Postcom chairman struggles against a 2nd class service
WHY anyone would abandon the comfort zone of life at the top in corporate Britain to work for the government is an utter mystery.
It is even more so when the new job is running the Postal Commission, or Postcom.
WHY anyone would abandon the comfort zone of life at the top in corporate Britain to work for the government is an utter mystery.
It is the body charged with making sure the notoriously inefficient Royal Mail is doing a good job and that the postal worker feels the hot breath of competition on the collar.
The avuncular Nigel Stapleton, Postcom chairman, believes his background in industry was just the kind of training he needed to make sure that the Royal Mail does better and actually manages to deliver the Christmas post on time.
He began his career at Unilever and ended up holding the top British job at publishing behemoth Reed Elsevier.
Stapleton wants to bring high corporate standards to bear in his new job.
This year, for the first time in the 350-year history of the postal service, the Royal Mail is being required to audit its Christmas service levels.
'The Royal Mail used not to have to publish quality of service figures over Christmas,' Stapleton says. 'The service monitoring was suspended. Now we have a voluntary agreement that they will publish, looking at the period from now to the New Year.' A congenial and garrulous figure, Stapleton, 55, recognises that the Royal Mail has image problems.
The public is angry that its top manager, former Football Association chief executive Adam Crozier is the highest paid executive in the public services earning an incredible Pounds 2.6m last year including bonuses. Crozier's generous rewards come at a time when the public is being asked to stump-up ever higher prices for stamps.
Stapleton is inclined to blame the government, rather than the Royal Mail's management for the pent-up hostility towards the postal service, which in the last decade has tumbled down the international performance league tables. It was once regarded as a world leader. He says the big bonus paid to Crozier was 'a shareholder decision' and as a regulator he personally has to 'avoid micro management'.
Clearly, the regulator is less than overjoyed about what has happened.
But he believes it is for Postcom to set the performances standards at ever more demanding levels.
'We've set a pretty tough framework for them in the next price controls with efficiency targets higher than they have achieved thus far,' he says.
Maybe, but for much of the great British public, the idea of paying 36p for a first class stamp with the price rising to 39p by 2010 is anathema.
Yet Stapleton sees the new price regime as a victory. He reveals that the opening position of the Royal Mail was an astonishing 48p for first class.
They tried to justify this by using the old-style thinking of a monopolist which believes the market can bear any burden.
Stapleton says management told the regulator 'we've got a pension deficit, but we don't want bulk mailers (the commercial customers like big banks) to pay for it because we might lose market share'. So the Post Office's answer is to load the costs onto the captive customer ordinary letterwriters.
Stapleton made it clear to the Mail that this was totally unacceptable, arguing that is 'monopoly behaviour at its most prevalent'.
'The regulator chiselled away and in the course of the negotiations Royal Mail have come down from 48p to 39p and we have gone up from 34p to 36p,' he said.
He rejects any notion that this was a negotiation because it is Postcom who in the end has the whip hand. If the Royal Mail challenges price controls, then the regulator has the right to take it to the Competition Commission.
What rankles with critics of the management of chairman Allan Leighton and chief executive Adam Crozier is that it is users of postal services who are being asked to bail out the Royal Mail's
pension scheme. 'Had there not been a Pounds 4bn pension deficit, our price control would have delivered a total price freeze over the next four years,' Stapleton says.
'The cost of funding the pension deficit in our price control is Pounds 500m a year. That's a massive number when you take into account that this is a business where total turnover is Pounds 6bn.' The regulator recognises that this is not the way that Post-Watch, the consumer group which monitors postal services, wanted it. 'It believes the government should have picked up the bill,' he says.
When the issue went out to consultation Labour made it clear that it did not intend to meet the deficit. So there was little choice but to deal with it through the price increase, with Pounds 200m a year funding current pensions and Pounds 320m being ploughed into deficit reduction.
Stapleton's journey to postal regulator began in the Winchmore Hill suburb of North London. As a boy of eight years old, he would commute an hour and a quarter to the City of London School where his father, a mid-ranking official with Imperial Tobacco, had also been educated. After that early commuting experience he has sent his own son to Winchester.
It was then on to Cambridge, where he gained a first in economics, before moving precisely back to where he came from with job at Unilever House, bang next door to the City of London School. The idea of Unilever was attractive because of the possibility of international travel, something he achieved in spades, spending 18 years in 11 countries before being headhunted to be finance director of Reed on his 40th birthday.
Together with Sir Peter Davis, he helped to transform the enterprise, becoming co-chairman of the group after the merger with Dutch group Elsevier where he had a big hand in creating an online offering. When the Anglo-Dutch structure was abolished, Stapleton decided to go plural, ending up, among other things, with a seat on the board of the Stock Exchange as well as the Postcom job.
In his regulator role, the pensions black hole has been something of a distraction from his main objective which is to see more postal competition introduced as soon as possible and heavy investment in modern equipment.
A critical goal is to open the Royal Mail to full competition as soon as possible and he has moved the date forward to January 2006. 'We have exposed them to full competition 15 months early,' he says.
Despite Royal Mail having fought a rearguard action against giving rivals access to the last mile, 'that has now started to happen' Stapleton says.
So far it is only big mail users like the Royal Bank of Scotland which are taking advantage, but he expects that to change. For big commercial users the driver for change is as much service as costs with mail picked up at 10.30pm instead of 3.30pm.
Competition, together with investment, will help to force up service standards. In 2003-04, he notes the Royal Mail failed all 15 service tests.
Last year they passed nine of the 15. Stapleton believes that the real task is closing the 'gap between the best and the worst postal areas which is enormous'.
He implies that the Mail manipulates collection times to improve quality of services data. 'There is evidence that in order to get 92.5pc of the first class post delivered each day they are making collections earlier in the day.
In deepest Wales the last collection is nine o'clock in the morning!
'You meet your universal service obligation if you get your first delivery 11.59pm at night, because there are no time requirements other than one collection and delivery each day. The targets have distorted service.' He hopes that a Pounds 1.2bn investment in automation will genuinely help to push standards towards those of the Dutch service, TPG, the best in Europe.
In Holland, by the time the postal work arrives at the delivery office, 90pc of the letters have been sorted, against only 50pc at the Royal Mail.
Stapleton believes that the present management of the Mail is better than its predecessors and has a genuine chance of turning it into an efficient competitor in the postal market. But the last mile is a long road to travel.
FACT FILE
NIGEL STAPLETON, CHAIRMAN POSTAL COMMISSION, CHAIRMAN UNIQ, DIRECTOR LONDON STOCK EXCHANGE
AGE: 59 FAMILY: Dutch wife Johanna, son and daughter
EDUCATION: City of London School, Cambridge University
HOBBIES: Photography and classical music
DRIVES: BMW 7 Series
