;
Access: a deal had been concluded with Business Post. It was agreed
that a briefing paper on this agreement would be helpful and a paper
was in the process of being prepared:
Repricing: a paper on re-pricing had been approved by the Holdings
Board and the new prices had been published on the Website and with
Postcomm. The issue had received little press coverage.
Transport review: Paul Bateson reported that the cessation of the
TPO's and the introduction of the new transport system had resulted in
major service failures. Teams in Logistics and RM Letters were
working together to resolve this quickly;
Health and Safety: it was reported that major injuries (Injuries resulting
in 3 days or more absence, requiring a RIDDOR report as major)
increased to 53 in the period, (36 in the Previous month) whilst overall
accidents in lost time decreased to 296 during the December period. A
number of suspicious powder incidents continued to occur on a regular
basis with three incidents of note occurring in the last six weeks. A
carefully developed plan for dealing with such incidents was in place
and was reviewed monthly;
Diversity and EOC Quarterly report: a paper had been circulated to the
Management Board on the full RM Group Diversity and Inclusion
report and in detail on the report on sexual harassment in RM (UK).
The Management Board agreed:
(i) That the Board would send a clear direction to all Area
Management Teams (AMTs) regarding taking ownership and
leading the Diversity Training Rollout Plans;
and noted;
ACTION
Vanessa Leeson
RMMO04/03
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Royal Mail — Strictly Confidential
(ii) that following the last report, Terms of Reference had been
drafted for a piece of research exploring questions raised by
the analysis of the data and which were of concern to the
Diversity Team and to the EOC;
(ii) the Diversity & Inclusion team were working with Group
Communications to prepare an appropriate cornmunications
pian. This would ensure that a clear message was sent out
throughout the business, about how we interact and in
particular the ways in which we speak to each other;
(iv) __ the timetable for the implementation of the Diversity
Programme had proved too ambitious and would be
reconsidered;
(v) Tony McCarthy reported that he had recently made a
presentation to the EOC on culture change at Royal Mail and
that the EOC would be attending the March meeting of the
Holdings Board;
(vi) Vanessa Leeson reported that feedback from research had
shown that women at all levels in the organisation, but
especially in operational units, were offended by inappropriate
sexist material that was displayed at many Company sites. A
draft action note had been prepared asking for such material to
be removed and this was circulated to the Management Board
for comment. Vanesa Leeson was asked to report back to the
Board on the outcome of this work;
Learning For All- Adam Crozier had taken part in a promotional event
with the DTI on the Learning For all Project. The DTI had been very
impressed with the programme within Royal Mail and this was now
likely to become a model for other organisations. The scale of interest
in the scheme within Royal Mail had far exceeded expectations, which
was causing some installation backlogs;
income generation at PEW: was trending correctly but had not made
aS much progress as was expected. Forecast revenues were down
£9.6 million, while January sales were trading 8% higher than forecast.
The actual trading pattern for the first year of the business had been
different from expectation.
FINANCE DIRECTOR'S REPORT
Frank Schinella, on behalf of Marisa Cassoni, presented the Period 9
results:
toss from operations was £40.1 million in December, £36 million
adverse to budget and £16.4 million adverse to prior year. The year to
date result for December was a profit of £120.0 million. Delays to the
implementation of strategic programmes continued to deliver savings
in strategic one off spend which was now £71.2 million favourable to
budget Quality of Service failures continued and on cumulative
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Royal Mail - Strictly Confidential
performance full year targets for 10/15 standards were now
mathematically unachievable. The results for period 9 were noted.
P&L ACCOUNTS IN ROYAL MAIL RMM(04)92
John Lappin introduced a presentation updating the Board on work
currently under way to develop a means of teporting Profit & Loss at
an Area and Operational Unit level within the Group. The Management
Board:
noted progress made on the project to date and that the process had
been trialled at 28 Operational sites from three Areas of the business.
However full rollout on 1st April would be delayed but the programme
would be implemented as soon as practicable;
agreed that the concept of Profit and Loss accounting as a means of
demonstrating shareholder performance at an Area and Operational
Unit level was one that should continue to be pursued;
agreed that work should commence on the deployment of Profit and
Loss accounting across all Areas and Operational Units from April
2004 (the solution being subject to evaluation of the trial);
agreed the project Board should continue to assess the training needs
of Managers and staff and put forward cost proposals in the current
planning round.
CORPORATE RISK SCORECARD-PROPOSALS FOR OWNERSHIP
OF RISKS RMM(04)93
Derek Foster presented proposals for ownership of the refreshed
Corporate Risks at Board level and also for Business level owners to
which line responsibility can be devolved on behalf of the Board. The
Board agreed:
the proposals for the ownership of Corporate Risks at PLC Board and
Business Owner level, and the responsibilities for each of these roles
in the management of Corporate Risks subject to the names indicated
for ownership of risks being reviewed in light of current personnel
changes;
that VAT was a significant issue for PFW and should therefore be
included in the Corporate Risk Scorecard.
MAJOR RISKS TO ROYAL MAIL RMM(04)99
Derek Foster reported that as part of the established corporate
governance process that Royal Mail Units had carried out a self-
assessment of the organisations risks and related control environment.
The paper analysed the issues identified and showed how the risks
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Royal Mail — Strictly Confidential
aligned to and impacted on the Royal Mail Corporate Scorecard. The
Management Board noted:-
the Risk and Control Self Assessment 03/04 Half Year report;
the business remained subject to exposure in a number of major risk
areas as a result of control environment vulnerabilities, at the same
time as internal and external pressures on the control environment
continued to increase;
the major business risks would be owned at corporate level, progress
monitored and remedial action taken where necessary in order to
maintain and drive progress;
agreed that a document clarifying delegated authorities would be
approved and issued.
PROSECUTION POLICY RMM (04)94
The Management Board received a paper which updated the Board on
current levels of legal expenditure and seeking endorsement for a
change in priorities and considered which activities might be ceased or
reduced without significant risk to the business in order to facilitate
further headcount reductions. The Management Board:-
noted the balance between further headcount reductions in Legal
Services and increasing external legal costs was being carefully
managed;
endorsed a prioritisation of the resource used in criminal prosecutions
by the Company. The Company's public position of having a strict
policy towards offenders would not be altered by this. Jonathan Evans
would investigate the possibility of increasing Police and CPS
involvement and report back to the Management Board on the
outcome of these investigations;
noted that Legal Services would undertake a cost benefit study of
litigating low value claims;
noted that Legal Services would in future adopt a more proactively
challenging approach to demands from the business for legal advice.
VEHICLE REPLACEMENT POLICY RMM(04)96
Phil O'Gorman and Alan Ellingham were welcomed to the meeting for
this item. The purpose of the paper was to agree a recommendation to
the Holdings Board for Vehicle Services to purchase approximately
20% of the 2004/05 vehicle replacement requirements. The
Management Board noted the paper and approved:-
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Royal Mail — Strictly Confidential
£10 million of additional Capex authority for Vehicle Replacements
equating to approximately 20% of the full Vehicle Replacement
Programme. A short paper would be prepared seeking approval from
the Holdings Board for the additional £10 million of capital expenditure:
the replacement of 1000 vehicles using normal existing contracts
under Option 1 of the Parcelforce Replacements Strategy.
PEOPLE STRATEGY
Tony McCarthy introduced a presentation on People Plan strategy.
The presentation was noted and it was further agreed that a full day
workshop would be arranged to consider the Plan in more detail.
NEW CONTRACT PAPER RMM(04)95
lan Bond attended the meeting for this item and presented a paper
setting out the background and objectives to a proposal for the
introduction of new contracts for Senior Managers. The Management
Board agreed:-
the new senior contract package be rolled out, commencing for each
business unit once its organisation structure has been reviewed and
senior appointments made. The Board noted the estimated scope and
costs. Whilst the headcount review is ongoing the only communication
of the package will be with the individuals affected;
the new contract will in future be a general requirement for all new
senior recruitments, promotions and voluntary job changes. If
exceptional circumstances arose that merited a departure from this
approach, these would be discussed between the Board Member and
the Group P&OD Director at the time. Senior Managers already in
position would have the option of taking the new package or remaining
on their existing pay and conditions;
LTIP would be offered (pro-rata for the first year) from the date of
appointment (or the date of accepting the contract where there has
been no appointment process and jobs are flowthrough from the old
structure), except that any contractual promises to the contrary will be
honoured.
P&OS UPDATE
Steve Hodgson attended for this item and presented an update on
progress to date with the P&OS transformation project. Implementation
Milestones were noted and also the intention to revisit outsourcing
once the current changes had been introduced. The Board
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Royal Mail — Strictly Confidential
congratulated the P&OS team on the tremendous progress, which was
being made in improving the efficiency and effectiveness of the HR
operation.
SUCCESSION PLANNING
Martin Hird introduced a presentation on the Succession Planning
process. The Management Board noted:
the development activities of the Top 500 and that this activity would
become a line management responsibility;
the implementation of a forced distribution of grades;
that a new Employee Change Request form had been introduced for
the Top 500 in order to regain control of changes to salary, bonus and
relocation costs. In future no alterations to the remuneration
arrangements of the people in the Top 500 would be possible without
the endorsement of the Group P&OD director.
COMPANY SECRETARY’S REPORT RMM(04)97
The Management Board noted the Company Secretary's report.
Jonathan Evans would provide a detailed timetable for the introduction
of the Utilities Directive.
REGULATION REPORT RMM(04)98
The Management Board noted the Regulation report.
HEADCOUNT REVIEW
John Millidge and Michael Moores provided a presentation on progress
to date with the Headcount Review. The Management Board noted:-
that progress was very slow on SDD/MCR and that these were now
priorities. Adam Crozier mentioned that as Headcount reduction was a
top priority activity it would be for the Members of the Management
Board to take personal responsibility to deliver the required Headcount
reductions. Every Delivery Office should have a plan for the
introduction of SDD and that those offices with the biggest savings
should be targeted. The Bunker Team and P&OD were progressing
this action;
VR offer letters would be sent in the names of Business Unit Heads
and any confusion in numbers would be resolved in the next week;
the Managerial/Admin review was on target.
ANY OTHER BUSINESS
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