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Date: September 2016
From: Michael Dollin - UKGI
Minister/SpAd To Note/Comment To Approve/Decide
Margot James Xx
Name of Special Advisor x
Perm Sec x
OFFICIAL
MEETING WITH PAULA VENNELLS, CHIEF EXCUTIVE OF POST
OFFICE LTD (POL)
Meeting purpose: An introductory meeting with Paula Vennells, to understand the
business’s recent achievements, the current opportunities and challenges facing POL
especially on industrial relations.
Meeting attendees:
Paula Vennells, Chief Executive, POL (Biography attached at Annex A).
Tom Wechsler, Chief of Staff, POL
Laura Thompson from UKGI will also attend.
Timing: Routine; the meeting is scheduled for 1 September at 10 am.
Areas for discussion:
1. Paula’s letter of 17 August sets out the changes the business is making, how
her team is managing these and the positive effects they are having on the
business. This is attached at Annex B and will form the basis of her meeting
with you.
State of the business - achievements
2. Paula will likely set out the key successes of the business during her tenure:
¢ The stability of the network, above the target of 11,500 branches and
meeting all access criteria in the latest annual report;
e the successful branch modernisation programme (heading towards 7,000
branches modernised by March); and
¢ improvements in financial performance (leading to greatly reduced losses,
which has enabled a significant reduction in taxpayer subsidy); and
¢ The imminent announcement of the new banking framework which will
allow 95% of bank customers to use post office branches for basic banking
services.
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State of the business — current challenges
3. She may also talk you through the current challenges:
¢ Changes to the Crown estate, especially franchising. This usually involves
closing the old branch and relocating it to another store nearby and with the
existing staff having the option to leave on voluntary redundancy which
almost all do. While franchising is a well-established process and the new
branches perform well, unions oppose them (due to staff leaving the
business) and there can be local stakeholder opposition to the prospect of
change (though there is almost no criticism once a new branch has gone live);
e Exiting the external customers for the cash supply chain (which gets cash
and stock to post offices and about 1000 external customers like
Mothercare). By focussing the supply chain just on the needs of the branches
this will allow POL to reduce the operation by 9 depots and c600 jobs (out
of a current 25 facilities and 1300 staff);
¢ The proposal to close the defined benefit pension scheme, which is
unaffordable long term. POL is taking action now before it goes into deficit;
¢ How the business supports the SME community with its financial and mails
offers. You could explore with Paula what further opportunities there are for
POL to support SMEs and the Government’s wider industrial strategy.
Industrial relations
4. Both the Communication Workers Union (CWU) and Unite object to proposed
job losses (in the Crowns and supply chain especially) and the closure of the
defined benefit pension and have called ballots for industrial action. The CWU
ballot has closed and while, of the staff who voted, 83% were in favour of strike
action it was a low turn out by recent CWU standards and at 50.3% it only just
passed the 50% turnout threshold for strike action under the Trades Union Act.
Unite’s ballot closes on 5‘ September. Paula will explain some of the
background to these strikes, POL’s contingency planning and what to expect
from the key CWU officials you will meet on 6"" September.
5. Feedback from POL’s direct engagement with staff is that there is no great
appetite for strike action among CWU members (many of whom are looking to
leave the business on its current generous redundancy terms and have already
filled out preference forms to that effect). The Post Office Unite section is less
prone to striking and POL has an agreement with the union to work
constructively on change involving job losses, this is in return for a 1.9% pay
deal and payment in lieu of notice as part of redundancies. Nevertheless there
is still scope for Unite strike action as it opposes the proposed closure of the
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defined benefit pension and their support may also be undermined by changes
to redundancy through the exit pay cap coming in with the Enterprise Act.
Strategy
6. POL is preparing its strategy for the period up to March 2021 and Paula may
take the opportunity to set out some of the business’s emerging thinking on
this. This strategy will form the basis for a new funding ask for the period after
March 2018 when POL’s existing funding agreement with Government comes
to an end.
7. The points Paula might raise here include:
¢ how POL will look to grow revenue in the future;
¢ POL’s approach to renegotiating key contracts with Royal Mail and
Bank of Ireland; and
¢ POL’s plans to further reduce costs. This latter area is likely to include
some challenging issues, such as further changes to Crowns which can
be unpopular with unions (due to staff leaving the business) and, on a
short-term basis, also with local stakeholders (i.e. there is usually
opposition to change but acceptance thereafter).
8. Until POL has a full draft strategy to share with Government (expected in
September/October) we recommend you offer support to POL for it to continue
its work in line with recent progress the business has made to improve financial
sustainability and reduce reliance on taxpayer subsidy.
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Submission Checklist (please retain)
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return your submission.
SCS Lead: Richard Callard
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(For Private office use):
Title: Meeting with Paula Vennells, CEO of Post Office Ltd. Author: Michael Dollin - UKGI
ANNEX A: BIOGRAPHIES OF MEETING ATTENDEES
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Paula Vennells — CEO, Post Office Limited
Paula has worked for Post Office Limited since 2007 in a number
of senior roles, including Managing Director, becoming Chief
Executive on I April 2012. Prior to Post Office, Paula spent five
years with Whitbread plc, latterly as Group Commercial Director.
She began her career with Unilever and L’Oreal and has held
directorships in sales and marketing with a number of major
retailers, including Dixons Stores Group and Argos.
Paula is a Non-Executive Director of Morrisons plc, a Trustee for
the Hymns Ancient and Modern Group and a member of the Future
High Street Forum.
(from POL’s website)
GRO
Alisdair Cameron - Chief Financial Officer
Alisdair joined Post Office as Chief Financial Officer in January
2015. Prior to this appointment, from 2002 to 2014 he worked in a
variety of roles for Centrica plc, a FTSE 100 company, including
Director of Audit and Risk, Group Financial Controller, Finance
Director of British Gas and Managing Director of British Gas
Enterprise. Previously he was a partner with Arthur Anderson and
served as a trustee of the e-Learning Foundation.
Alisdair is a Non-Executive Director of Oxford University
Hospitals NHS Foundation Trust.
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