Several raises several questions about the way a company is managed when a very well-paid CEO resigns even though the board fully supports him.
This is the case with the Finnish Post Office (Posti in Finnish) which has just announced the CEO’s unexpected decision to resign.
Posti is a state-owned company with a legal responsibility to deliver the mail to every person and company in the country. That is set in law as a public good.
It is clear that the whole nation has a natural interest in our postal services because they deliver letters, newspapers, magazines and parcels almost every day of the year to the whole country. That interest is especially strong when the CEO announced his recent decision to cut workers’ wages by 30% at a time when he and other senior managers were given huge increases in their remuneration packages by the board.
The last government had ordered this CEO to improve profitability of the Posti and prepare it for a possible stock exchange listing like in the UK. This same government wanted to privatise many of the basic services like healthcare, education as well as the postal services. Pressure was placed on Posti to reduce costs and implement productivity improvements.
That is no easy task in a country the geographical size of Finland with a relatively small 5.5 million population, especially one that has become addicted to digital solutions. The number of letters and newspapers being delivered is a fraction of past years and it is almost impossible for that activity to be profitable.
Posti’s private sector competitors have been supported by the Conservative and Center Parties, that rely heavily on funding from private sector companies. Both parties have an unmovable belief that only the private sector can deliver cost efficient solutions. These private sector delivery companies have embraced deregulation of postal services by grabbing the most profitable markets in the big cities, leaving postal deliveries to Posti while their lobbyists attack Posti’s position with claims of “unfair competition”, Trumpian style…
Posti is a company that operates in a transparent manner and enjoys no special advantages in its operations, except for government ownership. They receive no funding guarantees or state aid directly or indirectly. Posti’s profits are low, but they have legacy constraints and are forced to maintain a national network for delivery services which hey are seeking to upgrade and improve. Collective agreements with the unions are also a legacy and they are not that favourable for Posti as a company. Time is needed to find new modified agreements that take into account the needs for improved productivity and new services. These changes do not happen overnight.
Competition has, never-the-less, kept Posti on their toes and has made them seek out new sources of revenue using its huge network of workers throughout the country, who actually visit almost every home, office and factory each week as a normal part of their activities. They have taken advantage of digital solutions for communication and invoicing, in addition to helping the aged with simple chores like gardening and house-cleaning.
The former CEO cut service resources in the name of savings – which basically led to post not being delivered on Tuesdays in big cities – meaning that many printed magazines arrived late and daily newspapers turned to private delivery solutions! This has hurt clients who have turned to private delivery service providers.
The other big policy he was implementing was the plan to cut blue collar wages by 30%, a policy that caused a public outcry and could have led to open warfare with the unions had the new government not stopped it in its tracks. This probably caused the CEO to resign. The board praised the work of the departing CEO and made no apology for the crisis into which Posti is now facing.
Smart boards should not reward management that cut resources and performance quality or treat loyal workers badly. Change has to be managed in a clever ways and without creating chaos.
In the past, Posti has been a well-functioning public service that has been weakened by poorly planned enforced saving programs, and pummelled by hard-nosed lobbyists from competitors who receive a favourable support from right-wing politicians driven by blind dogma.
The same strategy and results are clearly visible in other areas such as education and health. The last coalition government has planned and implemented huge cuts in public education and healthcare. Health centres were still working well in the 1980s, but now long queues for health centres as doctors and health care workers move to the private sector for higher pay.
The private sector has no monopoly on productivity, we have excellent public education and healthcare systems. Bodies owned by the public sector can and must always see improvements but bringing in the private sector as their for-profit-saviour is no automatic solution for higher levels of productivity. We need more agile and more flexible public service providers with less regulation and bureaucracy limiting their potential.
CEO’s and board members need to consider all stakeholders over the long term, and not just stare at the income statement. It takes years to improve the performance of large companies like Posti – especially when its activities are fundamental importance to the country’s economy.