Public Services Management: Countering a music hall joke: Rachel Lipman reports on a radical transformation at the Post Office

Once upon a time there was a Cinderella business that was losing money, providing a poor service to customers, making mistakes on behalf of clients, and treating employees as though they were in an army. Then along came a fairy godmother, who waved a magic wand and transformed the organisation.

The business is Post Office Counters and the fairy godmother is actually a fairy godfather, Sir Ron Dearing, the former Post Office chairman. In 1985, Sir Ron realised Post Office Counters would not survive unless it changed radically, so he appointed a team of managers to devise and implement fresh ideas.

When Post Office Counters was hived off from the Royal Mail and Parcelforce the next year, the team had carte blanche to introduce a culture more suited to 10,000 white-collar employees working in 1,000 main post offices throughout England, Scotland, Wales, and Northern Ireland.

Together with 19,000 sub-post offices run by agents, Post Office Counters has the biggest chain of outlets in the country, twice as many as high street banks and building societies.

Now, six years later, Post Office Counters sees itself as an innovative, progressive, even radical organisation. It makes an annual profit of about pounds 26m a year and has grown by 1 per cent a year in terms of transactions to customers. Service to 28 million customers a year has improved dramatically, penalty payments to clients has declined from 'many millions' to less than pounds 1m a year, and working practices have been revolutionised. Bob Peaple, director of resources, says: 'Today we are perceived as one of the best post offices in the world, if not the best.'

Being the best means offering an efficient service involving more than 150 transactions from selling stamps to collecting road tax for the Government and telephone and gas payments for BT and the gas boards, paying out pensions and child benefit, and so on.

'We regard ourselves as being in a competitive environment because all the services we provide can be provided in a different way: for example, state benefits can be paid directly into people's bank accounts,' Mr Peaple says.

To ensure competitiveness, Sir Ron Dearing's team sat down at the start to analyse the business. It concluded that the Post Office was a labour-intensive business with people as its most important asset. 'Lots of companies pay lip service to that but we set out to be a proper peoplebased company,' Mr Peaple says.

The first task was to alter the culture of the sorting office, which was mostly male, blue-collar, bureaucratic and militaristic. There were fewer than 100 part-time employees and full-time staff on fixed schedules, despite the fact that customers' arrivals came in peaks and troughs.

'We were constrained by regulations and agreements that had been there since the year dot,' says Mr Peaple. 'There was a tendency to do things through the unions and a certain lack of pizazz on the part of managers. We were not exactly one of the world's crispest businesses.'

The management team recognised a great opportunity existed to break the mould. 'We realised we had to change the way we managed. We wanted to treat our staff in the same way that we wanted them to treat customers.' The aim was to treat employees with respect, rewarding them where they had done well, meeting their aspirations, communicating more effectively, and removing all barriers to advancement.

All barriers that discriminated against women and ethnic minorities were scrapped. Today, 55 per cent of the workforce is female (as opposed to 48 per cent previously), of whom 25 per cent are senior managers and 35 per cent middle managers (as opposed to fewer than 10 per cent in both cases before). Two of the 13 directors are women. Promotion is based on merit and not seniority. There are five-year career breaks for women who want to start families, full-time jobs can be converted to part-time ones, and work on a casual basis is uniquely encouraged for carers and mothers who want to keep in touch with the workplace but can only do so for short periods.

There are now 3,500 part-time employees, 90 per cent of whom are women. Part-time employees are paid on an equal basis with full-time staff.

'If you're dependent on team spirit, it's crazy to signal to part-timers that they are an inferior breed,' says Mr Peaple. 'There is a bottom- line cost involved but we believe it is worth paying because if people are valued and respected by the organisation, they are more likely to value and respect their customers.'

The proportion of employees from ethnic minorities has doubled to 10 per cent since 1986. The company feels it has a wide labour base to choose from because it shows that it does not discriminate.

The new workplace agenda was extended to customer services. Post offices were refurbished and queueing time - 'a music hall joke' says Mr Peaple - was drastically reduced so that only 3.4 per cent of customers now wait more than five minutes to be served, compared with 90 per cent before.

The average waiting time is two minutes, says Mr Peaple, who calls the Post Office the 'lead player on the high street in terms of queueing performance'. He says the average queueing time in a supermarket is three minutes.

Post Office Counters also leads the field in investment in training. It spends as much as 3.4 per cent of its wages bill on training because it believes a well-trained workforce is more likely to provide a better service. 'We see training not as a cost but as an investment: if training is expensive, try working out the cost of ignorance,' says Mr Peaple.

In Post Office jargon, Mr Peaple himself is more than a manager - he is a team leader. 'Our business, like most, is made up of small teams. While most companies have loads and loads of managers, what they really need are loads and loads of leaders to inspire teams.'

After training, team leaders at all levels are regularly evaluated by their teams and undertake a three-point 'action plan' to improve their performance. No one is exempt, not even Richard Dykes, the managing director, who promised to work behind a counter for a day. Last month he went to the North Finchley Post Office in north London.

He learnt many things, one of which was that 'customers wanted not only fast and efficient service, but also a warm and welcoming service, which is something we will try to develop', he says.

The Post Office is being considered for privatisation by the Government, which was this week urged by Michael Heron, the company's new chairman, not to break it up. Mr Peaple says: 'As far as the managers are concerned, whether we are in the private or public sector, we want to be a world-class organisation providing a superb service to customers.'

After our interview at his office in central London, Mr Peaple took me downstairs to see company noticeboards with a variety of displays, from cash-flow charts ('we're an open company') to employees' rating of company information videos and a neat travel expenses brochure condensed from nine typed A4 pages.

'We're not status-oriented in this company. If I have to go to Milton Keynes and I don't have to work on the train I go second class. If a counter clerk from Sheffield has to come to London and do some work on the train, he or she travels first class.'

He is proud of the organisation's achievements, but not complacent. 'We're on a journey,' he says, 'and we haven't reached our destination. There is still a lot to be done.'

(Photograph omitted)