Royal Mail To Change Its Business Plan And Strategies Business Essay
Royal Mail HRM Strategies an Overview (2005-2010)
Abstract:
The rapid growth in the Digital Communication applications such as internet, fax, email, online shopping, and the Postal Service Act (2000), liberalization of market, drives Royal Mail to change its business plan and strategies to survive in the current dynamic completive
postal market and in a broader way its future business is uncertain. This essay aims to depict
the Royal Mail Human Resource Management (HRM) policies and strategies, and mainly
focused for the period of 2005-2010. It also covers how Royal Mail is dealing with
competition from the new entrants, and how it handled the recent credit crunch and its
impact on the Royal Mail business.
Introduction:
In recent times, this group has been confronting with various problems. The group reported
loses for several quarters. So, the government had asked the postal regulatory body Postal
Service Commission (Postcomm1) to liberalize the postal market. Initially, in 2003 license
were allotted to private company to handle the bulk mail. In 2006, the markets were fully
liberalized and the group loses its monopoly2 status. All the licensed operators were able to
deliver mails to both the residential and business customers.
Postal Service in the UK:
1 An Independent regulatory body set p up in the year 2000, to regulate the postal service in UK
2 A dominant player in the postal service market with full control over the market.
3 http://www.royalmail.com.
In spite of the advancement in the communication methods like internet, email and other
electronic messaging options, people are trusting on postal service for sending parcel and
letters and particularly in elderly, disabled, and the low income groups, and the small
business sectors. Every week the group serves 20 million customers3 through its network of
around 12000 post office branches and deliver some 400 million parcels a year through
general logistics systems and parcel force .
The universal service and the uniform pricing are the two important attributes of the Royal
Mail postal service. Based on these attributes only the Universal Service4 Obligation (USO)
was formed. As per the USO, the cost of delivering the letter is same irrespective of the
location. To regulate the postal service in the UK, the Postal Service Act was put in place
with the Postcomm. The main task of the Postcomm includes,
4’Delivery every working day to every premises’ regardless of price and location , some exceptional
conditions permitted by UK and Europe Union law.
5 Handling with customers complaints in the postal services and monitoring the standards and quality
of the services provided by the Royal Mail.
. Grant license to other companies.
. Provisioning the uniform pricing and universal service.
. Controlling Royal Mail pricing strategy and its quality of services.
. Advising the government on the development in the post services.
To watch dog the Royal Mail quality services, an independent organization Post Watch 5 was
formed to monitor and control the quality standards.
Royal Mail Group History:
Royal Mail was established by Henry VIII, in 1516 under a Master of Post . Royal Mail was
available to public in1635, with postage being paid by the recipient. In 1660, Charles II
officially established the General Post Office (GPO). Telegraph services was introduced in
1840 by Royal Mail, and in 1912 the group started the telephone service.
Post code was introduced in 1959. In 1969, the GPO became a public corporation from its
existing government department. The post office made acquisition and partnership with
German parcel, Katipos and TNT post group to enter into international market. In 2000, the
company reported losses and it continued for several quarters. In 2001, the post office was
renamed Consignia. In 2002, Consignia was renamed as Royal Mail group plc.
The Royal Mail Group lost its monopoly status when the 2006 liberalization was introduced.
In 2007, government proposed to privatize the group but the election, change in the
government and the recent financial turmoil is the key factors for the postponement of the
proposal without any further date.
Literature Review:
Over the years, it is apparent that organizations are considering Human Resource
Management policies as the key factor to succeed in the business. HR department is acting
as a strategic business partner within the organization to make the effective strategic
business and human resource policies to achieve the organization goals and objectives,
rather than managing the employees and payroll, as was conventionally the case. Senior HR
practitioners and experts are more in demand in the today s corporate world.
Through the years, there is lot of organizational level studies and research across the
business sectors manifested measurable relationship between the effective HR practices
(recruitment and selection, performance appraisal, rewards and recognitions, training and
development) and business performance. According to Mark Huselid (Huselid, 1995)
seminal study related the adoption of HR practices across 968 US companies with their
financial performance (controlling for performance in previous years) .
HRM authors such as Becker and Huselid (Becker and Huselid, 2006) emphasize the need
for HR strategy to be clearly linked to the business strategy and for the constituent HR
Practices to operate in a joined-up way, this being seen as key in order for the strategy to be
focused on what matters, avoid duplication and optimize outcomes . Therefore HR function
has vital role in understanding the stakeholder s business goals, transforming those into
commercial business perspective and identifying the challenges and opportunities from the
employee s perspective and address them in their final approach.
Combs, et al. (2006) aggregated 92 large scale studies conducted at the organizational level
to produce a robust analysis across a large sample. This research revealed that on an
average, having a progressive HR system (e.g. objective selection, training, appraisals,
employee surveys, etc.) related to an average of 4% higher revenue per employee where five
or six major HR practices were in place within an organization .
Business Model:
Royal Mail Group operates through its subsidiaries Royal Mail, Post Office Limited, General
Logistics Systems (GLS) and Parcel force worldwide. Royal Mail is responsible for collecting
and delivering the mail in the UK and handles around 71 millions of letters and packages to
28 million addresses in every working day, in line with its unique Universal Service Obligation
(USO). Producing and Designing the stamps and, philatelic products are also taken care by
Royal Mail.
The Post Limited:
It has national net work across the UK. Larger post offices in urban area were directly
managed by the Post office limited and other branches are managed by franchise partners.
General Logistic Systems:
Royal Mail acquired the General Logistic Systems in 1999 to enter into the European parcel
market. GLS was market leader in the integration parcel distribution and express customer
service in the European market.
Parcelforce Worldwide:
Parcelforce Worldwide is responsible for collecting and delivering the parcel and express
packages throughout the world and in the UK for both the individual and business
customers.
Royal Mail Competition and Challenges:
Royal mail is facing tough competition in postal market after the full liberalization act, and in
particularly express package business. Its main competitors6 in the package delivery market
are world net, Deutsche Post, TNT, UPS, and other airline which provide express package
services. Most of its key competitors such as UPS, Deutsche Post, and TNT have large scale
of operations, which could put Royal Mail at a competitive disadvantage .
6 http://www.datamonitor.com
Though the letter market is declining due to the digital communication advancements, Royal
Mail s profitability and efficiency is vital for the future of the UK postal sector and it also
plays a major role in the UK economy and providing and safeguarding millions of jobs in the
recent financial down turn, where as all other public and private sector firms are reducing its
work force in large numbers.. But Royal Mail faces a lot of challenges. The group has been
reporting looses for several quarters, and its pension deficit is widening; Modernization
process is being very slow and also the tough competition from the new entrants in the
domestic and European markets are constantly increasing.
The culture change is one of the biggest challenges Royal Mail has been facing from quite
some time. It required consistent high quality delivery from everyone in the company, value
for money. According to, Adam Crozier7, Royal Mail must have the freedom and flexibility to
set the right prices, based on real costs. If that happens, I think the new competitive
environment will succeed. Competitors are already targeting profitable business mail. We
need to compete with them on price as well as service if we are to keep the universal
service8 in business .
Improving the Customer Service:
One of the main objectives for the Royal Mail was to reach everyone, everywhere, more
than any other business in the UK through its mail, post office, and parcel and package
business services . There were many complaints from customers about loss of letters but
after working with Post Watch, the quality and service standards were improved when
compared to the previous years. Price is the predominate factor in the competition. New
entrants are providing higher value services with the modern technologies. Royal Mail has to
offer high standard services to the customers.
IT Initiatives:
7 The CEO Of Royal mail (2003-2010(June) )
8 http://news.bbc.co.uk/1/hi/business/4274335.
To modernize its services and operations, Royal Mail streamlined its IT departments in
collaboration with BT and Xansa. Royal Mail web based customers are growing vastly, so to
improve the communication with online users. Royal Mail has also implemented the SAP
9Software to main its sales order and other process. As part its IT initiatives the group
introduced the recruitment and employment process through online.
Financial Crisis – Impact on Royal Mail:
9 SAP Systems, Application and Products in data processing. ERP (Enterprise Resource Planning)
software to automate the customer and payment details .
10 Royal Mail Holdings plc Annual Report and Financial Statements for the period 0f 2009-2010
Royal mail made good progress in (2008-2010), when compare on the previous year records.
Due to the subprime mortgage crisis, all the major economies are suffering from the so-
called credit crunch. Royal mail made profit, despite when the world economy in downturn
and the mail market is declining in UK and in all part of the globe. Due to the weak global
market conditions, the group revenue dipped to 9,349 million 10in first time in a decade,
but all it is four business groups (mail, post office, GLS, parcel force worldwide) made in
profits through their pricing strategy and good customer service. Royal Mail implemented
modernization and efficiency measures to automate the mail processing and the agreement
the made with Communication Workers Union (CWU) also made positive impact among its
employees.
Business unit performance External Revenue Operating
profit/Loss*
M M
2010 2009 2008 2010 2009 2008
Royal Mail Letters
GLS
Parcelforce Worldwide
Post Office Limited
Other businesses
Group
6,564
6,707
6,830
121
58
(3)
1,487
1,495
1,232
112
124
114
399
399
379
17
12
8
838
908
911
72
41
(34)
61
51
36
82
86
77
9,349
9,560
9,179
404
321
162
Source: Royal mail financial repots
Royal Mail HR Approach and Strategies:
To modernize the organization and create world class HR function, McCarthy 11 was
appointed as the director in 2003. According to him, there was lack in coherent HR strategy
which was characterized by disparate spread of HR professional across the group . The group
spent most of its cost on employment. Royal Mail reduced its HR employee strength from
3700 to 2400 and saved 57 million in two years span. There were only few HR specialists and
experts in the entire organization. The HR functions were separated and payroll was the only
centralization team.
Profitability, Modernization, Efficiency and Employee Relationship are the key words for
success of any public limited company. Developing the good HR frame work and strategy are
vital for the public limited organization like Royal Mail to sustain in the today s globalized
competitive postal market.
Due to the advancement in the technologies, communication industry changed quickly.
Internet, fax and other electronic options are dominating the traditional letters. Managing
the huge work force and trade union royal are the challenging task for Royal Mail, in
particular to the HR Managers. With strong HR strategic plans and polices, Royal Mail can
handle their workforce effectively.
Royal Mail HR Metrics:
11Royal Mail HR director(2005), http://www.personneltoday.com/articles/2005/01/25
. People Strategies
. Organizational Development
. Shared Services
The main goal of the HR team is to build strong HR strategies and polices to manage and
retain the human resources. It includes Recruitment and Selection, Learning, Career
development, Rewards and Recognition. Organizational Development and effectiveness are
the main objectives to provide the zero tolerance work place and working closely with the
business partners and HR directors. The training team conducts the leadership, personal and
career development programs to improve the leadership qualities and other work related
trainings.
Royal Mail s people strategy key areas:
. Creating meaningful, challenging jobs with flexible working structure;
. Treating customers with value and respect;
. Building the organization to improve and respond according to the changes in the
market and environment;
. Recruiting and developing the core potentialities to prosper in the open competitive
market;
. Recruiting and developing the leadership capabilities to deliver the goals and to
retain the talent to contend successfully.
Royal Mail HR Practices:
Recruitment and Selection:
Royal mail follows equal opportunity as an employer. Employment practices are based on
regardless of age, sex, disability, race, color, religion, and sexual orientation. Royal Mail
employs diverse mix of people who reflect the communities where we live and work. At
Royal mail, selection and recruitment goes on for both the experienced professionals and
fresh graduates. Different type of jobs are available; permanent, part-time, apprenticeship,
and seasonal (Christmas) jobs.
Training and Development:
Royal Mail believes in training and development. So, the training team organizes various
training programs for their employees which includes from starting induction training to the
customized individual training suits12 through the on job training, mentoring, e- learning,
and coaching. Major training programs provided by Royal Mail are
12 http://www.royalmail.com/portal/rm/content1?catId=24400706&mediaId=24400710
. Information Technology
. Health & Safety
. Communication Skills
. Performance Management
. Project Management
. Leadership Skills
The group also has self learning centers where employees can utilize different packages
according to their needs, and Royal Mail is having partnership and link with different local
institutes to improve the skills of their employees; with various external trainings.
Compensation and Benefits:
Royal Mail offers compensation package based on the employees skills and experience. To
attract the skilled employees, Royal Mail offers good compensation package based on the
type of the employment status like full time or part time, and Permanent or contract. Royal
Mail offers the following benefits to all the employees based on their employment type.13
13 http://www.royalmail.com/portal/rm/content1?catId=24500655&mediaId=16000174
14 http://www.ocp.co.uk/_Attachments/Re http://www.ocp.co.uk/_Attachments/Resources
. Health and Welfare
. Holiday Entitlement
. Basic pay/allowance
. Pension
. Time Out
. Benefits /discounts/ ongoing discounts
. Support for Disabled Applicants
Performance Management:
Performance Management is an effective method to analyze the employees potential and
capabilities, if it is properly implemented. Measuring the performance of the employee is an
indicator of the success of the organization.
Royal mail introduces new performance management practices14. The objectives of the
programs were to: 1.introduce a set of common validated numerical indicators which had
been standardized for similar units/businesses. 2. Apply the Pareto principle and exception
reporting. 3. Create a focus on looking forward, forecasting improvements (rather than a
backward-looking blame culture) .
Work life Balance (Flexible working):
Royal Mail is offering the flexible working option. This includes where employees are
allowed to work from home for their personal commitments, leaving early for the child care
and compensating the time as per the business needs. It generally gives moral support to
the employees and the best way to recruit and retain the talent resources which in turn
improve the productivity.
Corporate Social Responsibility:
Royal Mail strongly believes in serving to society. Royal Mail and its employees play
important role in serving to the community. Royal Mail s ambition is to become the leading
organization in corporate responsibility is a priority of our Chief Executive and every one of
our Managing Directors . Employees also fund to the good cause via their payroll regularly.
Royal Mail also takes part in controlling the climate change using renewable source
electricity to make the environment green. It raised 1.8 million15 via charitable donations in
2009. As a leader in corporate social responsibility initiatives, the group won the following
awards in the last two years.
BITC Example of Excellence (Healthy Workplace Award) 2009
Shortlisted for Personnel Today Awards2009 Award for Health at Work
Royal Society for the Prevention of Accidents Awards 2009 Gold Award, Safety
Institute of Fundraising Awards 2008 Winner, Best Use of Payroll Giving Award
Winner Quality in Print Media Environmental Award, Quality in Print Awards 2008 .
Findings and Suggestions:
15 ww.royalmailgroup.com/portal/rmg/content1
. Prioritizing the HR strategy according to the key business goals and objectives.
. Identifying the challenges and opportunities to moving ahead.
. Develop and define the HR strategy backed by strong analysis with good HR metrics.
. Reviewing the defined strategies and approaches with stake holders and business
partners.
. Finalize the HR polices and strategies.
. Building the right-sized productive work force to achieve the business goals.
. Automate and standardize the mail process with modern technologies and
equipments to compete in the business market with skilled and efficiency workforce
where the market and environment is changing rapidly.
. Analyzing the data with help of employee and customer satisfaction survey, opinion
pool and feedback data.
Understanding the external market environment and competitor strategies is important
while framing the HR policy. HR metrics will vary with each organization depending upon
their vision and mission statements. Metrics should be cover the organization goals,
rather than following the best industry practice. Stakeholders and business partners
should be engaged while framing the strategy, to make the strategy effective.
Conclusion:
Due to the advancement in digital technologies and internet, the postal industry and market
is changing quickly. Mailing market is declining and online shopping and other commercial
activities through internet are growing speedily. So, Royal Mail has to modernize and
restructure their business strategies to survive in the liberalized competitive market place.
As many studies, research, and survives demonstrated the strong relationship between the
good HR strategic policy and the business performance. So, Royal Mail has to develop the
strong HR policies and strategies to streamline the HR practice to achieve the organizational
objectives and goals. Implementing the effective HR strategies in public organization like
Royal Mail is very challenging task for HR mangers and, where trade union and pension
problems are widening year by year. The strong determination from the HR mangers, top
management, regulatory bodies, and the government can help the Royal Mail to implement
the HR and business strategies to shape the UK postal industry and economy and in
particularly in the current economic crisis condition where unemployment is already in peak.
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