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Breakfast with Frost
Allan Leighton, chairman of Consignia
Allan Leighton, chairman of Consignia
BBC BREAKFAST WITH FROST HOSTED BY PETER SISSONS INTERVIEW: ALLAN LEIGHTON CHAIRMAN OF CONSIGNIA JULY 14th, 2002

Please note "BBC Breakfast with Frost" must be credited if any part of this transcript is used

PETER SISSONS: Now it may sound surprising but the second largest employer in Britain is a firm called Consignia rather better known as the Post Office or the Royal Mail. Well although it provides employment for tens of thousands of people collecting, sorting and delivering mail it's an organisation in crisis, it has the worst strike record in Britain, it's been failing to meet targets for delivering mail promptly, it loses a million letters a week and its parcel service is widely derided as a shambles, worst of all it's losing money at more than a million pounds a day and there are calls for the whole operation, still owned by the government, to be sold off. Now the man who is charged with sorting this lot out is Allan Leighton, good morning Allan.

ALLAN LEIGHTON: Good morning.

PETER SISSONS: In the Telegraph this morning, Leighton orders rethink of 750 post charge plan and it says that you only heard about it on a radio news programme on Wednesday morning, is that true?

ALLAN LEIGHTON: That's right, yes, absolutely and we are having a rethink because on the one hand I'm trying to put a price increase on stamps so that I can argue that you know the first class stamp is the best value you can get in Britain today and one of the things we have to do for our customers is we've got to deliver some value and I think that 14, you know is a lot of money for small businesses. So the point of these pilots and it is worth remembering they are pilots in these 14 locations, is to learn how to do this properly, you know move to one delivery and then find a way in which we can cover our costs but at the same time deliver some value. So we're going to move to not just 14 but 5 and 10 and find the lowest cost way in which we can do this.

PETER SISSONS: But the management of the Post Office, of the Royal Mail, of Consignia, worked up this plan without putting the chairman in the picture?

ALLAN LEIGHTON: No I mean they worked up the plan in terms of the move to on-delivery which is the most significant thing. I mean the big move here is to go to one delivery a day because that saves the company a huge amount of money. As you know at the moment the second delivery is only four per cent of the mail but it's 20 per cent of our costs and 30 per cent of our time and in a business that's losing, you know, as you rightly say, over 1.2 million a day we just can't continue to do that.

PETER SISSONS: So do you favour the charge for the early delivery, the guaranteed delivery but at a lower level?

ALLAN LEIGHTON: Yes because, you know clearly if we're losing money.

PETER SISSONS: What sort of level?

ALLAN LEIGHTON: I think again the pilots will get you know 5, 10 or 14 and we will find the lowest cost route to do it but at the same time what we can't do is continue to lose money as you rightly say, on everything we do.

PETER SISSONS: So it could be 250 a year instead of 750?

ALLAN LEIGHTON: Yes it could be, or it could be, you know it could be more than but I think the most important thing for us to do in the pilots is to find a way which we cover our costs because we can't continue to lose money, but at the same time try and deliver value to customers and that's a difficult equation.

PETER SISSONS: But isn't it odd, if you want something delivered early the next day it's the sender who pays everywhere else, if you ring up a courier firm, if you want it there next morning you pay the extra, why should the person who gets it pay the extra for getting it early in the morning?

ALLAN LEIGHTON: Well I think again it's just the way that, you know, we've always historically done things, I mean it goes back to my original point, it is that so many of the things that we do are uneconomic, I mean you cannot lose 300 million a year which we're doing at an operating level if you're doing things profitably. And the issue here is to get to one delivery and to deliver to businesses before nine o'clock in the morning then if we want to add smaller volumes into that then we have to charge for it. Unfortunately, you know it sound bizarre to you but, but anything that, in many ways the smaller businesses which are, you know, under 20 letters, because it's a lot of stamped mail and because there's a lot of class, a lot of second class stamped mail is actually the most unprofitable piece of our business, it's nuts I know but anything that we put a stamp on and anything that we then have to put second class on, or a stamp on we just lose a lot of money, we lose 250 million a year on second class mail.

PETER SISSONS: But we hear this week that the trains used to be faster a hundred years ago, the Royal Mail certainly was, four or five deliveries a day, you could, you could mail your wife to say you'd be late home for dinner and she'd get it. With all the new technology available this must be a chronic failure of management?

ALLAN LEIGHTON: It's a chronic failure full stop. I mean you cannot imagine a company that's got, that is a monopoly which it is, which has got 6 billion of sales that manages to lose 1.2 billion, 1.2 million a day. And so there's a whole, you know there's a cast of things that have gone wrong over a period of time, the most important thing is it can't continue because the business will go bust and therefore the things that we're doing, although unpalatable, you know we've got to do otherwise the mail as we've known it and exists today, which still in many ways is a pretty good service, I mean you know 90 per cent of all letters are still delivered the following day within 24 hours at 27 pence, that is fantastic.

PETER SISSONS: Ten per cent is an awful lot?

ALLAN LEIGHTON: It's a lot but 90 per cent is also an awful lot for 27p. The big thing is here, which is, which everybody's got to face into, the business is in a terrible state and unless we do some things differently it will go bust.

PETER SISSONS: And yet when the Post Office is crying out for leadership you're only a part-time chairman?

ALLAN LEIGHTON: Yes that's right but again, you know most chairmen are part time.

PETER SISSONS: Are you having, is it true you have 11 separate boardroom positions from Leeds United, BSkyB, Dyson, Scottish Power, I mean you just can't devote the time to this job?

ALLAN LEIGHTON: Well actually I don't have 11, some of those are gone, but that's by-the-by.

PETER SISSONS: How many?

ALLAN LEIGHTON: I've got nine jobs but I spend 50 per cent of my time on Consignia and the clear, the clear thing for me to do is, you know what I've got to do is create a full-time management team to lead the business into the future. Most chairmen are part-time and the thing that I'm embarking on now is to recreate the management in that company to get us through this period of renewal which is very important, I mean it's very important, the postal service, it's key to this country, it was the best postal service in the world and it can return to that. But it can't return to it by continuing to do what it's been doing for the last five years because, you know, as you say the losses are horrific.

PETER SISSONS: There is a view any management that changed a company's name to Consignia from Royal Mail needs its head examined?

ALLAN LEIGHTON: Well I mean I can't comment on the examining heads of past management...

PETER SISSONS: But are you going to change it back?

ALLAN LEIGHTON: We're changing it back, I mean we've already done so...

PETER SISSONS: As Royal Mail or Post Office?

ALLAN LEIGHTON: As Royal Mail.

PETER SISSONS: It's Royal Mail.

ALLAN LEIGHTON: It will become the Royal Mail Group Plc...

PETER SISSONS: It's a superb brand name...

ALLAN LEIGHTON: Absolutely...

PETER SISSONS: Which its own management didn't know the value of?

ALLAN LEIGHTON: Absolutely I mean we're very fortunate we've got two great brand names, we have the Post Office and the Royal Mail and you know everybody wants to, to change the name of the company and it will be done by the end of this year, we've already announced that. And I think again psychologically and for our people in terms of motivation that's quite a significant step.

PETER SISSONS: It's not going to motivate them very much when you start slashing the, the pay roll?

ALLAN LEIGHTON: No but, you know the issue is that, we, you know our problem is that we just, you know we're very inefficient and it's not, the real issue about slashing the pay roll is unfortunately, you know the people that we take out which are the 30,000 redundancies are in many ways not the people that, that caused this problem. But you know realistically what we've got to do is we've got to look at the business and say we cannot continue to lose 1.2 to 1.5 million a day. The only way we'll do that, unfortunately, is to take work out and if you take work out then you have to take the people out too.

PETER SISSONS: How are you going to motivate those that remain, share?

ALLAN LEIGHTON: Shares, yes I mean I think that's, there's two things, people are motivated not just by pay and we have to do something about our pay for our people because our front-line people particularly are under-paid and my intention is to bring a share scheme in so that everybody in the business shares in the prosperity of the business and hopefully to have that in at the end of this year. But the big thing is, you know the morale in our business is awful, you know people have to work in terrible conditions, they're not listened to, the levels of harassment, bullying, racial discrimination will be as high as any company in Britain and all those things are unacceptable and unpalatable and we have to change those things because then if you show people respect then you've got a chance that, you know, they'll respect back and that will improve the service levels in the company.

PETER SISSONS: But with the prospect of full competition by 2007 you're predicting you could lose 30 per cent of your current market?

ALLAN LEIGHTON: Yes.

PETER SISSONS: That's real defeatism isn't it, with that sort of attitude you're never going to be profitable?

ALLAN LEIGHTON: Well I mean I'm not accepting we'll lose 30 per cent at all, I mean you've got to, you know you've got to work on some numbers but as far as I'm concerned, you know we have some of the best people, some of the best infrastructure, but as you say we've got some of the best brands, I mean the Royal Mail brand and the Post Office brand are fantastic brands so what I want to do in terms of competition, it's a fact of life and actually to a degree would be good for us, but we're going to compete and we should be able to compete better than anybody else but the only way we're going to compete is if we change the way in which we do things because at the moment competition come in, they'll slice us. But we're not going to give in, we are going to compete, it can be a great service, it is and can be the best postal service in the world but not if it continues as it is.

PETER SISSONS: Allan Leighton thank you very much.

ALLAN LEIGHTON: Thank you very much.

END

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