A sustainable Network

It is easy to be critical of POL – far too easy.   Incompetence reigns supreme in that organisation and the inability of management to recognise that crucial weakness labels them as incompetent as the others.

Yet I do recognise that they are trying to do what they think is best for the network.  Paula has her vision and I have mine.  They are not a million miles apart either.  The goal for instance is the same – a viable and sustainable network with a reduced dependency on a Government subsidy and we both believe in the central role a post office plays in the community it supports.

But there were many roads to achieving those goals, not just mine or Paula’s, other’s have different ideas as well.  Sadly Paula chose the wrong one and I pretty sure my ideas will be full of holes that can be picked on but I offer the following at least to show that there were other ways of transforming the network and ultimately achieving the required targets.

A Sustainable Network

I guess we need to define what makes a sustainable network.  I think perhaps Paula and I disagree on this.  The large majority of the network of branches are owned by independent self employed businessmen and women.  As sure as they bought into the Post Office franchise in the beginning they will ultimately have to sell it in the end through illness, retirement or other.   For the network to be deemed sustainable there as to be a willingness in similar minded small businessmen to invest into the franchise when one becomes available.

But more than that I think is the ability of the network to attract the right sort of business person.  The less you pay the less you get unfortunately.  We only have to look back a few years to find Subpostmasters making a reasonably substantial income from their business.   Now, and I’ll discuss this in detail later, the very low pay is no longer an incentive to operate a post office to the best of one’s ability.

Secondly, one of the problems Paula faced from the beginning was the political agenda of the government to enforce an unsustainable network size on her of 11,500.  There comes a time when you really have to stand up to politicians and explain to them the commercial realities of falling footfall and weakening margins.  There are far too many Post Offices, particularly in the urban environment that are cutting their own throats by competing against each other.

My first move towards making the network more sustainable would be to reduce the size of it yet again – just imagine the mess we would be in if some bright spark had suggested NT when there were still 20,000 branches!

A One SIze fits all approach

Well some might call NT a 3 size fits all approach.   It doesn’t work.  If there is one thing that is unique among Post Office branches (is that an oxymoron?) then it is the fact that they are all different.  Different location, different size, different products and different customer mix and most importantly different subppostmasters.  This creates the biggest headache of all, particularly for consumer focus groups, inconsistency in delivery of the franchise.

The network now needs to be split into two with completely different agendas.  One part will focus on rural outlets while the remainder will form a true Post Office Standardised Franchise focusing on the Brand and the Customer.

This rural post office network will embody the quintessential traditional concept of a village shop and post office.  The minimal management required to control the network will be also responsible for the fair and equitable distribution of the government subsidy.   The key concept that needs to be taken on board here though is that the subsidy supports the shop as well as the Post Office.

As for the remainder operating under a true franchise set up well NT gives us a clue where to take that.   It is all about retail supporting the Post Office.  POL have never ever embraced retail.  You just need to go into one of their Crown Offices (Last one I was in was York – heaven help us what a mess) to see their feeble attempts.  Subpostmasters on the other hand have always embraced retail as a little bonus on the side and over the years they have come to provide a fairly standard offering of cards and stationery.  Yes there are lots of other retail choices but cards and stationery I would say are in the majority.

So  just as a rough example – let’s say POL as a wholesaler provided cards to its network on a 10% margin.  Say there were 8,000 offices in the franchise each turning over £500 per week in cards and stationery that equates to over £40m a year!   If POL were to involve themselves in providing a wholesale solution to the retail offering of a Post Office Franchise outlet the could make a considerable amount of money.   I don’t know why they have never considered this before – many years ago I worked for Shell Select Stores central office in South Africa and they were one of the largest Convenience Store retailers in the country – in fact they were the largest retailer of Coke in the World for a long time – although they always remembered people came to them for petrol first!

With 11500 outlets POL operate the largest retail network by far in the UK – something they keep boasting about but have never exploited.  With so many outlets you get some serious discounts put your way and they could certainly compete with Londis and the like on buying power.

Protecting the Brand

When you walk through the door of a shop that has a Post Office sign above it you really need to be able to buy items to do with Post first and foremost.  I see no future in over the counter financial products under a post office umbrella – NS&I can do without OTC availability and you don’t see many High St shops selling insurance these days.  I must point out that I am not talking about banking transactions as they must remain part of the Post Office provision.

You protect the brand also by ensuring it is the main form of income for the franchisee.  It is something that both parties to the franchise are as keen to promote as they would be unwilling to lose. That ensures branch standards as well as a consistent offering across the network.

If Post Office were to become the cheapest wholesaler in town then it would also be another reason for the Franchisee to protect the brand.

Protecting the Franchise

The franchisee has to get something in return and that is protection of the asset they are prepared to invest in.  Standard practice in all real franchise operations and best delivered through demographic protection.   The bizarre idea that Paula has to bring in PO Basics – while I understand the commercial rational – beggars belief that she is unaware of the impact that will have from both a financial and motivational viewpoint on her operators.

And of course a standard franchise opens the way to a mutualisation process that can see ownership of the master franchise pass to the collective of franchisees.  It could work both ways.

My Vision

I do have a vision of what my network(s) would look like but I don’t seem able to put it across as well as others – this is just a blog – it takes more than this to describe it in detail – but what I do see is a tremendous opportunity to make it all a lot better than the current mob are doing for the benefit of the operator and the consumer and not just the bonuses of head office staff.

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5 thoughts on “A sustainable Network

  1. Reading your blog is like reading my twins mind!

    POLs total inability to think in, let alone out, of the box is never less than staggering.

    I agree with you that stationery is a natural fit, but with the difficulties that market leaders (like Clintons) in prime locations have faced, I would argue that the better fit is offices like ours that operate as convenience stores AND Post Offices.

    In rural areas particularly, the synergy of people using the PO to withdraw money and then spending substantial amounts of that money in the shop is, from a shopkeepers view, a joy to behold.

    I almost take it as an insult if a customer takes out money and none of it gets spent with me!

    As you mention, service stations have long enjoyed strong (but changing) relationships with whichever symbol group has offered the best deal. One near me has gone from Booker to Londis to Mace and back to Booker in 10 years and the level of service they enjoy from symbol groups is much greater than I get as an independent.

    Our cash and carry bill is over £2000 a week, so even at a 5% rakeoff, POL could generate over £5,000 per branch in any putative POL alliance, and some companies like Booker have assorted add ons like bulk energy buying, insurance, food to go offerings etc that both potentially cut costs or generate profits for the retailer AND potentially profit for POL.

    Sure, there will be existing stores that dont want to change cash and carries, but for many of us, having enhanced terms from a symbol group because we are allied to POL

    Unfortunately, too many senior people at POL are anything but retail experienced, so it is never likely to happen, but it COULD and it SHOULD if they have an eye to the future.

    POL bang on about branding, but when we underwent conversion, PO actually removed our PO fascia and replaced it with a window sticker – not exactly maximising the brand impact

    I do recall that Esso did a NT in reverse a few years ago; ejecting long established franchisees from stations and bringing them under one brand (and bland) umbrella of ROC. After spending fortunes refitting stations, and substituting local suppliers with centralised buying, the “big is best and beautiful” approach doesnt seem to be working as local franchisees with a variety of suppliers seem to be coming back.

    Despite the constant bragging about retail, I cannot sell an envelope through Horizon, nor can I sell stamps at a profit through my retail side – but I can buy books of stamps from Booker at a better price than from the Post Office.

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  2. One afterthought.

    When considering whether to accept NT, POL supply data on what they claim to be the workload of the office, so one can see whether it is possible to reduce staff costs to compensate for the loss of core tier payments. Exactly what that data is based on (presumably average transaction/session times from first key to settlement) was never made clear.

    We none of us have the ability to verify this data, and have to take it on trust.

    Within the spreadsheet data provided, there was a field called “scaling factor” and next to the figure showing X was an annotation saying USE Y (a much lower number than X)

    My first job ever was in what was then called work study, so it was obvious to me that POL had deliberately skewed the workload figures down to make it appear manageable, but as the data and calculations were not in a format that could be investigated, even though I knew the data was going to be innacurate, HOW innacurate was impossible to determine.

    This workload analysis “proved” that we only needed to double man about 4 hours a day, so even allowing for fiddle factors, should not have come out to more than 5..

    Within 3 days of reopening, it became apparent that the workload remained exactly the same as previously i.e. double manning needed between 9 – 5, so exactly double the hours suggested by POL.

    This manipulation of data that only POL can provide may go to explain why so many new/transforming branches are throwing in the towel so early, and it is a measure of POLs too clever by half mentality that they think they can get away with conning operators on workloads to try and make the miserable remuneration seem generous.

    It is a double irony that, as part of my work study training, we visited the POs then work study unit where enormous efforts were made to ensure that workloads for all elements of PO activity was based on the actual time needed to do the work, rather than some management dictated number – a more innocent time!!

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  3. If only customers came in when you wanted them to Fim – but more to the point – there is nothing more depressing than a long queue in front of you – we all know the feeling at Xmas but that is mitigated by the fact the customers expect nothing less – during the rest of the year we (as SPMRs) feel we are letting the customer down if they have to queue – yet POL see a 5 minute queue wait as being acceptable.

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  4. On the subject of serving hours.
    Before conversion of my franchise office to a mains, I had a queue management system which produced a report showing how many customers each cashier had served, during every quarter hour period, for the whole of the day.
    [ My very basic retail till did exactly the same thing]
    After ripping this out, during the refit, they replaced it with a simplified calling system, which tells me nothing useful at all. That’s not accidental. They don’t want us to know exactly how much in staff hours, is being taken up by “selling”.
    I do know from other statistical information, that we are at least 15 hours a week overmanned.

    On the benefits of footfall.
    Greatly oversold in my opinion.
    A goodly number of POL transactions are of highly questionable benefit, even with the footfall which they “supposedly” generate.
    Bill payments, especially pay station transactions, generate approximately £3.60 per hour
    in revenue,when we actually need nearer £20.

    POL as a wholesaler?
    Well, they were almost there at one point.
    They awarded the contract to supply Branch offices with retail products such as cards and stationery, including the premium Postpak brand, to Magsons of York.
    Sub postmasters would also receive “preferential terms”
    Then..and I can leave you to work out why, they ended the contract and awarded it to a nonentity organisation by the name of Vow, rumoured to be run by the son, of a friend, of a board member.
    Magsons you will recall, went bust very soon after.
    In recent weeks, Gift cards have been removed from Bank of Ireland and given to another organisation with no history.
    Travel insurance recently suffered the same fate.

    A subsidy of £60,000,000 if shared between 6000 offices gives each office £10,000.
    What we really need, is an inquiry into where the other £120,000,000 has been going for the last ten years.

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  5. Yes, I’m in the throes of timing how long each operation takes v the transaction rate the PO pay us (not what they receive, what we do – I’d really love to know the average HO rake off on each transaction)

    My intention is to share this with CABPost, so they have a context in their criticism of how long we can afford to spend advising customers whether to choose 1st or 2nd class!

    The work I’ve done so far, seems to show that on average, income from POL v transaction time is below the NLW, so we will all have hard choices on employing staff in the months to come.

    Like you, I would love to know where all the money has gone

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