The organisational risks & moral dilemmas of privatising Royal Mail: Why undo something that works?

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The current UK government’s plans to privatise the Royal Mail raise a series of issues which can create long term instability in this key sector. The organisation has been a highly productive and effective part of the British public sector and whilst the government may be able to raise some short term revenue the truth is that the longer term costs will outweigh the short term gains. There are various reasons for this.

Firstly, the identification of the workforce and the consumer with this service is very strong and this is linked to its public and nation-wide status. The fact that employees have rejected the possibility of shares in the firm as a consequence of privatisation means that there is a firm belief that things will not get better in a post-privatised organisation. Many see the organisation as a national asset which guarantees stability in terms of service and work for a large part of the UK population and is a major pivot within the nation’s communication infrastructure. This clear commitment is based on a stable workforce, one which has a strong insight into how postal work is to be done. The workforce has contributed greatly to the organisation through various rounds of modernisation. The new automated centres were the outcome of joint discussions as many older sorting offices were closed and new ones open. The privatisation of Royal is likely to uncouple this relation and dialogue on strategic issues and make for a more challenging situation.

Secondly, the fear of organisational fragmentation and the possible separating and dividing key divisions and sections means that the organisation could end up being a series of franchises which offer variable quality and services. Regions and sections within the organisation could be spun off to opportunistic suppliers and interests. These, in turn, may start subcontracting work and using unreliable sources of labour. The advantages of an integrated and stable operation would be lost. At the moment there are clear strategic links and people-planning processes that allow for a greater amount of flexibility and labour deployment which would not be the case were to be privatised. With privatisation the organisation could end up being fragmented with a workforce losing the skills to work across many parts of the operation. In effect, the advantages of scale and integration will be lost.

Thirdly, the Royal Mail is a key service and reference point within all communities and it forms a basic part of the UK infrastructure. The risk is that it would be difficult to guarantee the quality and consistency of operations. Privatisation would probably lead to more zero hours contracts and temporary/agency employment practices such that people handling the mail may have very little support and eventually develop a low level of commitment to the organisation. The country faces a real challenge in the way employment is changing and strategic sectors are likely to be undermined by working practices that are about cost containment and not quality enhancement.

Fourth, many have argued that Royal Mail as an organisation would not have invested as much in terms of automation and modernisation had it been privatised in the past. The Royal Mail has, since the early 1990s, undergone a massive programme of automation, building of new offices, and greater use of IT and ICT integrated process which would have not been possible within the private sector. Next time around, were it to be privatised such a high quality and high technology approach to sorting and processing mail may not be possible as profits are squeezed for shareholders and higher managerial and director salaries. One cannot underestimate how the management and workforce of the organisation have endeavoured to develop the organisation into what it is today and this has been linked to its public sector status and the highly structured nature of the firm. The union has been involved in much of this planning and joint work and this could be lost. Conflict levels could rise in a context of post-privatisation. The investment within what is a leading global operation would be lost to international organisations that could aim at undoing the culture of planning and modernisation that has occurred in terms of a high-tech approach.

Fifth, Royal Mail has, in general, been committed through its employment relations system and structures of negotiation to more stable employment practices. The management and unions of the Royal Mail have worked to ensure that there has been a commitment to training and quality, for example, which would be challenged in the private sector. There is a long history of dialogue and discussion between the unions and the organisation which has been pivotal to the process of modernisation and change. Privatising the organisation may undo much of this work. The preparation for privatisation has already kicked started some tensions and issues as workers feel their conditions are being eroded for a quick sale. Yet the organisation is a badge of pride for many workers in it. Undoing this organisation in the longer term, which is likely to happen with privatisation, will no doubt lead to an undermining of commitment and engagement with quality. The British national context cannot afford to lose more and more examples of stable and employment in what appears to be a downward shift within Britain to zero-hour contracts and a precarious workforce.

Then, sixth, there is the question of privatisation as an ideology. At a time when we see so many problems related to the UK’s post-privatised infrastructure such as high prices and the failure to reinvest in organisational capacity, the agenda for privatisation appears to be driven by short term interests and a failure to reflect on some of the limitations of earlier periods of privatisation. It is curious that at a time when we can see the consequences of the failure of the politics of de-regulation, the government wishes to de-regulate even more. Privatisation appears to be about the public debt and deficit more than what’s best for organisation and the people it serves – and the nation as a whole. In the end Britain has lost control of many of its key national assets and this has raised alarm as to how the country is to control and develop its infrastructure. Selling off core national organisations that then get re-traded and are subject to minimal public control is ill-advised especially when the organisation is an example of national success. Controlling the national infrastructure is a national case for concern and the movement of an individual’s private documentation and commercial materials cannot be left to firms who will then subcontract it out and undermine working conditions. In the end, one thing is clear: a privatised Royal Mail will become a series of different units and firms where the dignity of work is undermined by the rule of shareholders and the interests of bonus-driven senior managers. In effect, it will be a fractured industry.

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About Author

Miguel Martinez Lucio

Miguel is a professor in Alliance Manchester Business School’s People, Management and Organisations division. Miguel has authored a book on International Human Resource Management. His research looks at the changing patterns of rights and regulation within employment relations and HR. His work considers the position and role of regulation and institutions in the context of globalisation, increasing managerialism, and socio-economic uncertainty.

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