The Sickness of Network Transformation

 

Yesterday, Citizens Advice finally published their ‘late’st report[1] into Post Office Ltd’s Network Transformation project.  They labelled it ‘Transformation Health Check’.  The report summarises CAB’s research into the views of Subpostmasters/Operators/Multiples who are now operating Post Offices under one of the new models.

Let me make it clear from the start.  I don’t think CAB would have published this report if they had not been placed under extreme pressure by myself and others to do so.  The fact they only published it yesterday after the government’s consultation[2] into the role that the Post Office plays in the community had closed is extraordinary.  The fact that CAB allowed POL to comment on the contents of the report before publication suggests that POL and the government had some say on the final edition.  That would be astonishing though because the contents are totally and utterly damning of the failure of the NT project and the very high risk now of the entire network imploding rapidly.

The report itself is 33 pages long.  It will be provided no doubt to a short list of recipients and will remain hidden from public consumption in the dark recesses of CAB’s research pages.  Most notably they have not ‘tweeted’ the publication of this report as they have done others.  No matter.  Others will raise the existence of this welcome report into the failure of NT with those who should know about it.

When you hand a 33 page report to a bureaucrat or politician to read you can bet your bottom dollar that unless the executive summary contains some startling revelation whose detail follows in the report that they will not read further than the opening few paragraphs.

In this report the summary ends with three conclusions:

  1. Ensure staff can conduct Post Office transactions confidently
  2. Consider adding greater flexibility to branch model types
  3. Continue monitoring the medium term financial viability of new models

You read through the summary and then these conclusions you stop there.  Looks like NT is doing OK with a couple of minor problems that POL can handle.  Nothing to worry about.  Well I for one worry about why the executive summary fails to mention the extraordinary revelations hidden in the main body of the document.

Let’s look at that in more detail:

BY the end of page 7 CAB have provided the background to NT, the purpose and method of the research and noted that they had 121 responses to an online form (promoted on Twitter – but not the resultant document!) and then conducted 65 telephone interviews.   POL could counter any criticism coming out of this report by saying the sample size was insignificant compared to the network size of 11,500.  Well I would like to see them try.   Skip to the end of the document where it is revealed that the researchers also interviewed 6 multiples that together represent 1,800 offices!   It is the comments coming from the multiples that are the truly frightening part of this document.

These comments from multiples are understandably not associated with any individual multiple but one must assume that this CAB report reflects a balanced opinion and when and if multiples’ comments were at odds with each other this would be noted.   Therefore these comments can and should be attributed to all multiple outlets – 1800 of them.

The Myth of Increased Opening Hours

When POL get on their high horse and try to defend the £2 billion pounds they have wasted of taxpayers money they consistently refer to the increased number of opening hours now available to their customers.   Brilliant – but a total waste of time and money for most operators and compounded, as the report suggests, by a massive drop in branch standards due to poor training and a high, and rising, level of staff turnover as a direct result of the complexity that the job entails.

Post Office footfall is in decline and has been for years.  Opening Post Offices for longer hours has not stopped that.  From an operator’s perspective it has merely spread the same number of customers over a longer period and increased the amount of skilled staff they need to run the outlet.

If Operators were allowed to choose their own opening hours (many do anyway) then they would be reducing the number of hours open not increasing them.    Perversely in rural areas, and I have firsthand experience of this, when a restricted hours office changes hands Post Office Ltd themselves insist on reducing the number of hours they open the Post Office for.   You really can’t make it up with these people.

Queues

A significant weakness of NT is where retailers have a single PO combi counter at their retail counter.   A lengthy PO Transaction or one that requires a call to the Help Desk will result in queues forming and customers leaving without purchasing.   Queues are inconvenient to customers.  Post Offices are by and large in Convenience stores.  Convenience is the name of the game.  I have no answers to that conundrum as I support the concept of a combi counter, but it needs a solution.

Staffing

The single biggest overhead for most retailers is staff costs.  The single biggest worry for operators is staffing.   There is no doubt that a dedicated Post Office counter with dedicated trained staff is no longer viable for most operators in the absence of core tier payments.   Reduced income from Post Office transactions is matched by populist government increases in living wages.  Living wages indeed.  When the self employed start demanding living wages our service industry will no doubt collapse.

The report misses though the glaring obvious that requires no research.  It is all on the internet, facebook and twitter complaints.   Walk in to most Post Office branches these days and you will find behind the counter staff and owners alike with a most disagreeable temperament.   Working for Post Office is a sad and depressing affair with complicated transactions, demanding customers with repetitive interaction required and in urban deprived areas? I don’t think we need to go there other than to mention the security screens are there for a reason.

Footfall

Take on a Post Office into your convenience store and watch your footfall increase and as a result your retail sales was the pledge from POL.   It beggars belief that so many people fell for that.   The research shows it not to be the case and as I pointed out right at the beginning of NT, put two identical convenience stores next to each other with one having a post office and the other not and see who gets the most footfall and the higher retail sales.  The proof of that is now out there.  Convenience stores are throwing out the Post Office and seeing their retail turnover increase!   The same incidentally applies to Paypoint who also spin the footfall line.  Many are getting rid of that loss making machine on their counter and watching their income increase!

New Operators

A glaring omission in this report is research into the skill levels of the new operators that Post Office has appointed.   The survey was voluntary.  Most new operators would have no inkling that it was taking place.   The rush to get the job done, the bonuses that were being paid for securing conversions, the lack of any basic skills test all led to a huge portion of the network now being run by individuals who are barely able to address an envelope let alone decide what postage is required for it.  You see it doesn’t take a lot of intelligence to run a convenience store just hard work and determination and many of the operators I refer to are very well off thank you very much so I am not criticising their ability to run the shop just the post office.

A sustainable network.

That is what NT was all about.  A network secured for the future with much reduced government funding required.  The key word which I keep harping on about is ‘sustainable’.  What does that mean?  It means a network of post offices that can continue to be run by independent operators on a profitable basis.  A network of businesses that can be sold into a pool of experienced small business entrepreneurs who see the purchase of a shop with a post office as an attractive investment.  Without that prerequisite there is no sustainability.  Without that pool of investors attracted to the opportunity of running a post office there is no future.   One of my very first pieces 6 years ago was about what happens when a PO Local closes?  When the operator says enough is enough and throws the keys in and by doing so loses his investment in the business.  Which idiot close by will take up the challenge to do better knowing full well the reason why the previous idiot had lost his money?   Idiots only need apply to take one on and therein lays the rub.

Conclusion / Executive Summary

So here is my summary.  No – I am not going to write it.  I am going to let the multiples that were interviewed for this research write it.  After all they represent 1800 branches.  These are in grave danger of being closed overnight based on sound financial policy by large organisations who themselves are in decline.   How would the government and the nation react to that I wonder?

‘Customers do use services outside core hours, but after 8pm there is very little usage. Custom is still concentrated during traditional opening hours.’ Multiple retailer

‘Overall Post Office footfall has slightly increased due to longer opening hours. But in many cases there has been no increase in footfall following the extension of opening hours.’ Multiple retailer

‘Where post offices are open 5.30pm-8pm, and there are no or few customers, this results in costs for the retailer.’ Multiple retailer

‘Generally the relationship between the retail and Post Office side is good. Some sites work like a dream.’ Multiple retailer

‘Biggest positive has been refurbishment, stores are modern and look better compared to before. Good feedback on this from customers and staff.’ Multiple retailer

‘Combi counters can lead to privacy issues. Customers, perhaps especially older people, do not like to stand in a queue where people can overhear what they are saying, for example when undertaking financial transactions.’ Multiple retailer

‘Customers expect to queue in a post office, but never in a convenience store. So [name of retailer] cannot afford queues which can lose customers.’ Multiple retailer

‘In Locals, staff undertaking transactions can be slower than the more experienced staff (in traditional offices and Mains) and can exacerbate any queuing issues – if staff don’t do certain transactions frequently, they forget how to do them.’ Multiple retailer

‘If the branch has inherited staff from closed branches, it generally runs well. If there are new staff in, it is tough for the branch.’ Multiple retailer

‘It takes 6-12 months to learn Post Office products properly. Many staff are students, working for six months and then leaving. This leads to training problems.’ Multiple retailer

‘Go live training is 7 to 8 days in total, which equates to half a day per member of staff. This is not much compared with, for example, Subway which has 3 weeks training. However, Post Office transactions are more complex.’ Multiple retailer

‘Training is offered in core hours, so this does not work for staff who only work out of core hours.’ Multiple retailer

‘Previously under the traditional post office model, in each store Post Office compliance training was undertaken by 2 people… Under the PO Local each store may have around 12 people who need this training – this is a financial problem.’ Multiple retailer

‘In general [retail] staff do not want to do Post Office transactions because they are complex.’ Multiple retailer

‘Retail products are simple to sell with barcode scan and till prompts. However, Post Office products are not always consistent and need an element of knowledge of the different products.’ Multiple retailer

‘We have a recruitment challenge with Locals as staff apply for jobs primarily in retail and do not want to undertake Post Office transactions.’ Multiple retailer

‘Opening hours are difficult to manage and we would prefer to be able to offer a reliable and predictable service, rather than a service that is less reliable but open all hours.’ Multiple retailer

‘The Post Office has been useful over the years in bringing in footfall. But the footfall benefits are not seen so much now. If it is the only retailer in the village the presence of a Post Office does not make much difference to footfall.’ Multiple retailer

‘The impact on footfall is different depending on the store in question. In many newsagents the Post Office footfall is needed to make the business viable.’ Multiple retailer

‘A high proportion of our post office branches are loss making. Others are not making massive money.’ Multiple retailer

 ‘For us post offices are very unprofitable. [We] have decided to keep post offices (for now) and run them at a loss to the business, because they are a great community service.’ Multiple retailer

‘As the [retail] sector isn’t making a huge profit, the pressures from the [retail] business may lead to a tipping point on [our] stance on post offices.’ Multiple retailer

‘The recent and future National Minimum Wage rise puts pressure on business that wasn’t there previously – a 25% minimum increase in payroll.’ Multiple retailer

‘Remuneration for transactions is very low. Transaction income for many products is pennies.’ Multiple retailer

‘Remuneration in Mains is mixed. There are quite a few Mains where the 3 year protection is very important.’ Multiple retailer

‘We have concerns that there will be a shortfall for some Mains after 3 years when the parachute payment runs out, due to the loss of the core tier payment which previously made up around one third of Post Office remuneration. We could end up with Mains that are at best breaking even, or starting to make a loss. This is not what was originally expected.’ Multiple retailer

‘Over the next 2 to 3 years [we] will have to consider our post office strategy. We love the Post Office. We want to make it work and offer the service, but at a profitable level and are struggling to do this.’ Multiple retailer

‘How will the Post Office be competitive when the Royal Mail contract comes to an end? Will Royal Mail transactions continue to decline? And at what rate?’ Multiple retailer

[1] https://www.citizensadvice.org.uk/Global/CitizensAdvice/Consumer%20publications/Transformationhealthcheck.pdf

[2] https://www.gov.uk/government/consultations/post-office-network

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