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#8 @ Shareholder
Department Executive
for Business HM Government
Innovation & Skills
Post Office Ltd Senior Management
Risk and Assurance Committee
February 2014
RESTRICTED — PEOPLE & MANAGEMENT
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EE summary
Advice from the recent I + Key challenges facing POL
Annual Review
suggeeted thet the POL. = POL has recently secured a £640m funding commitment untl March 2018, with the expectation that his moves the company
Seen otvarcareeit to a sustainable footing, completes the modemisation ofthe network and prepares POL for possible mutualisaton.
consideration to the = The company is reliant on winning and retaining clients, and successfully negotiating with RM in 2016 is essential forthe future
continued suitability of
Paula Venneiis as ceo I *Th# mPortance ofthe CEO
= POL has a tumover of ¢.£1bn, operates the largest retal network in the UK, is constant in the public and political eye, and
There is a general
‘consensus that Paula Is
ro longer the right I * What has been achieved under Paula's leadership
person to lead POL but
Justification is anecdotal
‘must operate competitively and commercially under public ownership, while meeting uneconomic Government objectives.
= The company has successfully separated from RM, established @ Board, made some progress towards mutualsation,
maintained network compliance with Govt objectives, started network modernisation programmes, and grown revenues.
This short paper aims to I « Why is Paula's position under review?
‘examine the options
avalible to-Siee = However, the 2010 plan, which admittedly was not hers faled to deliver the expected revenue growth, and the Network
‘Transformation has required poltical awkward revisions to remain deliverable,
Paula has not shown an understanding of politcal considerations (.. presentation of plan to Ministers) or ofthe detal of the
plan, and she has been unable to work with personales that provide robust challenge to her.
NT will require strong and focused leadership, if POL is to achieve the plan
Ll
or Business
Innovation & Skis 2
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Considerations and options
Paula joined POL from
Whitbread in 2007.
As Network Director she
was responsible for
Implementing the
‘Network Change
Programme.
In October 2010 she was
‘appointed Managing
Director, succeeding
Alan Cook.
‘She became CEO in April
2012 following the
separation from RM.
Ll
or Business
Innovation & Skis
+ Issues to consider
= Timing is now the time to change leadership? How long would the process take? Has she been given long enough in charge?
— What does the process look ike POL would un the appointment process, but within parameters (Le. pay) set by Govt
‘Who needs tobe consulled SoS appoints the CEO, but the POL Chair and Board would need to be consulted
Impact on plan the new strategic plan has onty recently been agreed, how would stakeholders and POL employees react?
Does a change of leadership create more ofa risk than we are trying fo mitigate? Would a new CEO accept the plan?
Legal risks do we have evidence to support our decision if Paula challenges @ decision to remove her?
— Management loyally Paula has eppointed or outlasted most other Directors. Those who dont ft have been moved on. Would
there be a management exodus?
Internal candidates there are no proven intemal candidates witha strong track record of delivering a change programme
Required skis set the role requires someone with strong commercial knowledge, experience of implementing @ change
programme, and a thorough understanding of the way Government operates ~ a difficult combination
+ Options
= Retain maintain the status quo
= Retain and review ina year give Paula more time, but be prepared fo actif concerns are not addressed
- Remove begin taking steps now to replace Paula
- ‘Senior management restructure retain Paula, but introduce @ COO role to drive delivery at an operational eve!
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Retain
As a former POL Network
Director, Paula does
have experience of
delivering a large
network change
programme.
To the extent that NT has
been developed and
Implemented under her
leadership, it can be
‘seen to be her plan.
‘She has demonstrated
leadership at times by
acting to remove
Directors that she has
perceived as not being
‘suitable for the role.
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or Business
Innovation & Skis
“Timing and impact on plan
= Removing Paula soon after agreeing the new strategy risks perceptions aboul Govt support, and could undermine delivery of
the plan as stakeholders stop positively engaging with SPMs waiting to see Ifa new CEO changes stratepic direction.
= Its unity tat
then there willbe likely dp in plan delivery, leaving dual isk.
replacement for Paula could be immeciately and quietly identified. If plans o replace Paula become public
= Paulo's base pay has not risen since her appointmentin 2010, There is @ feeling that her base salary is low in comparison to
her peers. Given he dificult in securing CST approval for CEO remuneration, and given the electoral cycle, there isa isk
that we would not be able to appoint an appropriate replacement quickly
+ Current track record
= Although Paula is not a proven CEO (this is her frst CEQ role), she has performed adequately, meets most of the desired
skills, is relaively inexpensive, and has a knowledge and understanding of the business
= Wedo not curently have access to Paula's appraisals and currenty have imited ‘hard’ evidence to justify @removel on
‘grounds of failure to perform her duties well enough. She can point to successes such as seperation as proof of her suitability.
= Next steps include consulting those close to, but pat of, POL ~ Will Gibson, Susannah Storey (NEO) and the Chair
+ Summary
~The reasons for retaining Paula are largely negatively framed, posited in avoiding the risk of disruption o delivery ofthe plan —
but this reflects the realty ofthe situation.
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Retain and review
This option would give the
ShEx team time to fully
assess Paula's
performance in light of
concerns about her
leadership
Itwoutd enable a scoping
exercise fo be
undertaken and for a
‘succession plan to be
fully developed
This option could minimise
the lead time for @
replacement and
mitigate the risk of a dip
in strategy delivery
Ll
or Business
Innovation & Skis
+ Timing
= Itmay become more dificult to remove a CEO in the run up to an election as Ministers would be conscious of the political
Implications. Therefore this option maybe constrained by the electoral cycle.
= Allematively, there maybe a greater appetite for making @ change afer the election, although this would again risk causing @
<p in delivery ofthe strategy as stakeholders wait to see if new Govt adopls a new strategic direction.
+ Impact on plan
= This gives Paula time to deliver her plan, and Govt ime to prepare for her replacement should she fal to deliver on the plan.
= It should be possible to form an opinion on implementation by the end of 2 2014/5, recognising this could be too early, but
‘also conscious thal time is precious, and a change's likely to be more challenging in the run up to an
ton,
+ Process
~ Any decision to replace Paula would need to be supported by the POL Chair, Board and key Govt Ministers. Retaining and
scrutnising Paula's performance for a defined period allows this important consultation to be undertaken
+ Management loyalty and internal candidates
= Kevin Gillland and Chis Day are unlikely to be suitable intemal candidates, and owe ther postions in part to Paula. Martin
George has not yet had tie to prove his credentials, but does have a commercial background, Given time he could be a
sultable, possibly interim, candidate, Sue Barton has a song track record both within and without POL.
+ Summary
= This route puts a review framework in place that should already exist, but there are ting ciffculties around the election
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Remove
There is a general feeling
{that Paula is not the
‘optimal person to lead
POL to deliver its
commercial strategy.
Paula has not been able to
establish good working
relationships with Jo
‘Swinson.
‘She has been unable to
retain key staff.
Ll
or Business
Innovation & Skis
« Performance as CEO and delivery of strategic plan
POL failed to deliver its 2010 strategic plan, and refused to keep Govt properly appraised of developments in the NT
programme, requiring ficult revisions in 2013. She has shown @ worrying lack of knowledge about the detail ofthe new plan,
Paula's people management has caused concem as she appears unable to work wih personales and approaches that ier
from hers, and has failed to buld relationships with key Directors.
Paula's performance as CEO has been questioned by the POL Chair, and by members of the Board
+ Engagement with Ministers and stakeholders,
= Paulahas not developed strong relationships with stakeholders. The scale of change envisaged under the strategic plan
requires a sible, dynamic and charismatic leader able o reengage and energise the relationship with stakeholders
— This includes engaging with BIS Ministers. Over the last year Paula has repeatedly over-promised and under delivered
« Replacement
= With anew strategic plan in place it coud be timely to appoint a CEO with a proven track recordin delivering change within,
‘organisations. However, it could be dificult to appoint someone to implementa plan they were not involved in designing,
+ Summary
= Paula has failed to perform on number of key areas. But removal without a clear process in place for appointing @
replacement creates greeter risks, not least in finding @ suitable candidate quickly.
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Senior management restructure
Rather than removing
Paula, but recognising
the need for change, a
fourth option sees the
Introduction of a COO
role, with responsibility
for day-to-day delivery of
the strategie plan
‘Such a move may
precipitate Paula's
departure on her own
volition, with the COO
(providing they are a
suitable candidate)
‘stepping up
‘There would be relatively
ttle public notse, and
‘manageable stakeholder
reaction to this option
Ll
or Business
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* Introducing a COO role
= Assuming sufficient support rom the Chair and Board, the Govt could insist on the appointment of a COO to drive delivery of
the strategicplan, This person would have operational responsibly, leaving Paula to focus online management of Directors
= There could be diffcuities in appointing a suitable COO on a salary lower than Paula's. Conversely, raising Paula's salary to
‘eccommadate @ suitable COO could be dificult perceived as ‘rewarding failure’
+ Current management
= Chris Day (Chief Financial Officer) — general feeling that his performance has been adequel, but not @ dynamic personality
= Kevin Gililand (Network Director) has worked in POL for 20+ years. Lacks relevant experience to lead POL ina change
Programme of this nature. Has kept e surprisingly low profi given changes in NT. Likely to be loyal to Paula
= Martin George (Commercial Director) — is unproven in leading an orgenisation, though his commercial experience is important
~ Sue Berton (Strategy Director ~ currently on sabbatical leave) —has very considerable sector experience, and has proven
herself adept at managing dificult sakeholders such as the NFSP and CWU on complex and contentious matters, andis de
facto author of the curent strategic plan
+ Summary
— Thisis an appealing option as it minimises the isk of adverse publicity and impact on delivery ofthe plan, while taking
‘appropriate action to ensure the delivery ofthat plan and therefore Govt objectives is made more likely.
= Challenge isto persuade Paula / POL of the need for this additonal roe.
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Next steps
for Business
Innovation & Skis
1. Discretely consult with those close to POL (Will Gibson, Susannah Storey) /
2. Determine what evidence we have that suggests change is required
3. Discuss with Alice Perkins (and possibly other NEDs)
4. Establish ShEx intended view (in consultation with Mark Russell)
5. Seek views and clearance from Ministers
6. Discretely identify and consider alternative candidates
To note — risks to be assessed after every step before proceeding
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Conclusion
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or Business
Innovation & Skis
Blurb
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