Telling the truth about SME life today

How to solve a problem like Royal Mail

Unstable large companies present problems for SMEs. They not only create a credit risk but also endanger the supply of vital goods and services. The Royal Mail dispute is a timely example. It’s not just a spectator sport but a problem that affects thousands of businesses that rely on Royal Mail’s services.

As a nation, we have a poor record of managing once-vibrant major employers. Royal Mail is the new coal, ship-building, steel or car industry: the problem is entirely about the socio-political impact associated with the fate of 165,000 employees.

There are five parties:

1.      Royal Mail management – who want to assert their right to direct the affairs of the business.

2.      The employees – who want reassurance that their economic welfare will be handled with sensitivity.

3.      The CWU – who want to protect their members‚ interest and preserve their standing as a negotiating body.

4.      HMG – that owns the business and wants to close a financial black hole without a political ordeal.

5.      RM customers – who want a reliable, economical collection and delivery service.

Royal Mail’s scale and business model are no longer viable. The market it serves has evolved faster than Royal Mail has been able to adapt and poor industrial relations continue to impede its ability to change radically or rapidly.

Another serious problem is that Royal Mail employees no longer trust management. They have transferred their allegiance to the CWU.

HMG owns a two-part liability. Firstly, the circa £10bn deficit in the pensions scheme. Secondly, the negative cash flow from investment and restructuring costs.

Resolving the recent dispute has not brought long-term peace, as the fundamental problems remain unresolved. Only a radical approach that eliminates the union/management confrontation and establishes a new basis for progress can offer a stable solution.

Here’s one solution: HMG could sell Royal Mail to the CWU for £1. Both the CWU and the workforce could operate the business in their interests. Under this structure, the preservation of jobs would depend on the capacity of the employee shareholders to deliver a cost-efficient and reliable service and the creation of a positive business value would contribute to employee benefits in the form of jobs, pay and pensions. Further industrial action would be pointless, as the CWU would have no-one to confront.

Too good to be true Probably. The CWU’s business model requires a third-party adversary to confront and, ideally, a shareholder with unlimited funds. It would probably be suspicious of anything unconventional and may accuse HMG of attempting to abrogate its financial responsibility. However, most successful change requires a counter-intuitive approach, leading to an unconventional course of action.

Controversial as it may seem, this unconventional proposal has the virtue that it changes the balance of negotiation and, combined with new leadership, it may just provide the creative stimulus necessary to achieve a lasting solution.

I look forward to your views, Real Business readers.

Picture: source

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