Modernisation of the Royal Mail

This report has been conducted to investigate and critically evaluate the modernisation of the Royal Mail. In doing so it will analyze the organisations activities and conduct using theory to discuss its impacts.

2.0 Objectives

• Investigate how modernisation was planned and implemented and evaluate its effectiveness
• Identify and deal with resistance factors to the change
• Clarify how to establish when the planned change has been completed and how its effectiveness should be measured

3.0 Introduction

Organizational change

Significant organizational change occurs, for example, when an organization changes its overall strategy for success, adds or removes a major section or practice, and/or wants to change the very nature by which it operates. It also occurs when an organization evolves through various life cycles, just like people must successfully evolve through life cycles. For organizations to develop, they often must undergo significant change at various points in their development. That’s why the topic of organizational change and development has become widespread in communications about business, organizations, leadership and management (McNamara, 2010). This is confirmed by Richard Whittington and Michael Mayer (2002) argument that adaptive reorganization, the ability to redesign structures frequently, is now critical to organizational performance.

Organisational change has three models (Jawad, 2010):

Incremental Change Model – The Incremental change model states that individual parts of an organisation deal incrementally and separately with one problem and one goal at a time (Burnes 2009).

(Jawad, 2010:19)

Punctuated equilibrium – Tushman and Romanelli (1985, cited in Passmore & Woodman, 2005, p207) state this model assumes that fundamental organizational change occurs in short periods of discontinuous, revolutionary change , which punctuates long eras of relative stability typified by incremental, convergent changes (Tushman & Romanelli, 1985)

(Jawad, 2010:20)

Continuous Transformation model of change – Only by continuous change and adaption will organisations be able to be aligned with their environment and thus survive (Burnes, 2009:354)

(Jawad, 2010:21)

History of the Royal Mail

The Royal Mail was reorganised in the 1930s and again in the 1960s. Eventually it became a public corporation in 1969. Restructuring continued in the 1980s and 1990s, with the separate telecommunications section being privatised in 1984. In 2001 the Post Office became a public limited company (PLC), named Consignia – which was replaced by the Royal Mail brand in late 2002 (Royalmailgroup.com, 2010).

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The company primarily operates in the UK. It is headquartered in London, the UK and employs 193,000 people. The group recorded revenues of £9,179 million during the fiscal year ended March 2007, an increase of 1.4% over 2006. The operating loss of the company was £10 million during fiscal year 2007, as compared to the operating profit of £145 million in 2006. The net profit was £286 million in fiscal year 2007, a decrease of 27.6% as compared to 2006 (Datamonitor, 2008).

4.0 Reasons for change

Transportation costs – Paul Bateson, Royal Mail’s managing director, logistics, said: “There is a marked difference between the price we believe we should be paying for rail services and that which was on the table. Quite simply, other forms of transport can give us the same benefits, in terms of flexibility and quality, but at a lower cost” (Independent.co.uk, 2003).

Inefficiency – The Royal Mail is the third most inefficient postal service operating in the UK with an estimate of 40% less efficiency . The European couriers already have automatically sequencing machines which sort 90% of the letters they deliver at operates at a lower costs whilst the Royal mail operate a walk-sorting and walk-sequencing procedure which only sorts 70%. (Hopper et al 2008:47).

Competition – The Royal mail faces competition from the digital media. The royal mail reported losses of £500 million in 2007-08 (Hooper et al 2008:48)

Technology – This has led to reduced volume of sales (Hooper et al 2008). The way in which customers communicate has altered to online, email, mobile telephony, text messaging and digital broadcasting as they have low marginal costs, flexible and faster. It is estimated that the substitution from postal to alternative digital media reduced its operating profits by £500 million in 2007/8 (Hooper et al 2008:48)

(Hooper et al, 2008:9)

Pension Deficit – Royal Mail has a found a £10bn black hole in its retirement postbag, the biggest pension deficit in UK corporate history (guardian.co.uk, 2009).

(Hooper et al 2008:55)

Universal service – The universal service is important to the UK’s economy as it enables trade (Hooper et al 2008:3) in 2008 Royal Mail reported that the universal service had made an operating loss of £100 million.

Strained relations – In 2007 over 67,000 employee days were lost as a result of industrial action (Hooper et al 2008:56). The consequence of this was the loss of contracts including Amazon (Guardian.co.uk, 2009).

Working practises – The organizations working practises are outdated, as a result act as a barrier to their efficiency (Hooper et al 2008:51). The employees are able to finish their morning rounds up to three hours early (Hooper et al 2008:51) and continue to be paid until the end of their shift.

5.0 Lewins group dynamics

Lewin research in this area has been cited as one of his best-known research topics. In this study Lewin, along with Ronald Lippitt, looked at the effects of democratic, autocratic, and laissez-faire methods/styles of leadership on group structure and the behaviour of group members. Results showed numerous insights into group structure. Also groups with efficient change that occurred in democratic ways lead to superior group results.  Superior results were found with the basis that as all individuals can participate and become an identifiable part of the group, change is more easily accepted (Kariel, 1956). Groups that contained more authoritarian structures were found to be more rigid, hindered creativity and lead to dysfunctional decision making processes. Groups that contained laissez-faire styles were found to be very inefficient and unproductive (Daniels, 2003).

Overall results of these three leadership styles showed that democratic leadership styles lead friendliness, conscientiousness for group members, and more originality than the other leadership styles (Buchanan et al, 2004).  Autocratic and laissez-faire groups showed significantly greater amounts of discontent, hostility, scapegoating, and aggression than the democratic leadership style. Lewin concluded that changes resulted not from individual differences but from group dynamics.  He also emphasized need to facilitate and guide change, as autocracy is imposed on individuals, but democracy is learned (Smith 2001). 

With the Royal Mail being under the control of the UK Government it can be argued that they are subjected to a more authoritarian leadership structure. Unlike a corporate business organization where decisions are made by senior management, in the Royal mail decisions must be made in consideration of the UK budget, strategies and actions are all subject to parliament, leaving management in the Royal Mail with lesser powers to do their job.

6.0 Planned & Emergent change

Lewin’s (1951) three-stage model of unfreezing, movement, and refreezing often underlies planned change. This planned approach to change is long established and held to be highly effective by many (Burns, 2004), but it has been criticized at least since the early 1980’s (Kanter, Stein & Jick, 1992). Firstly it tends to ignore that environmental factors in which an organization is situated may be inconsistent with planned change initiatives, apparently assuming that organizations can move in a pre-planned manner from one stable state to another (Bamford & Forrester, 2003) in ways that are not strongly impacted by outside factors. Royal Mails initial efforts to implement change were of a planned nature, Weick (1999) suggests that organization change is a more open-ended and continuous process than a set of pre-identified self-contained events.

Emergent change emphasizes that change should not be perceived as a series of planned linear events within a given period of time. Rather, it is best viewed as a continuous, open-ended process of adaption to change circumstances and conditions (Burns, 2004).

7.0 Resistance to change

Where change is incremental and aims only at organisational realignment, it can be viewed as adaptive. Where such incremental change is more punctuated, but still aiming at organisational realignment, it is known as reconstruction. The process of reconstruction is more likely to result in employee resistance than adaptation because such significant changes in business processes could negatively impact upon the roles of some employees. However, unlike transformational change, whether this happens incrementally or in a punctuated fashion, adaptation and reconstruction are less likely to have either an organisation wide impact on employees or require a paradigm shift in thinking. Evolution and revolution, on the other hand, do require such a shift because they can involve significant shifts in organisational culture and may also have deep impact on job roles and even redundancies (Balogun and Hailey, 2004).

The change plan suggested by the Independent Review of the Royal Mail involves the political separation of the Royal Mail to provide it will commercial confidence, the separation of the Royal Mail from the Post Office, the transfer of the Royal Mail Group’s pension risk to the government, a strategic investment in modernisation, and the use of a strategic partnership between the Royal Mail and a private sector firm to help bring about the change process. This is clearly indicative of revolutionary change, such that it is no surprise that not only are the forces for and against very strong, but they are equally matched between those desiring changing (management) and those opposing it (employees and their representatives). To effectively manage employee resistance to change at the Royal Mail, a number of solutions can be suggested. In presenting these solutions, it should be emphasized that management at the Royal is required to manage through revolutionary change. Here, the speed of the change process adds to the impact that the change initial will have on the firm, also creating greater levels of fear, suspicion, uncertainty, and ultimately, resistance.

First, effective leadership is a critical component of effectively implementing change that the Royal Mail. According to Bennis and Nanus (2003): “The new leader is one who commits people to action, who converts followers into leaders, and who may convert leaders into agents of change” (p.3). In this respect, effective leaders are not only visionary in their motives and actions (Nanus, 1992; Collins, 2001), but also they are the ultimate agents of change. Here, emotions play a central role. As Boyatzis and McKee (2005) state: “Even if they get everything else just right, if leaders fail in this primal task of driving emotions in the right direction, nothing they do will work as well as it could or should” (p.3). This can be especially important during periods of transformational change, and especially the revolutionary change proposed at the Royal Mail. Here, leaders not only need to have personal competence in the form of emotional competences such as transparency, but also social competences such as empathy and organizational awareness (social awareness competences), but also conflict management and bond building (relationship management competences) (Goleman et al., 2002). As Boyatzis and McKee (2005) state: “Great leaders face the uncertainty of today’s world with hope: they inspire through clarity of vision, optimism, and a profound belief in their – and their peoples – ability to turn dreams into reality. Great leaders face sacrifice, difficulties, and challenges, as well as opportunities, with empathy and compassion for the people they lead and those they serve”. Whilst the current predicament for employees is stark, a visionary, inspirational leader will be able to communicate the long-term, optimistic view of the Royal Mail; that is, an organisation where employee pensions will have been secured by the Government, a more efficient work environment and organizational structure that will enable employees to develop through greater investment and innovation by management, as well as greater job security for those that remain. Whilst this does nothing to quell the resistance amongst those that believe they will not be chosen to remain, the Independent Review clearly highlights that the change has to happen or the Royal Mail Group will not be able to continue in its current format. Leadership has to emphasize how it can help get the company and its employees through a bad situation in the best possible way.

Second, change agents can be particularly effective in helping to overcome employee resistance. The change agent starts out where the strategist left off. They are charged with making change programmes a success at the implementation stage. With information scarcity and poor communication being a central factor causing employee resistance to change, the change agent is an important part of the communication process between management and employees. The use of change agents can have a particularly strong effect because of their impact on relationships. As Tierney (1999) states: “Strong relationships between supervisors and employees, and among employees and their team members, is associated with employees perceiving that they work in a context characterised by risk-taking and departure from the status quo, open communication, trust, operational freedom, and employee development, five of the necessary conditions for the emergence of individual and organisational change” (p.129). Change agents therefore play an important role in building a psychological climate that is conductive to change (Schneider and Reichers, 1983; Porras and Hoffer, 1986; Tierney, 1999). As a general rule, internal change agents are no more successful in implementing change than their external counterparts. The appropriateness of choosing one over the other depends on the nature of the change, the change outcome, and specific organizational circumstances. An external change agent may benefit the firm by providing experience and advice based on knowledge developed during other change processes that the firm itself is not privy to. The external change agent is also an appropriate choice where employees do not trust management. Alternately, the internal agent may be more sensitive to and knowledge about local conditions within the firm, helping the agent to communicate in a more appropriate manner. This may help in convincing employees that would not be prepared to listen to external change agents that have no vested interested in them as individuals (Balogun and Hailey, 2004). In the case of the Royal Mail, the problem is that management and employees have a very bad relationship, with employees having a stronger relationship with their unions. As such, unions may be one of the best potential agents for change, even though these have been one of the biggest problems impeding innovation and change in the past.

Finally, it has often been suggested that change management is more successful when a pilot of the proposed change is carried out in order to assess the potential problems that could be faced, enabling the organization to re-engineer how the change process is rolled out (Balogun and Hailey, 2004). However, this would be difficult for the Royal Mail because the change it is facing is revolutionary. Such change provides little time to test out different change scenarios.

8.0 Force field analysis

Figure 1 is a force field analysis to illustrate why Royal Mail employees may resist change. This highlights not only how difficult it will be to achieve change without significant employee resistance, but also the reasons why relative tensions exist. The rationale for employee resistance is based on the potential for significant job losses, the loss of union power following a restructuring, and the potential costs and disruption that this may cause to employees and customers.

Significant job losses anticipated: The transformational changes made to date, which are slight in comparison to what is needed, have resulted in over 40,000 job losses. The proposed change in the Independent Review would mean a significant number of additional job losses, most of which would happen in the Royal Mail, not the Post Office. With the power of the major unions in the postal sector, such job losses will be met with fierce resistance and most likely some industrial action. As such, it has a “5” rating.

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Weaker union position because of restructuring: The relationship between the unions and the management at the Royal Mail Group is extremely poor, not only because of the power of the unions and their propensity for industrial action and heavily resisting almost any form of management change, but also because of the ability of unions to take their complaints straight to Minister, circumventing management at the Royal Mail Group. The transformation would break up this arrangement and provide the Royal Mail with the autonomy and commercial confidence it needs, but it would also significantly weaken the position of the unions. “5”.

Cost and disruption could reduce customer numbers: The Royal Mail is relied upon to process and deliver 99% of the UK’s post. The level of transformation required, the loss of staff, the inevitable industrial action that will be taken, and so forth will not only be costly but will also damage the Royal Mail’s reputation and potentially reduce customer needs. “3”.

Plan:

Strategic partnership between Royal Mail and private sector companies to help bring about change 

Political separation of Royal Mail

Transfer pension risk to government

Separation of Royal Mail and Post Office

Strategic investment in modernisation

Massive pension deficit needs to be resolved

Structural decline in major product markets

Inefficient structure and poor labour relations

Significant jobs losses anticipated 

Weaker union position because of restructuring

Cost and disruption could reduce customers numbers

Forces for Change

Forces against Change

Employee resistance is not only reflected in the forces against change, but also the overall pressure of the forces in each direction. In this case, the score for forces against change is 13 whilst the forces for change also scores 13. Out of a possible score of 15, therefore, not only are there considerable forces against change, but employees are also being heavily resisted by the firm, which is pushing equally strongly for change. This increases the overall levels of employee resistance.

9.0 Securing effective change

A professor at Harvard Business School and world-renowned change expert, Kotter introduced his eight-step change process in his 1995 book, “Leading Change” (Buchanan et al, 2004).

1. Establish a sense of urgency
2. Form a guiding coalition
3. Create a vision
4. Communicate the vision
5. Empower people to act on the vision
6. Create ‘short term wins’
7. Consolidate improvements to produce further change
8. Institutionalize new approaches

Other models in management literature include Ulrich (1998) seven-steps, Eccles (1994) four step and Collins (1998) ‘n-step guides, all of which echo the same principles as Kotter, vision, leadership, communication and involvement. (Buchanan et al, 2004)

What is imperative to carry out the model effectively is a ‘change leader’. Change leaders can be thought of as persons who create enough disconfirmation in the organisation to arouse motivation to change (Bennis, Nanus, 1985). Change leaders should therefore have three characteristics if they are to arouse motivation to change and learn:

Credibility – whatever they say must be believed

Clarity of vision – Whatever they say must be clear and make sense

Ability to articulate the vision – They must be able to state verbally and in writing what it is they perceive and what the implications are for the future of the organization (Schein, 1999).

In implementing Kotters (1995) 8 steps to change the Royal Mail can follow these actions.

1.

• Examine opportunities that should be, or could be, exploited.
• Identify potential threats, and develop scenarios showing what could happen in the future.
• Start honest discussions, and give dynamic and convincing reasons to get people talking and thinking.
• Request support from customers, outside stakeholders and industry people to strengthen the argument

2.

• Identify the true leaders in the organization. 
• Ask for an emotional commitment from these key people. 
• Work on team building within the change coalition. 
• Check the team for weak areas, and ensure that there is a good mix of people from different departments and different levels within the company.

3.

• Determine the values that are central to the change. 
• Develop a short summary that captures what is seen as the future of the organization. 
• Create a strategy to execute that vision. 
• Ensure that the change coalition can describe the vision.

4.

• Communicate the change vision.
• Openly and honestly address peoples’ concerns and anxieties.
• Apply the vision to all aspects of operations – from training to performance reviews. Tie everything back to the vision. 
• Lead by example.

5.

• Identify, or hire, change leaders whose main roles are to deliver the change. 
• Look at the organizational structure, job descriptions, and performance and compensation systems to ensure they’re in line with the vision. 
• Recognize and reward people for making change happen. 
• Identify people who are resisting the change, and help them see what’s needed. 
• Take action to quickly remove barriers.

6.

• Look for sure-fire projects that can be implemented without help from any strong critics of the change.  
• Thoroughly analyze the potential pros and cons of the targets.  
• Reward the people who help the organization meet the targets.

7.

• After every win, analyze what went right and what needs improving. 
• Set goals to continue building on the momentum achieved. 
• Learn about kaizen, the idea of continuous improvement. 
• Keep ideas fresh by bringing in new change agents and leaders for the change coalition.

8.

• Communicate the progress at every opportunity. Tell success stories about the change process. 
• Include the change ideals and values when hiring and training new staff.
• Publicly recognize key members of the original change coalition, and make sure the rest of the staff – new and old – remembers their contributions. 
• Create plans to replace key leaders of change as they move on. This will help ensure that their legacy is not lost or forgotten.

Conclusion

The Royal Mail is in a position where change is a necessity to survive, and it must do so quickly. The organization requires better communication from its leaders to enable a joint commitment of its managers and workforce. To enable this it must separate from political leadership. It is essential that a new change strategy is formulated which fits the circumstances.

Progress has been show through the Communication Unions (2010) agreement which will help defuse employee resistance.

Basic pay will rise by a minimum of 6.9 per cent 

Further payments will accompany the phased introduction of change in the workplace 

The CWU will play a full part in the introduction, deployment and review of change 

The working week will reduce by one hour with no loss of pay 

Royal Mail will remain a 75 per cent full-time industry 

Existing job security will be further enhanced 

Further steps must now be taken to implement modernisation around the agreement, implementation of Kotters 8 steps of change can solidify plans which will help take Royal Mail into modernisation past the 3 year agreement.