Three Postal CEOs Speak Out About Driving Change

October 2012
Leading Transformation
in the Postal Sector
Three Postal CEOs Speak Out About Driving Change
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LEADING TRANSFORMATION
IN THE POSTAL SECTOR
THREE POSTAL CEOS SPEAK OUT ABOUT DRIVING CHANGE
BAS VAN HEEL
BJORN MATRE
GRANT FREELAND
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CONTENTS

INTRODUCTION
Funding the Journey
Winning in the Medium Term
Building the Right Team, Organization, and Culture

INTERVIEWS
Jürg Bucher, Former CEO, Swiss Post
Dag Mejdell, CEO, Norway Post
Moya Greene, CEO, Royal Mail
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FOR FURTHER READING
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NOTE TO THE READER
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INTRODUCTION
I
    area of the global economy
that needs an overhaul, it is the postal
sector. The historical relationship between
GDP and postal revenue has been severed.
Letter volume is in decline in most markets,
and many postal organizations are not well
set up to capture new potential sources of
growth, such as e-commerce.
The sector needs a fundamental transformation. All parts of the postal business need to
be reimagined. But transformation will not be
easy. The postal service is the largest employer in many nations. For government-owned
and private-sector postal operators alike,
there is intense political pressure to change as
little as possible. It is hard to imagine a more
volatile, high-stakes business environment in
which to operate.
The success of postal transformations turns
on the ability of leaders to set the agenda,
tone, and pace of what will certainly be a
massive undertaking. In that respect, postal
leaders share many of the challenges that
confront leaders in other sectors. In talking
with the CEOs of postal operators and of other companies, three core elements of transformation have come to the fore:
•
Funding the Journey. Even with ambitious
goals and tight time frames, it takes a
while to change a business model. The
leaders we interviewed typically had to
achieve quick wins and build credibility
in order to address near-term pressures
or invest in longer-term ambitions—or
both. Even leaders who were unencumbered by an immediate crisis needed to
find and expend the political capital
necessary to make the changes that are
essential to the long-term success of an
organization.
•
Winning in the Medium Term. Nearly all
leaders fundamentally changed their
business model in order to move their
companies to a substantially better place.
In most instances, these leaders set and
achieved enormously ambitious goals in
as little as one to three years.
•
Building the Right Team, Organization,
and Culture. To achieve a successful
transformation, this linked set of topics
has to be the center of gravity. A grand
vision and agenda will fall flat if an
organization’s people lack a shared
mindset and commitment. It takes the
right culture and talent to drive and
sustain change.
In interviews with BCG, three postal leaders
share fresh insights into their organizations’
successful transformations: Jürg Bucher, newly retired from Swiss Post; Dag Mejdell of
Norway Post; and Moya Greene of the U.K.’s
Royal Mail.
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The starting lines of the three executives
were very different. Bucher had been
running Swiss Post’s successful financial
arm when he became chief executive; he
faced only modest declines in mail volumes
during his tenure. Mejdell joined Norway
Post in 2006, following its most profitable
year, but was quickly confronted by the
global financial crisis and a rapid decline
in mail volumes. And Greene, the former
head of Canada Post, stepped into a moneylosing organization that was in need of immediate triage. But their lessons should be
broadly relevant to postal operators everywhere.
Funding the Journey
There are several key strategies that leaders
should use to fund their transformation successfully. These include cutting costs in corporate and indirect functions before hitting operations, addressing the basic issues, starting
the transformation process as early as possible, and tackling the hardest problems first.
Reduce costs, starting at the center. In a
business that is continually shrinking, complexity and indirect costs must shrink at least
as fast as revenues do. In order to build
credibility with the frontlines, it is important
to reduce costs in corporate and other indirect functions first. That approach will give
business leaders the credibility they need in
order to begin taking out costs from overall
operations. “We wanted to identify some
improvements that would generate quick
returns and would be viewed as affecting me
more than the operational guys. There is
oen a view that the plant or distribution
center takes a bigger hit than the head
office,” said Dag Mejdell, CEO of Norway
Post. And it is crucial that new growth areas,
even if they are not yet profitable, should be
protected if they are hitting their targets.
Fix the basics. During a transformation, postal
operators need to hit their service levels, both
for their universal-service obligations (USOs)
and for new businesses. “You have to satisfy
all the stakeholders with high-service quality
and profits,” former Swiss Post chief Jürg
Bucher told us. “Then you have more freedom
and more flexibility to act.”
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Start early and never stop. A postal transformation is not a one-off project. The decline in
traditional mail revenues is not showing signs
of slowing. As Norway Post’s Mejdell put it:
“We think that by 2020, [our mail] volume
will be off by 50 percent from today, and that
will require additional transformation. Every
three to five years, we will need to make big
operational changes.”
Start the hard things first. While no aspect of
transformation is easy, some parts are harder
than others and have long lead times—and
those should be tackled first. Labor reform,
redefined service levels, pricing freedom, and
other tough issues need to be targeted in the
early stages of transformation. Although a
series of quick early wins can build momentum, there are big drawbacks to leaving the
most difficult transformation efforts until
later. The best approach is to sequence
implementation so that the groundwork for
the hard stuff can happen concurrently with
the quick wins.
Winning in the Medium Term
It is possible to set and reach ambitious goals
in only a few years, according to the postal
leaders we interviewed. Such success can
happen if leaders radically alter the business
model and make sure it includes a target of
building competitive advantage, managing
the constraints set by stakeholders, and making mail profitable.
Develop a vision to build competitive advantage. Current USOs are unrealistic. Instead of
gauging success based on these standards or
maintaining current revenue or employment
levels, postal operators must start to emphasize the building of new sustainable businesses in attractive market segments while
promising more realistic levels of universal
service. To do so, postal chiefs have to create
and communicate a vision of the future for
their organizations in those markets. “A
vision is a dream with a deadline,” said Swiss
Post’s Bucher.
Manage the constraints; don’t manage within
the constraints. It’s no longer enough to lead
the organization by working within the
constraints set by the various stakeholders.
Instead, postal CEOs must be the ones to
manage the constraints. Moya Greene, head
of the U.K.’s Royal Mail, realized that right
away. “The company had not been successful
for a very long time. It had been cash-negative for four years in a row, and it could not
be successful if we could not completely get
out of the stranglehold regulatory approach
that had been taken,” she said.
Progress, in this case, means managing stakeholders. Beyond communicating your strategy
to them, you also have to get them to buy into
your vision of something better through a
process of stakeholder discovery, strategy, negotiation, and marketing. All the discussions
should be framed around market needs to
persuade external stakeholders (such as legislators, regulators, unions, and shareholders)
to focus on the delivery of services that the
market wants.
Ensure that letters fund new growth, not the
other way around. Finally, new-growth areas
should not support legacy cost structures or
compensate for losses in traditional mail
businesses. Mail has to be profitable on its
own. “If you do not have profits in the core
business, you will not have enough money to
invest in the new business,” said Bucher. This
comes back to stakeholder management: if
new business opportunities are pitched to
stakeholders as a way to offset losses in the
mail business, then the whole transformation
will be at risk.
Leaders need to be careful to keep their attention focused equally on the traditional
and the growth businesses, because, over
time, the success of the enterprise depends
on each. “It is very dangerous to focus only
on the new businesses; it is also very dangerous to focus only on the core business,” Bucher said. “You have to maintain the core business and develop the new businesses. The big
challenge is to do both.”
Building the Right Team,
Organization, and Culture
Members of the organization need to stand
behind the goals of the transformation for it
to succeed and last. To make this happen,
postal leaders must actively work to change
the existing culture, upgrade talent across layers and functions, encourage attitudes that
embrace the new, motivate the organization,
and remember to be themselves.
Actively change the culture. Many postal
operators need to demonstrate greater
entrepreneurial initiative and risk taking as
well as more agile decision making. Embedding a commercial mindset is not something
that is going to happen overnight. It will
require a mix of interventions, ranging from
delayering and making the right hires to
setting up new key performance indicators.
“Employees at government-owned companies
oen think that not making mistakes and
making your budget are most important. But
you do not win in the marketplace with that
type of thinking,” said Norway Post’s Mejdell.
Upgrade talent in all layers—and all functions. A crucial step for most postal operators
in accelerating change and enabling the
organization to move into new areas will be
to bring in new talent—and not just at senior
levels. “We have some of the greatest people
in the logistics business anywhere. But if you
are going to capitalize on growth, and growth
is going to occur in new areas, you have to import new skills to help you leverage what you
have,” said Royal Mail’s Greene. The trick is
to manage a blend of talented individuals
from the old world and the new. Added
Bucher: “One team will be saying that the
other team does not understand our culture,
and the other team will be saying that the
first team lives in the last century. It is not
easy. You have to manage it.”
Bias the organization toward new opportunities. Indeed, the organization of most posts
still tilts toward the past rather than the
future. Organizational structure, service
models, and career paths all tend to have
been built during an early era dominated by
letter volume. It will be hard to break into
new businesses with that orientation. Leaders
need to reshape their organizations and
people systems around new opportunities,
even if it means the traditional business must
take a slight hit in efficiency.
When creating a new organizational and operating model, leaders need to carefully pick
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those initiatives that have the greatest potential impact and chance of success. “If you
have a vision and a strategy, you cannot do
everything,” said Bucher. “The most important word is ‘no.’ It is easy to say, ‘Yes, do it,’
but when ideas do not have a link to the
strategy, you have to say no.”
Make the organization work. A new organizational structure, however, does not execute a
strategy. The strategy needs to be broken
down and translated into objectives, cascaded
through the organization layer by layer, and
followed up with an appropriate measurement and control process.
Still, the results will only follow if everyone is
highly motivated. An organization’s managers
and other employees are unlikely to be as excited about the possibility of change as the
CEO is. Therefore, top management teams
must work overtime to identify what motivates which groups of employees under what
circumstances.
Middle managers often have the best sense
of how the frontline is faring, and they
should be actively recruited into the trans-
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formation. “You have to work through the
line in order to implement a culture change.
People relate best to their closest manager,”
said Mejdell.
If layoffs and other difficult decisions need to
be made, monitoring employee engagement
becomes doubly important. Most employees
can deal with bad news, such as layoffs, if
they feel as if their leaders are acting fairly
and out of business necessity—and if they are
seen to be communicating honestly. “We
wanted to try to calibrate the plan so that we
were successful in taking cost out but were
not so mindless on how hard this was on our
people that they just dig in their heels and
stop,” Greene said.
Be yourself. During a major transformation,
leaders need to be both engaged and authentic. As Greene says, “If you are running out of
cash, you had better be engaged.” Equally
important, leaders need to be themselves. A
leader’s tone and delivery have a big impact
on how employees interpret and internalize
events. “You have to be very reliable and
authentic as CEO. You need to be yourself,”
says Bucher.
INTERVIEWS: JÜRG BUCHER
LINKING THE OLD
AND THE NEW
JÜRG BUCHER
FORMER CEO, SWISS POST
S
 P   on the leading edge
of postal organizations that are finding a
way in a world where bits and bytes are
replacing letters and envelopes. The mail
operator has been able to make up for
declining mail volumes both by automating
its traditional operations and by building new
digital businesses.
Chief executive Jürg Bucher once ran PostFinance, Swiss Post’s first and most successful diversification (dating to 1906), and he
is careful not to forsake the old for the
new. The traditional mail business of Swiss
Post may need to be reimagined, but it is
not going to disappear, and it remains profitable. Without the steady flow of profits that
plain old mail delivery provides, Swiss Post
would be unable to fulfill its USOs and finance its expansion into logistics, digitaldocument management, and other electronic services.
A common sales force and a common belief
that customers need a range of services—not
just digital offerings—link the traditional and
new businesses. Bucher has been sure to communicate to the people working in the traditional business that what they do is vital to
the overall success of the organization. Certainly, if mail service levels start to slip, Bucher is likely to hear from politicians—another
reason to ensure that the mail gets delivered
on time.
Bucher retired in September 2012. He recently spoke with Bas van Heel, who heads BCG’s
global postal practice.
What are the challenges in transforming
Swiss Post, both now and over the next
five to ten years?
The main issue is the changing needs of customers, especially in the communications
market. We also have issues in the parcel sector and payment services. In all these sectors,
we have to adapt our strategy. The needs are
different.
JÜRG BUCHER
Born in Switzerland
Year born: 1947
Education
Licentiate in economics, University of
Berne
Career Highlights
2009–2012, chief executive, Swiss Post
2003–2009, chief executive, PostFinance
Outside Activities
Member, InnoBE AG board
Member, Bern Arena Stadion AG board
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In the letter market, we will have a decrease
in volume. But that is only one problem. The
main problem is: what is the position of the
letter in the communications market? We
know we need cost reductions and investments in new technologies. In the parcel sector, we have to find the position of the parcel
in the value chain. Postal organizations will
not only deliver parcels. Business and residential customers will need different services.
In the payment sector, there is a technological
shift from making cash payments in the
branches to e-banking and mobile banking.
How did you align your senior leadership
team with your vision?
When you have different and new customer
needs, it is very important to guarantee highquality service and to transform the organization. You have to find a balance. In the past,
postal organizations have focused too much
on cost reduction and investments in new
technology and forgotten about service quality and, therefore, the customer.
Not because of the strategy discussions.
In a changing world, you have to be careful
to have enough stability in the team. That
does not mean you have the same team
for five years. But you must be very careful about replacing people. You want to
have a core team that helps to establish
a common strategy and to execute this
strategy.
How important is a vision for a transformation?
I think you need a common and simple vision. It must not be too complicated. All
members of the company have to understand
it, not just the management.
“You want to have a core
team that helps to establish
a common strategy.”
Does the vision drive strategy, or is the vision a packaging of what you are already
doing?
A vision is a dream with a deadline.
How did you find or create the vision?
It is an issue for the top management and supervisory and management boards; they have
to discuss this vision. You cannot create the
vision from the bottom up. Afterward, you
have to communicate this vision very simply,
formulate a strategy, and follow through with
operational planning.
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You need to discuss the vision with them. It
is a process. It is not the vision of the CEO.
It is the vision of the management board
and the supervisory board. You need discussions. It is hard work. You will not be able to
do it in one day. It took us a year to clarify
our vision.
During this hard work, did you lose any of
your senior people?
What is the role of the CEO in a transformation? When do you need to decide to
engage, and when do you decide to keep
your distance?
Creating the vision is a very important role
for the CEO with the management and
supervisory boards. The CEO must have a
clear view of the future. He has to communicate this vision with the management, with
the people in the company. He also has to
make sure that the vision is formulated
into a concrete strategy and that there is
not a gap between the vision and the
strategy.
When do you decide to intervene?
It depends on the business and the people.
Some businesses may be working very well
and following the vision and strategy. Others
may not understand the vision and formulate
a new strategy every three months. Then you
have to have more influence.
If you have a vision and a strategy, you cannot do everything. The most important word
is no. It is easy to say, “Yes, do it.” That is
easy. When ideas do not have a link to the
strategy, you have to say no.
How do you decide when to focus on
growth versus the traditional business, on
the new versus the old?
It is very dangerous to focus only on the new
businesses; it is also very dangerous to focus
only on the core business. You have to maintain the core business and develop the new
businesses. The big challenge is to do both.
We built a new organization at the management-board level, Swiss Post Solutions, to focus on new products. We have also built up a
new e-post product house responsible for
new business. But the same sales force sells
both traditional products and new e-products
and e-solutions to customers. So we link the
new businesses to the core business through
the sales force.
How do you manage to keep your core
business sufficiently profitable so that it
can fund growth?
Our letter business is very profitable. We
need to maintain this profitability through
cost reductions, technology, and sometimes
price increases.
You are in a better position than some of
your peers that are struggling. Hypothetically, if something happens in the next
year or two in your traditional business,
will you need to make radical change?
How would you then address that balance?
It is very important to act early and to invest
in new technologies. We made big investments in the parcel, letter, and payments sectors at the end of the 1990s. In the last 10 to
12 years, these investments have paid off. You
cannot change the company in a few years.
You need a long time. Some postal organizations did not invest early enough.
the investments. That is the problem in the
U.S. today. They are not profitable and did
not make investments early enough. You have
to satisfy all the stakeholders with high service quality and profits. Then you have more
freedom and more flexibility to act.
“We link the new businesses
to the core business through
the sales force.”
What about the labor perspective, which
in other countries is an issue?
It is important to motivate your people and to
tell them how they can benefit from changes.
Sometimes the opportunities will be outside
the organization. That means you have to follow social policies and act early enough to
give people enough time to adapt. If you act
too quickly and tell people they have to leave
the company next week, then you will be confronted with very bad news. But if you tell
them you may need to reduce the size of the
workforce over the next two years and help
them find a new job, and support them with
money and other possibilities, they will understand. It is not good news. But they understand because they have enough time. They
can adapt.
How do you keep people motivated if they
are working in the old, traditional businesses, and their colleagues are working in
one of the new businesses?
How do you manage your stakeholders—
regulators, owners, the general public,
etc.—who may not see the need to make
early investments?
Most of our people are working in the core
business. That is one point. Senior managers
also have to focus on both businesses and
communicate to people that both the core
and new businesses are important. We recently invested 10 million Swiss francs on improving the core business. It tells people that
top management believes in the core business.
It is very simple. If the service quality is high
enough and the customers are satisfied, few
people will oppose the changes. If the company is profitable, then it is also easier to make
If you do not have profits in the core business, you will not have enough money to invest in the new business. It is very simple.
They depend on each other. You have to give
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very clear signs that the core business is very
important for the company.
How do you define the culture you want to
have? How do you change the culture?
Culture change is a long process. I think that
the main challenge is to change to a more
customer-focused culture in postal organizations. Sometimes at postal organizations, internal processes are more important than
customer needs. We started this process in
the 1990s. We have increasingly focused on
this service orientation in the last two to
three years. And it is not yet finished.
New people can help to change a culture. But
you cannot change the whole staff. It is not
possible. But you can do it in the following
way. You can mix old people who are familiar
with the company with new people. You can
form mixed teams. You can also give new impulses to the older ones.
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No team should have only new people. That
is absolutely dangerous. You will have a fight.
One team will be saying that the other team
does not understand our culture, and the other team will be saying that the first team lives
in the last century. You have to bring together
the new people and old people. It is not easy.
You have to manage it.
Is there any advice you would like to give
to other leaders of other postal organizations?
You have to create confidence internally
and externally by providing high-quality
services. That’s the one point. The second
point is you have to motivate the people for
the challenges by telling them there is not
only a risk but also a big opportunity. And
the third point is you have to be very reliable and authentic as CEO. You need to be
yourself.
INTERVIEWS: DAG MEJDELL
CHANGING THE
CONVERSATION
DAG MEJDELL
CEO, NORWAY POST
W
 D M  Norway Post
as chief executive in 2006, the need for
transformation was less apparent than today.
Buoyed by strong growth in its logistics
business, the organization posted record
profits the prior year and its second-highest
profits in 2006, despite a drop in the volume
of first-class mail.
In order to increase efficiency and profits further, Mejdell created the Spinnaker program,
named for the large billowy sails that propel
boats downwind. But by 2008, Norway Post
was facing stiff headwinds. Notably, the global financial crisis had helped accelerate the
decline in the amount of addressed mail.
One of Mejdell’s first challenges was to build
the case for change among employees who
did not necessarily see the erosion in business. The organization was siloed, and longtime employees had grown accustomed to the
parade of similar initiatives that preceded
Mejdell’s arrival. As part of the transformation, Norway Post eliminated segments of its
divisional structure that kept employees from
seeing a fuller view of the business, and Mejdell encouraged greater risk taking.
To build credibility among the rank and file,
Mejdell made sure that headcount at headquarters would be trimmed along with field
staff. He also emphasized the need for a safe,
open, and healthy workplace, demonstrating
that the transformation was about more than
just money.
Today, Norway Post is on a much more even
keel even though the winds of change are
whipping harder than before. Mejdell recent-
DAG MEJDELL
Born in Norway
Year born: 1957
Education
1980, MBA, Norwegian
School of Economics
and Business Administration
Career Highlights
2006–present, president and chief executive,
Norway Post
2000–2005, president and chief executive,
Dyno Nobel ASA
1997–2000, president and chief executive,
Dyno ASA
1981-1997, finance director and other positions, Dyno ASA
Outside Activities
Chairman, International Post Corporation
Vice chairman, Evry ASA
Vice chairman, SAS AB
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ly spoke with Bas van Heel, who heads The
Boston Consulting Group’s global postal
practice.
What were the challenges you encountered in transforming Norway Post?
I joined Norway Post in 2006. At that time,
people still talked about growth in certain areas, such as direct mail. The business was stable, and the name of the game was entering
in new markets and taking advantage of competition.
The financial crisis and the speed of conversion to digital communication changed the
conversation. We started to realize the changes were going to be very dramatic. We had
been talking about digitalization for more
than a decade, but then it actually started to
happen.
It was a challenge to convince the managers
that we need to change. A lot of money was
invested in services that did not have a return. There were no good processes to ensure
that we received a return on investments in
the mail segment. It was very much a question of changing that attitude and asking ourselves what do we need to do in order to cope
with a much steeper decline. At that time, we
talked about a 3 or 4 percent decline a year,
and now we are talking about more like 6 or
7 percent.
When I arrived, we had divisions that did
sorting, sales, and that ran the post offices.
Nobody really saw the complete picture.
When I went into the field to meet the letter
carriers, or salespeople, or the post office
people, they talked as if they worked in different companies. As part of our Spinnaker
transformation program, we eventually
merged the divisional structure, and that has
helped drive change.
What were your first steps in the transformation?
First, we needed to get all stakeholders to
agree on the challenge. It helped immensely
to establish a baseline about what would
happen if we watched the world go by and
did nothing.
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In our case, as with most cases, there are lots
of doubts about profit-improvement programs. Is this real or just playing around with
the numbers? We wanted to identify some
improvements that would generate quick returns and would be viewed as affecting me
more than the operational guys. There is often a view that the plant or distribution center takes a bigger hit than the head office.
We reduced our staff and support headcount
by nearly 30 percent, which meant that 350
people left. That helped to show improvement and clearly affected this office. We had
to vacate one floor in headquarters. It had a
large symbolic effect.
“We had been talking about
digitalization for a decade.
Then it started to happen.”
How important is a vision, and how did
you create a vision?
A vision gives people direction, but I did not
fundamentally change Norway Post’s vision. I
sharpened it. It was more important to
change the overall targets—we are more focused on growth in the logistics area—and
corporate values.
We want to be an attractive and healthy
workplace. In a labor-intensive business, that
is very important. You do not succeed if you
only focus on profits. You also have to focus
on quality, customers, and employees.
We also want people to have courage. Employees at government-owned companies often think that not making mistakes and making your budget are most important. But you
do not win in the marketplace with that type
of thinking. We need to have the courage to
make mistakes. You get more creativity and
change if you allow your employees to work
that way.
Openness is also important. This was a very
closed organization in a sense that everybody was focused on his or her operational
unit or area of responsibility. In order to cooperate with one another and think about
the best of the corporation, you need to
share information.
You are not going to embed these values in
everyone’s daily work overnight. You cannot
just tell people that, starting on January 1,
you are open. You have to build and repeat.
You have replaced several people on your
management team with executives from
outside. You also have a reputation for empowering your people. How do you think
about management and your management
style?
I did not come in and say everything is bad so
I will change the entire management team.
But some people did not believe in transformation, and other people had a mindset that
they only cared about their own area of responsibility. In order to get this program running, I had to make some changes with people. I also had to be very consistent in what I
said and in defining actions and activities
that I would not compromise on.
When do you decide to engage, and when
do you let your executives do their own
thing?
You have to work through the line in order to
implement a culture change. People relate
best to their closest manager. But the top executive also has to lead by example and sending signals. You have to demonstrate 100 percent consistency between what you do as the
top guy and what the lowest line manager
does in his daily work.
Now we are looking at the logistics sector. In
2007 and 2008, logistics was viewed as the future of the company and more profitable
than mail. Now that has changed. The logistics guys are now looking to the mail business
and wondering what they can learn. So we
have now introduced the Spinnaker program
into the logistics sector.
Strong business performance will likely
help improve the spirits of managers and
executives, but what about your operations people? They may be less concerned
about the bottom line and more concerned about their jobs.
Of course they are concerned about their
jobs. But the day when the last letter is sent is
a long time away. It is not something you care
about every day. I think our emphasis on continuous improvement—doing something better everyday—has also helped.
In Norway and the other Scandinavian countries, we have a long tradition of working
closely with employees. You can view it as a
burden or as an alliance to achieve results.
We have employee representatives who are
realistic. They accept the future because we
can show them the facts. We can always debate whether the decline will be 5, 6, or 7 percent a year but not the overall direction.
There is trust on both sides.
“You are not going to embed
these values in everyone’s
daily work overnight.”
Is the culture you have now the one you
will need in five years?
How do you keep everyone motivated?
We focused on transformation originally in
the mail sector. That part of the organization
is different from what it was six years ago.
It is much more open and transparent. People in the mail sector now understand that
mail volumes will drop, but they are also
encouraged by the challenge of managing
that decline: make money, deliver quality to
your customers, and handle your employees
fairly.
I do not believe motivation is a problem.
They have been through restructurings not
only for the last ten years but basically their
entire work careers. People think that this is
just the way it is. I met one guy who had been
made redundant five times and always found
a new job within Norway Post. So I think people have the attitude that it will probably
work out this time as well. About one-third of
people leave with a package, one-third find
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new positions, and about one-third retire, so
there is a large internal employment market.
We do annual employee-satisfaction surveys.
Last year, we had a satisfaction rate of 77 percent. I think that goes back to the balanced
scorecard. We do not just care about profits
and cost reductions. We care about our employees. We work very diligently on safety
measures, quality, CO2 emissions, and the integration of nonethnic Norwegians into the
postal service.
What are your challenges over the next
few years?
We think that by 2020 volume will be off by
50 percent from today, and that will require
additional transformation. Every three to five
years, we will need to make big operational
changes.
We also need government support to ease the
service-level requirements, and not just a little bit. It has to be pretty radical and fundamental. It has been very hard to convince politicians that we have to make big changes.
Up until now, we have basically been able to
do everything without needing to seek the
government’s approval. And that made it
much easier. But as we reach new lows in volume, we will need government approvals. It is
not only about six- or five-day delivery but
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also radically changing the product offering
in ways that will challenge both the government here but also EU regulation.
When do you organize and restructure for
new growth areas, such as logistics?
It is always a challenge to downsize and grow
at the same time. Those activities are by nature quite different. Our strategic plan acknowledges that mail volumes will gradually
become smaller, that the logistics operation is
growing, and that we will funnel some free
cash flow into growing the logistics segment.
It also helps telling the mail employees that
there are opportunities in the growth areas.
We are trying to implement a balanced market-based downsizing of the mail segment
that is supporting the logistics area.
What would your advice be to a new postal CEO?
Paint a realistic picture of the future, which is
decline. If you plan for something else, I think
you are fooling yourself, and you will create
larger problems. We are on a long-term transformation.
I would also think about growth opportunities in parcels, logistics, and secure e-mail.
There are pockets of growth, but they are
not substantial within traditional communications.
INTERVIEWS: MOYA GREENE
DELIVERING CHANGE
MOYA GREENE
CEO, ROYAL MAIL
E
   , Moya Greene was
the public servant responsible for the
deregulation or privatization of a large swath
of Canada’s transportation sector. She also
turned around and modernized Canada Post.
But those experiences did not fully prepare
her to lead the transformation of Royal Mail,
the U.K. postal agency that delivers 60 million
letters and parcels daily.
Royal Mail was mired in losses and unmanageable regulation when Greene arrived two
years ago. She quickly recognized the need
both to gain regulatory freedom and to transform the organization that, in her words,
“taught the whole world how to do this business.” Today, Royal Mail is a leaner and more
commercial organization. The customer is
also now “part of every conversation” within
Royal Mail, Greene says.
If transformations are long journeys, especially at government-owned companies with
their expansive histories of inertia and complacency, Royal Mail has started in the right
direction and at the right pace. Bjorn Matre,
BCG’s regional chair of Europe, Middle East,
and Africa, recently spoke with Greene
about Royal Mail’s transformation. Excerpts
follow.
You were appointed the CEO of Royal Mail
in May 2010, only two years ago. It was
clearly an organization that needed fun-
damental change. What were your initial
priorities?
First, I had to figure out how to put some financial stability underneath the company
MOYA GREENE
Born in St. John’s,
Newfoundland and
Labrador, Canada
Year born: 1954
Education
1978, bachelor of law,
Osgoode Hall Law School
1974, bachelor’s degree, Memorial University
Career Highlights
2010–present, chief executive, Royal Mail
2005–2010, chief executive, Canada Post
2003–2004, senior vice president, Bombardier
2000–2003, senior vice president, Canadian
Imperial Bank of Commerce
1996–2000, managing director, TD Securities
1979-1996, positions at Public Service of
Canada, Department of Labour, and Privy
Council, rising to assistant deputy minister
for Transport Canada
Outside Activities
Member, board of directors, Tim Hortons
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quickly. That very immediately brought me
face to face with the need for wholesale regulatory reform, because the company had not
been successful for a very long time. It had
been cash-negative for four years in a row,
and it could not be successful if we could not
completely get out of the stranglehold regulatory approach that had been taken.
“You have to import new
skills to leverage what
you have.”
Did you want to establish an overall vision
early on in the process or later on?
In the Royal Mail, within six months, we
knew that we had to do three things. We had
to review all of our products and services and
all of our operations in order to be brilliant
at the basics. The second thing we needed
was a really strong commercial DNA. If you
have been government-owned for many
years, and if every aspect of your business
has been regulated so it has kind of been run
by remote control, importing a commercial
DNA into the company is not something that
is going to happen overnight. Finally, we
needed to start growing the business—to look
at where we have competitive advantage.
What is it about this operation, this brand,
and the trust that people have in this company that makes us the best? In which areas can
that be said to be true?
We are going to really benefit from our 35
percent share of the parcel and packet business. E-retailing is exploding in the U.K.
To what extent do you need to bring in
people from the outside?
We have some of the greatest people in the
logistics business anywhere. But if you are going to capitalize on growth, and growth is going to occur in new areas, you have to import
new skills to help you leverage what you
have. Direct marketing is a perfectly good example. We have been terrific at delivering direct-marketing materials, but now we want to
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add value. We want to capitalize on the data
that we have so that returns on marketing
spending can continue to go up and up. So
now we need to import an advertising mentality into our direct-marketing offer.
In a significant transformation, how
important is it to change the organizational structure and parts of the leadership team?
If you have the right people, you can overcome organizational problems. But if you do
not have the right people, an organization
that is brilliant is not going to get you there.
With that said, organizations need to be at
least sufficiently tidy where people can understand how they report up in a large organization, and senior people can understand
what they are responsible for.
The organization has to signal what you think
is important for the next three or four years.
We had to put the customer in a position in
the Royal Mail so that it became a part of every conversation that we had at the management table and throughout the whole organization.
As CEO, when do you engage and when do
you hold back in a transformation?
If you are running out of cash, you had better
be engaged. You had better figure out very
quickly what you have to do with the supply
base, with every expenditure, with pricing,
with shareholders, and with customers. What
do I have to do to make sure that I do not hit
a wall?
In strategy, the CEO has more freedom to set
a broad course and empower the organization. You cannot speak for all 160,000 people
in the company.
You have a very particular challenge in that
you have to take costs down in one or two
businesses because volumes are coming
down, but you also have some high-growth
businesses. How, as a CEO and as an organization, are you managing to do both?
Taking cost out of the traditional business is
really about automating and modernizing it.
What did I have to do? I had to be out in the
field and take the temperature of our people
and understand how much change they could
cope with. We wanted to try to calibrate the
plan so that we were successful in taking cost
out but were not so mindless on how hard
this was on our people that they just dig in
their heels and stop.
In most transformations, you go through
waves. There will be ups and downs. How
do you ensure that the motivation and
confidence of your employees stay high
throughout this journey?
It is really two things. The first is massive internal communications at all levels. That was
not really part of the personality of the Royal
Mail. For a communications company, the internal communications of the Royal Mail was
a little bit surprising to me. There wasn’t very
much of it.
Second, the rewards system has to be aligned
for the goals that you are trying to achieve.
My scorecard should be the same as the
scorecard of the person who is out delivering
the mail so that we are all on the same page,
and we are all watching the same things.
Reward systems that are aligned to scorecards—especially scorecards that go top to bottom—help to change the conversation in the
organization. This company had a pretty bad
legacy of industrial relations. If you are going
to change that, you need to change the conversation, and the conversation needs to be more
aligned with what it takes to be successful, to
what the competition is doing, and to what the
customer wants the Royal Mail to do.
If you were to compare what you and your
team are currently doing at the Royal Mail
with the process you went through at Canada Post, what are the key differences?
Canada Post is a very big company in Canada. It is probably the sixth largest company in
Canada. But the Royal Mail is on a much bigger scale. Historically, this has been a treasured institution in Great Britain. This is the
company that taught the whole world how to
do this business. It has been in financial difficulty for a very long time. But even with that,
it has managed to retain the love of the British people.
“This is the company that
taught the whole world how
to do this business.”
As you look into the twenty-first century
and the new challenges business will be
facing, how will they impact CEOs and how
they need to do their jobs?
In all my years in investment banking, I never
heard anybody say, about anything we were
doing at the time—this is 1995—“But is that
the right thing to do?”
Increasingly, CEOs and management teams
are going to be asking ourselves, “But is it the
right thing? Are we doing right by our customers and our suppliers? Are we a good
partner? Have we been fair?”
If you could give one piece of advice to a
new CEO leading a significant transformation, what would it be?
Make sure you are up for it. This is not a
50-hour-a-week job. Try to get your arms
around the full parameters of what you have
to deal with as quickly as possible. Talk to
lots of people. Go up. Go down. Go out. Go
see as many of your own people. Go talk to
them in small groups, in big groups.
You really have to understand that social media have changed everything about what our
people think, every minute of the day, about
their company. They are either going to be
great ambassadors for your company or they
are going to be detractors, and their criticisms
are not just going to be water-cooler conversations. They are going be conversations that
go across the globe in a nanosecond.
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FOR FURTHER READING
The Boston Consulting Group publishes other reports and articles that may
be of interest to executives in the postal sector. Recent examples are listed
here.
Retail 2020: Competing in a
Changing Industry
A report by The Boston Consulting Group,
August 2012
Focus on the Future: Building a
New Compelling Position for Posts
A report by International Post Corporation
and The Boston Consulting Group, June
2012
Leading Transformation:
Conversations with Leaders on
Driving Change
A report by The Boston Consulting Group,
October 2011
Creating People Advantage 2011:
Time to Act
A report by The Boston Consulting Group,
September 2011
The Internet Economy in the
G-20: The $4.2 Trillion Growth
Opportunity
The Postman Always Brings Twice:
Receiver-Driven Transformation of
the Mail Business Model
A report by The Boston Consulting Group,
March 2012
A report by The Boston Consulting Group,
March 2011
Demystifying Organization Design
in the Public Sector
Adaptive Leadership
An article by The Boston Consulting Group,
November 2011
Multichannel 3.0: The Mobile
Revolution
An article by The Boston Consulting Group,
November 2011
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A Perspective by The Boston Consulting
Group, January 2011
NOTE TO THE READER
About the Authors
Acknowledgments
For Further Contact
Bas van Heel is an associate director
in the Amsterdam office of The Boston
Consulting Group and the leader of
BCG’s postal sector practice. Bjorn
Matre is a senior partner in the firm’s
London office and chairman of Europe,
the Middle East, and Africa. Grant
Freeland is a senior partner and managing director in BCG’s Boston office.
First and foremost, we want to extend
our sincere appreciation to the three
postal chief executives—Jürg Bucher,
formerly of Swiss Post; Dag Mejdell of
Norway Post; and Moya Greene of the
U.K.’s Royal Mail—for their time and
their insights. This report would not
have been possible without their willingness to share their experiences in
driving fundamental change within
their organizations.
If you would like to discuss this report,
please contact one of the authors.
The authors would also like to thank
Rob Wolleswinkel, Craig Baker, and
other BCG colleagues for their contributions. They would like to acknowledge John Kerr and Mark Voorhees
for their writing assistance as well as
Katherine Andrews, Gary Callahan,
Sarah Davis, Angela Di Battista, and
Sara Strassenreiter for their contributions to its editing, design, and production.
Bas van Heel
Associate Director and Postal Sector Leader
BCG Amsterdam
+31 20 548 5855
[email protected]
Bjorn Matre
Senior Partner and Managing Director
Chairman of Europe, Middle East,
and Africa
BCG London
+44 207 753 5642
[email protected]
Grant Freeland
Senior Partner and Managing Director
BCG Boston
+1 617 973 1200
[email protected]
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© The Boston Consulting Group, Inc. 2012. All rights reserved.
For information or permission to reprint, please contact BCG at:
E-mail: [email protected]
Fax:
+1 617 850 3901, attention BCG/Permissions
Mail:
BCG/Permissions
The Boston Consulting Group, Inc.
One Beacon Street
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