I wrote recently about the Royal Mail, POL and the IBA. Today, as the remaining shares are sold, the final link has been broken and the Government has no longer any say in the day to day running of Royal Mail Group by any other means than legislation.
The Mails Distribution Agreement is now a serious issue for both POL and the Government. The failure of Network Transformation which has led to a massive decline in Branch Standards leaves POL with no bargaining power over RMG when trying to re-negotiate the MDA which is due to happen in 2017.
POL are currently adding to their long list of woes by trying to introduce a new postage label printing program into their Horizon system. I’ll write about that separately as it is clear it is going to be a massive disaster for all concerned, but it is a belated attempt by POL to introduce some value added work to their side of processing mails.
So where now though for Moya Greene the CEO of RMG? Free from the shackles of BIS involvement she can now more readily steer her own course. However, as I warned in my previous piece on the subject, she is now totally beholden to the city and the institutional investors that keep her in her position. These investors want a return on their investment and they want to see action being taken to improve the likelihood of that happening.
While POL harp on about their 11,500 strong network, that won’t be enough for Moya. The exclusivity agreement with POL won’t cut the mustard when all a retailer needs is a franking machine to offer a cheaper alternative to POL as a postal collection point. Moya, at a whim could open up the market to thousands more outlets at a much reduced commission rate than she currently pays to POL.
If that happens then the POL network would collapse overnight as those branches shift to direct contracts with RMG. RMG would then be paying the branches significantly more than POL does for the same amount of work while still saving money. With a much larger network RMG would be able to take a far more pragmatic approach to branch standards than POL. The ability to terminate agreements at a whim without consultation or public protest based on poor branch standards will have a positive effect on the rest of the network.
When it comes to AGM time, Moya will face a hard time explaining why she hasn’t already considered the removal of POL and to provide justification for not doing so. Tradition is no excuse in profit making enterprises.
Can Moya help POL to survive? It may be that this new label printing process is her idea in order to create additional value to the services POL branches provide. But if it fails to deliver? It just adds to the reasons to remove POL from the link between RMG and the branches.
Whether I was Moya Greene or an important institution with a large stake in RMG I would want POL out of the loop as quickly as possible.