poisoned chalice or bad hiring?

If the reports are true and Royal Mail boss Simon Thompson is on the verge of leaving, the company will soon be appointing its third boss in five years and its fourth since coalition chancellor Vince Cable decided it would be a good idea to raise a couple of billion for the public purse a decade ago.

It might therefore appear that being chief executive of what is now called International Distributions Services PLC (LSE:IDS) (one of several questionable Thompson legacies) is a poisoned chalice. An impossible role at the head of an intractable company that should never have been listed. 

But given the huge demand for parcels amid the internet shopping age, maybe it’s just bad management?

Looking at the two years and four months since he took the role, it’s hard not to say there have been some thunderously bad missteps.

And equally, were all those errors entirely his own? Maybe the board’s hiring committee should also be questioned for putting the wrong men in the job, including perhaps executive chairman Keith Williams, who has seemingly been at least an equal agitator in the painfully protracted pay negotiations with the CWU.

Thompson’s predecessor was Rico Back, a German who lived in Switzerland, but got neither workers nor shareholders on-side after his bumper pay deal was rejected by 70% at the AGM and his push for change was rejected by a highly unionised workforce. 

While Germans are used to the concept of working hand-in-hand with union representatives for the mutual benefit of the company, the Communication Workers Union (CWU) accused him of attempting “asset-stripping” with his plans to bump up efficiency and focus more on parcels.

Before Back, Canadian Moya Greene’s eight-year tenure to 2018 ended after a much-trumpeted deal with the CWU that turned out later to be nowhere near as groundbreaking as shareholders had hoped. 

Looking at Thompson’s work history, spanning around a decade and a half in digital roles, including Ocado, HSBC’s digital commerce, Morrisons and Apple’s online stores, lastminute.com and six months managing the government’s test-and-trace app immediately before he was hired, the board this time put their eggs in the digitisation basket.

However, under his leadership not only were the company’s cybersecurity systems exposed in a hack that badly hamstrung the business for many weeks, but arguably a bigger issue was first improving the relationship with an intractable workforce, to get them onside with the drive to improve efficiency.

As a former state monopoly, the company enjoys a dominant position and the spread of its huge network of posties might seem a highly valued asset in the right hands.

But while Royal Mail has a requirement to maintain the universal service obligation for letters, its competitors focus on the profitable parts of the letter delivery game, probably also using non-unionised staff on lower salaries.

Greene had trumpeted a deal with the Communication Workers Union (CWU) that was later revealed to be far from the panacea for the company that some had hoped, with little improvement in productivity actually delivered.

In their side of the negotiations, Thompson and Williams had been accused by the union of trying to force the ‘Uberisation’ of the company, but eventually backed down and agreed not to bring in owner-drivers, swathes of agency workers and compulsory Sunday working.

What’s more, following an unprecedented pandemic-related profit, the pair showered £400mln on shareholders via a buyback and a special dividend in November 2021, money that more equitably would have been used as a lubricant for the pay deal, or at least shared with staff, who instead received a small fraction of that amount.

The fact that the pay deal includes a profit-sharing agreement may indicate an acknowledgement of the error of their ways. 

At the time of the shareholder payout, the new CEO said the “re-invention of Royal Mail is in flight”, but even Icarus would be cast scorn on Thompson’s attempts.

While his first year saw the company bear the fruits of that pandemic-fueled parcel demand, those sacks of potential goodwill were lost in the post and the shares have roughly halved during his tenure. 

Investors will be keen to see if the next new boss is one who can learn the lessons from their predecessors or just provide further evidence that the company should never have been sold by the government in the first place.