How to lead a successful transformation programme
By Kevin Green, former HR Director, Royal Mail, and Non-executive Director and Strategy Adviser
The UK’s postal operator had got itself into a tough place in 2003. It was losing over £1.5m a day – yes, a day! Its customer quality record was failing, its industrial relations were so poor that it accounted for well over 60% of all the days lost to industrial action, absence was high, there was no new technology and what there was just didn’t work. It was a once-great institution (Royal Mail had helped set up most global postal operations) and one that had remained profitable for most of its 500-year life.
The challenge for Alan Leighton (Chairman) and Adam Crozier (CEO) was to transform this organisation so it was fit enough to thrive in a newly created, deregulated market. The regulator, Postcomm, was opening up the market to competitors for the first time and if you can’t make money as a state monopoly then being up against young, hungry entrepreneurial businesses was not going to be easy or comfortable. I joined Royal Mail in 2003, first as the Chief Learning Officer and then as the Human Resource Director for the £7.5bn letters business.
We all knew that this transformation programme needed to operate at multiple levels at the same time. We needed to empower frontline managers to lead their people and create change, from the bottom up. We needed to provide our people with the tools for the job, including walk sequences and sorting machines. We wanted to reduce the power and bureaucracy of the centre, who were a dead weight on change and improve customer service and experience. When I arrived the HR function alone was huge; we stopped counting the people in it at 4,000. We had a budget of £157 million just for HR. We knew that we needed to change things at a pace, and HR was where we needed to start by putting our own house in order. We were in crisis and so the change programme needed to operate in a counter-cultural manner. We decided we needed to break things before we sought to fix them. Even now, I get a cold sweat when I think about how we went about the early stages of the transformation. It was direct and, at times, brutal.
Transformation is context-specific
This is an important learning point for people leading change. Every change programme is different; it’s always context-specific, so what will work in one organisation will often not work in another. Each transformation needs to be designed to meet its own specific requirements and recognising the organisation’s culture, leadership, pressure for change and its mobility.
The learning for me and my colleagues was: we needed to start the change and make sure it was visible, dynamic and showed that we were serious. The organisation had been trying to transform itself in an incremental way for over a decade with little success. If we had had longer and weren’t in such a poor operational and financial situation we would have taken more time to analyse and been more careful and considerate, but in a crisis you have neither the time nor the money.
For example, we restructured the HR function from top to bottom in six months, creating a Shared Service, Centres of Excellence and HR Business Partners. We removed hundreds of personnel people who were doing line managers’ jobs for them. Our managers needed to manage their people and performance themselves, rather than delegating the difficult people conversations to their HR colleagues. This was also about HR sending a message to the rest of the businesses; ‘We’re doing this to ourselves first before we help you do the same!’
Hard and soft change at the same time
The objective for Royal Mail was simple: to survive. At one point the business was technically insolvent so survival was clearly the first objective. After that, we knew we needed to compete and thrive in a deregulated marketplace where customers for the first time ever had choice.
We needed to show our people that how we currently operated would not be good enough in this changed world, and while the change was difficult, we stated clearly that we wanted to take our people with us on the journey of transformation.
This led us to work on soft and hard change at the same time. A great example of this was improving our absence record. We had, on average, over 12 days’ absence per worker per year. This cost Royal Mail £50 million in total for each day of absence. We reviewed our processes and could see we needed to tighten them up and ensure our managers were proactively managing absence. They needed to ask staff for doctors’ notes, and we implemented a return-to-work interview. Repeat absentees were referred to Occupational Health. The unions were very unhappy as they thought managers were becoming over-zealous. This process of hard change included the design of new processes and policies. We trained the managers and modified reporting so that leaders could track performance at a regional level.
However, this hard change was supported by some well-designed soft change. We created a competition for all posties who had not taken a day off sick in six months. They would be entered into a draw for a new car. In fact, we ran this in all 31 regional areas and across all central functions. In total we ran 39 competitions. The Chairman went around the country handing out new cars to 39 staff. The title of the competition was ‘You’ve got to be in it to win it’. It created a huge buzz and showed that, as an organisation, if we got better we were prepared to share the benefits of success with our people. We repeated the exercise at least three more times with different prizes each time, and by 2007 absence was down to six days per worker per year. This amounted to a saving of £300 million, while hundreds of staff benefited from new cars and Caribbean cruises. When designing any transformation process, always seek to find ways to link your people into the success of the change. You have to be able to answer ‘ What’s in it for me?’ Winning hearts and minds is never easy, but it is an essential part of any change programme.
Don’t forget to explain what remains the same
Is it any surprise that people often don’t buy into change or transformation? One major reason I have observed is that the change is over-sold. Leaders often get obsessed with talking to their people about the change, while not talking about what remains the same.
We changed 104,000 frontline posties’ jobs. We changed the times our people started work, we asked them to drive rather than walk or cycle, and we wanted them to use hand-held computers for the first time. These were significant job changes. We communicated what we needed to change and why, right at the start of the process. However we didn’t communicate what would remain the same for our people; they would retain their current walk, they would work at the same office, be part of the same team, wear the same uniform and have the same terms and conditions. By over-engaging and repeating the change message without balancing it, we created more uncertainty and fear than was necessary. We forgot to emphasise what would remain the same for our people. Once we recognised this and we started to balance the change messages and talk about the factors that would remain the same, we found it got easier to engage our people about how and when we should make the change.
Measure the change
During the transformation we measured employee engagement on a monthly basis and at a granular level to see if our people’s perception was improving, were the changes working at a local level and were managers communicating more often. We used the customer service profit chain as a tool to help us explore if these people changes were feeding through improvements in customer satisfaction and performance quality. It took time but it proved there was a causal relationship between improvements in employee engagement and customer satisfaction. This was one of the key elements in the transformational programme.
Transformation is far reaching; it leads to a dramatic change within the organisation. Transformation needs to be recognised as an unnatural act; it shouldn’t happen too often in an organisation’s life. At Royal Mail it took us close to 500 years before having to reinvent how we operated!