Insiders fear UK Royal Mail management not prepared for long haul

When Adam Crozier landed the chief executive's role at the Royal Mail last year, there was disbelief from the bottom to the top of the organisation. At the cutting edge in sorting centres and post offices, the arrival of the 'football bloke' seemed a little bit incongruous. On the board there were equal misgivings.

'People are wondering what [chairman Allan] Leighton is doing,' one director told The Observer at the time. 'This is going to be a very tough, hands-on job, dealing with serious operational problems and industrial relations difficulties. Crozier is a marketing man. If his job is what it needs to be, I'm not sure he's right.'

Crozier, who says he took the job because it was such a challenge, has had a hard first year. He had to deal with last autumn's strikes, and negotiate the 14.5 per cent pay rise with the Communication Workers Union. This year he has been overseeing the introduction of single deliveries and overhauling work practices at sorting offices.

Crozier can point to the fact that he saw off the strikes – helped by the 'No' vote in last September's ballot – and got the CWU to accept the pay-for-productivity deal. He can point to the return of profitability, and to the roll-out of cost-saving single-delivery measures. But there has also been a plunge in service standards (see above), and it appears the senior management was not working properly together.

Crozier argues that the plunge in service standards came during the serious disruption caused by last autumn's strikes, and that evidence provided in snapshots such as the recent TV documentary on the mail in London do not show the full picture.

Nevertheless, and as a result, earlier this month Crozier was plunged even further into a hands-on role, moving from his group responsibilities to focus on Royal Mail's core letters business. The group's number three, executive deputy chairman Elmar Toime – a postal veteran from New Zealand who effectively provided the industry expertise as a foil to Crozier's 'fresh to the industry' approach – was demoted to run the parcels operations.

The Observer 's director source – who has since left – now says: 'All the questions that were asked then will be coming back. But now he is saying I am going to fundamentally change Royal Mail when we have shoved out the people who really know what they are doing, such as Jerry Cope (former group managing director and Royal Mail careerist).'

A union source says: 'Toime caused a lot of problems for us throughout the negotiations over pay because he refused to com municate with us. It didn't work. But now Adam is under huge pressure to deliver by himself.'

Crozier would contend that he has the management skills to deliver the change he is planning, regardless of the fact that he learnt them at the Foot ball Association and Saatchi and Saatchi, the advertising agency. In addition, Royal Mail points out that his new operations director, Tom Melvin, has 30 years of experience in the Royal Mail letters business.

Crozier argues that the change programme is being implemented on time – at the beginning of the month he said it was two-thirds of the way through already. And he admits there are teething problems.

But with the demotion of Toime, questions about the businesses operations (as opposed to the financial turnaround) continue to be pressing. The concerns are several: first, are too many experts being lost at a time when they are needed most – during a turnaround plan?

Second, is the change of culture at the top, from a management steeped in the operational requirements of the business to one which believes in generic management solutions, likely to deliver long-term benefits for the business by grinding operational changes through the massive organisation? Third, if the answer to that is no, why are Crozier and Leighton there?

There are obvious concerns on the first score. Along with Cope, three other long-standing senior executives quit last year. Insiders say those who have left, such as Adam Novak and Kevin Williams, were well respected. That won't bother Leighton and Crozier.

But last week, Peter Carr of Postwatch said the problems with service standards were partly caused by the absence of the right people. 'Some key people volunteered to go on generous terms, and were allowed to leave. A couple of key senior people – Steve Hannam and Rhona McLeod – who knew most about the single-delivery questions should have been persuaded to stay.'

On the second point, there is equal scepticism. Leighton is well known for his plural directorships and his view that they reinforce each other, although many in the City take a different view. Unions have grudging respect for him, admitting that his interventions are often necessary to break deadlock in tough negotiations – as happened over the pay deal last year. They also have a bitter kind of respect for Crozier, or at least accept they need a working relationship with him.

But given the deterioration in service standards, the unions believe they need long-term leadership. Officials are concerned: 'The problem is we want to know whether Allan is in for the long term, or whether he just wants to turn the finances around and go.'

And this leads on to the third point. 'They say they want to create the finest postal service in the world,' said a union official. 'That is going to take years. Are they on for that, or will they be happier with a quick turnaround in preparation for privatisation?'