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You can’t be a commercial company and fail to deliver the service you promise without penalties, and that’s why Ofcom Royal Mail fines totally £1.6m have just been imposed.
Ofcom Royal Mail fines for missing 1st Class delivery target
£1.5m of the fines were for failing to delivery First Class letters on time in the 2018-2019 financial year. Only 91.5% of First Class letters were delivered on time against a target of 93%. Ofcom state that Royal Mail didn’t provide a satisfactory explanation for this, and didn’t take sufficient steps to get back on track during the year.
Royal Mail say that “We accept and understand Ofcom’s decision”. They go on to say that during the 2019-2020 year which they’ve recently reported on they tried harder but the Coronavirus pandemic made them fall at the final hurdle – For the full year Royal Mail delivered 92.6% the next working day, but up until the 15th of March they were meeting the First Class target for the full year with a performance of 93.0%.
“We are pleased that Ofcom has taken into account the unprecedented impact of the coronavirus pandemic on our operation when assessing our 2019/20 First Class Quality of Service performance. We worked hard to restore our service quality in 2019-20 and, were it not for the pandemic and its impact on our business in the latter half of March, we were on course to deliver the requisite First Class regulated Quality of Service target (93 per cent). Despite our best endeavours, some areas of the UK experienced a reduction in service levels during March. Relevant factors included high levels of coronavirus-related absences and necessary social distancing measures.”
– Royal Mail
Ofcom Royal Mail fines for overcharging
The remaining £100k of the Ofcom Royal Mail fines was for overcharging for the price of a Second Class stamp between the 25th of March and the 1st of April 2019. The price cap set back in 2012 was due to rise on the 1st of April but Royal Mail’s new pricing put them 1p over the price cap for the week before.
Royal Mail tried to make amends by apologising and donating the £60k additional income they estimate they would have received to charity but Ofcom fined them anyway.
“Given the harm caused and failure in its processes to stick to the price cap, we have decided to fine Royal Mail £100,000. It has since made changes to its processes that it says will prevent this error from happening again.”
– Ofcom
“Many people depend on postal services, and our rules are there to ensure they get a good service, at an affordable price. Royal Mail let its customers down, and these fines should serve as a reminder that we’ll take action when companies fall short.”
– Gaucho Rasmussen, Director of Investigations and Enforcement, Ofcom
Will future Ofcom Royal Mail fines be avoided?
It’s hard to argue with the Ofcom Royal Mail fines and indeed in terms of Royal Mail’s budget they are almost insignificant. Royal Mail have put aside £150m for redundancy payments and Rico Back who recently left as CEO picked up £5.8m in 2017 and walked away with £480,000, £50,000 to cover legal costs and up to £25,000 for ‘outplacement support’. The real question is how do they revitalise the business and avoid them in the future.
With Keith Williams as interim Executive Chair of Royal Mail Group, Stuart Simpson as interim CEO of Royal Mail UKPIL (UK Parcels, International and Letters), and Nick Landon acting as Chief Commercial Officer for Royal Mail UKPIL and Parcelforce, the only real difference to Royal Mail currently is that Rico Back has gone. Can Royal Mail turn around with existing officers stepping up to take over or will these executives carry on down the same agenda of the past few years?
Accepting that letters business is declining and parcels growing, Royal Mail are doing little to stem the flow of competitors such as the newly launched Amazon Shipping hoovering up what would in the past have been their profitable business. With the same people doing the same things, trying to prop up the organisation with the same fixes, it would be little surprise if the results didn’t end up being similar.
There is a strong argument that Royal Mail needs something more drastic than cutting 2,000 senior leader and management roles (half of Royal Mail’s senior leaders and most senior managers are to lose their jobs). Spinning off GLS, if that’s what’s decided, won’t help as that will leave UKPIL and Parcelforce weaker than ever – GLS is where they’re hoping the profit will come from.
It’s time to stop worrying about the next couple of years and a couple of Ofcom Royal Mail fines as they are irrelevant if the 5 Century old institution collapses and is sold for parts at the end of the decade. What’s needed at Royal Mail is a permanent Chair and permanent CEO brave enough to bring a new vision to take Royal Mail forward not for the next five years but for the next century.
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