Royal Mail Group Ltd.: Examination and Evaluation of its Modernisation Programme - Case Study Example

Royal Mail Group Ltd. – Examination and Evaluation of its Modernisation Programme Table of Contents Introduction 3 2.Reasons for Change 4 3.Modernisation Programme 5 3.1.Planning 6 3.2.Implementation 7 3.3.Evaluation 10 4.Factors Resisting Change 11 5.Conclusion 11 References 12 1. Introduction Royal Mail Group, Ltd. is headquartered in London (Royal Mail Group Ltd.-a, 2010) and it “is the parent company of Royal Mail, Post Office® and Parcelforce Worldwide” (Royal Mail Group Ltd.-b, 2010). Back in 2003, the software giant SAP that is a notable vendor to the group had reported that “a public limited company wholly owned by the Government, Royal Mail Group is a massive organisation with annual sales in excess of £8 billion and more than 220,000 employees” (SAP AG, 2003). In its attempts to realise the vision “to be demonstrably the best and most trusted postal services company in the world” (Opportunity Now, 2010), the company collects, processes and delivers approximately 84 million consignments to around 27 million address destinations on each working day, while maintaining reasonable price leadership. More detailed figures show that “each week Royal Mail Group serve 28 million customers through a network of some 14,300 Post Office® branches and deliver some 337 million parcels a year” (Opportunity Now, 2010). However, the company has been going through a phase of financial crisis in the recent years. This in turn has alerted the management to bring about significant changes in the operations of the company. The present report aims at identifying the reasons for changes in order to outline a comprehensive modernization programme for Royal Mail Group, Ltd. Attempts will be made to describe the stages of planning, implementation and evaluation. The report will also discuss the factors resisting changes and undertake an assessment of the effectiveness of the changes. During the course of analysis Lewins three-step change model will used as the theoretical foundation and additional literary sources will be extensively referred to. 2. Reasons for Change Organisational change is initiated by various driving forces that are either external or internal. The external drivers comprise “forces that are outside the organisation and usually fall into one of the following four categories: economic, political, socio-cultural, or technological” (Proehl, 2001, pp.123). In contrast, the internal drivers “are those forces within the organisation that propel the organisation towards change, and they include such categories as strained finances, limited skill level of employees, inadequate equipment, changes in leadership, and high turnover and absenteeism rates” (Proehl, 2001, pp.123). Figure 1: Financial Performance of Royal Mail Group Ltd. (Source: Shareholder Executive, n.d.) The financial performance of the company appended above reflect the incremental trends that it has shown in terms of turnover, operating profit and net operating assets. However, the annual profits have been dwindling since 2008 and in 2009 the company reported a loss of £ 373 million. While expressing his viewpoint about Royal Mail Group Ltd. its chairman Donald Brydon had said that the company “must accelerate its drive for modernisation if it is to continue to provide the high-quality, innovative services that its customers deserve” (Brydon, 2009), despite the fact that its business has underwent transformation “from an operational disaster to one that is, however modestly, profitable” (Brydon, 2009). Moreover, Brydon has also pointed out that the regulations should undergo changes by referring to the fact that “It is common ground among political parties that a system that requires Royal Mail to accept mail from other mail companies and distribute it at a loss makes no long-term sense” (Brydon, 2009). Apart from these limiting factors, Royal Mail Group Ltd. “is effectively crippled by historic liabilities of its pension fund” (Brydon, 2009). The actuarial deficits that have piled up over the years are so high that “the company is spending an additional £1 million for each working day to eliminate the deficit identified three years ago and this process will continue for 17 years” (Brydon, 2009). In a nutshell, Royal Mail Group Ltd. is in serious trouble and has significant reasons to initiate an organisational change process. 3. Modernisation Programme Christensen has observed that “reform and change are not new phenomena for public organisations, since many of them have been experiencing attempts to bring about change and reorganisation for a long time” (Christensen, 2007, pp.122). In his attempt to differentiate reform from change in the context of public organisations, Christensen has opined that “by reform, we mean active and deliberate attempts by political and administrative leaders to change structural or cultural features of organisations; change is what actually happens to such features” (Christensen, 2007, pp.122). With reference to this, it may be mentioned that “The Postal Services Bill makes clear that a change of the regulatory environment is required” (Brydon, 2009). As has been revealed by Donald Brydon, Royal mail Group, Ltd. has “embarked on a £ 2 billion transformation that would see fewer mail centres and an automation of sorting mail into the postman’s route” (Brydon, 2009), thereby bringing about technological improvisations in the operations of the company. A generalised model for change management has been provided in the figure appended below. Figure 2: Activities contributing to Effective Change Management (Source: Cummings & Worley, 2008, pp.164) 3.1. Planning It has been suggested that “successful managers in continuously changing organisations (1) provide employees with clear responsibility and priorities, including extensive communication and freedom to improvise; (2) explore the future by experimenting with a wide variety of low-cost probes; and (3) link current projects to the future with predictable (time-paced rather than event-paced) intervals and choreographed transition procedures” (Cummings & Worley, 2008, pp.163). As has been outlined in Figure 2, the process of change management should start with a motivational phase wherein the management should create an inclination towards change and simultaneously overcome the resistance factors that inhibit change. 3.2. Implementation In the context of the implementation of change it is worthwhile to mention the three-step change model proposed by Kurt Lewin. In the ‘unfreezing’ stage, forces that maintain the behaviour of an organisation at the present level are reduced by a process that Lewin had described as “psychological disconfirmation” (Cummings & Worley, 2008, pp.24). Unfreezing can be achieved through the introduction of “information that shows discrepancies between behaviours desired by organisation members and those behaviours currently exhibited” (Cummings & Worley, 2008, pp.24). This in turn motivates the organisational members to participate in change process. The second stage, i.e. ‘change’/’moving’, “shifts the behaviour of the organisation, department, or individual to a new level” (Cummings & Worley, 2008, pp.24), by developing new behaviours, attitudes and values through structural as well as process changes. Finally, the changes are institutionalised by stabilising “the organisation at a new state of equilibrium” (Cummings & Worley, 2008, pp.24) through the reinforcement of organisational culture, structure and rewards. Figure 3: Kurt Lewins Change Model (Source: McMillan, 2008, pp.88) A reflection of this model may be observed in the initiatives that were taken in order to implement changes within Royal Mail Group Ltd. Organisation Consulting Partnership LLP (OCP) “worked in partnership with a systems consultancy and a client team to design and implement a co-ordinated programme management approach which would deliver the IS strategy” (Organisation Consulting Partnership LLP, 2010) for Royal Mail Group Ltd. The group has reported that though Post Office® had planned to invest “in five automation projects which had the potential to dramatically improve point-of-sale processes and cross-selling capability” (Organisation Consulting Partnership LLP, 2010), this strategic business unit (SBU) of Royal Mail Group Ltd. lacked sufficient experience in the management of large as well as multi-dimensional programmes. On account of such inherent limitations there was a major impact of the projects on “staff skills, remuneration and job security” (Organisation Consulting Partnership LLP, 2010) that exposed service as well as customer performance to the risk of being damaged during the phase of change. However, OCP has reported that it “helped put a communications strategy in place and advised on the required geographical structures and approaches to deliver the changes, including providing support to the regional heads of management process” (Organisation Consulting Partnership LLP, 2010). In the context of Royal Mail – another notable SBU of Royal Mail Group Ltd. – OCP “has contributed to a series of initiatives aimed at achieving a turnaround in operational performance” (Organisation Consulting Partnership LLP, 2010), as the urgent business priority of the former was to augment operational control and improvement of productivity as well as performance in terms of the critical areas of its network. During this phase the business strategy was refurbished through the following activities: “Designing and delivering a development programme for directors of planning and integration and their counterparts in HQ; Coaching the new directors on a 1:1 basis; Supporting new Strategic Heads of Planning and Integration in the definition of the strategic programmes; Introducing a new approach to capability testing on a pilot basis in 2 divisions; Developing a practical approach to change management in divisions” (Organisation Consulting Partnership LLP, 2010). Furthermore, measures for performance management were also implemented in order to achieve the following objectives: “Introduce a set of common, validated numerical indicators which had been standardised for similar units/businesses; Apply the Pareto principle and exception reporting (in place of a ‘measure everything’ approach); Create a focus on looking forward, forecasting improvements (rather than a backward-looking ‘blame culture’); Ensure that the process would explore the true causes of variances and encourage corrective action and support” (Organisation Consulting Partnership LLP, 2010). The performance management programme was implemented through management workshops, management reports, designing the content of review meetings and coaching the senior executives on the basis of the review meetings. 3.3. Evaluation It has been observed that “a combination of cost reduction driven by modernisation and changes in our price and product mix helped operating profit increase slightly to £48 million from £46 million in the same period last year despite a £55 million fall in Letters revenue year on year” (Royal Mail Group Ltd.-c, 2010, pp.1). Figure 4: Key Figures of Royal Mail Group Ltd. for 2009-10 (Q-2) (Source: Royal Mail Group Ltd.-c, 2010, pp.1) The group has reported that “a combination of new and upgraded sorting machines in mail centres means more than 80% of the mail is now automatically sorted down to the level of the postman or woman’s walk and is delivering cost benefits while changes in working practices – including everyone working all the hours for which they are paid, working flexibly and using the new equipment we’re investing in - have also helped drive efficiency and offset the effects of volume decline” (Royal Mail Group Ltd.-c, 2010, pp.2), which in turn has resulted in enhancing the operational efficiency. Consequently, the group could downsize its workforce by 5000. 4. Factors Resisting Change During the course of research numerous factors had been identified as resisting the change initiative adopted by Royal Mail Group Ltd. Firstly, “the group is under-capitalised to undertake the investment necessary and to cope with the changing business environment” (Brydon, 2009). It has been observed that although the group has a dedicated management, there is a probability that “these will tire of endless uncertainty over funding” (Brydon, 2009), as assurance of funding as well as transparency of direction are required for the successful implementation of a change process. Finally, coming straight from the horse’s mouth, “Parliament, too, needs to face brutal realities and not treat Royal Mail as a political football” (Brydon, 2009). 5. Conclusion Royal Mail Group Ltd. presents a classic case of change management wherein the organisation belongs to the public sector. Succumbing to dwindling profits the company had decided to embark on a change process in order to bring about modernisation in its operations. It has been observed that post-implementation, the progress of the company has been showing positive trends. Although, the company has reported that it’s “letter volumes fall by around 8% year on year” (Royal Mail Group Ltd.-c, 2010, pp.1), other financial key figures pertaining to its subsidiaries have shown signs of progress. Hence, it may be concluded that the Royal Mail Group Ltd. has a promising future and its operations will prove to be more profitable. However, as its Chairman Donald Brydon has pointed out, the Government should take proactive measures to help the organisation sustain the changes. References 1. Brydon, D. June 5, 2009. Royal Mail Group Needs Clarity on Funding: The Royal Mail, the Sole Provider of the One-Price-Goes-Anywhere Postal Service, Sits At the Centre of Communications. Times Online. [Online]. Available at: http://business.timesonline.co.uk/tol/business/columnists/article6433712.ece [Accessed on May 12, 2010]. 2. Christensen, T. 2007. Organization Theory and the Public Sector: Instrument, Culture and Myth. Routledge. 3. Cummings, G. T. & Worley, G. C. 2008. Organization Development & Change. 9th ed. Cengage Learning. 4. McMillan, E. 2008. Complexity, Management and the Dynamics of Change: Challenges for Practice. Taylor & Francis. 5. Opportunity Now. 2010. Royal Mail Group Plc. [Online]. Available at: http://www.opportunitynow.org.uk/about_us/members/champions/royal_mail.html [Accessed on May 12, 2010]. 6. Organisation Consulting Partnership LLP. 2010. Royal Mail Group Plc. [Pdf]. Available at: http://www.ocp.co.uk/_Attachments/Resources/58_S4.pdf [Accessed on May 12, 2010]. 7. Proehl, A. R. 2001. Organizational Change in the Human Services. SAGE. 8. Royal Mail Group Ltd.-a. 2010. Contact Us. [Online]. Available at: http://www.royalmailgroup.com/portal/rmg/jump1?mediaId=23900507&catId=23900506 [Accessed on May 12, 2010]. 9. Royal Mail Group Ltd.-b. 2010. Royal Mail Group. [Online]. Available at: http://www.royalmailgroup.com/portal/rmg [Accessed on May 12, 2010]. 10. Royal Mail Group Ltd.-c. 2010. Royal Mail Group Results for the First Half of 2009/10. [Pdf]. Available at: ftp://ftp.royalmail.com/Downloads/public/ctf/rmg/Royal_Mail_Group_Half_Year_Trading_Statement_10122009.pdf [Accessed on May 12, 2010]. 11. SAP AG. 2003. Royal Mail Group Success Story. [Pdf]. Available at: http://www.sap.com/uk/services/education/royalmail.pdf [Accessed on May 12, 2010]. 12. Shareholder Executive. No Date. Royal Mail. [Online]. Available at: http://www.shareholderexecutive.gov.uk/performance/royalmail.asp [Accessed on May 12, 2010]. Read More