Speaking to an audience of some of Australia’s senior business leaders yesterday, Australia Post’s John Stanhope and Ahmed Fahour shared the story of the business’s large-scale transformation program that aims to bring the struggling letter service into the 21st century.
When Ahmed Fahour FAICD joined Australia Post in 2010 he inherited a business – and one of the country’s most iconic and beloved brands – under great threat.
At its peak around the year 2008, Australia Post delivered approximately 5 billion letters each year. Its core letter service has since halved. Fahour entered the business when there was a near halving of its profits from the year before. Unions were on strike, the ACCC had rejected a proposal for a five cent increase for the letters business and the morale of the organisation’s staff was at an all-time low. Australia Post was in serious need of transformation.
“When you think about it, it took 200 years for us to reach our peak and only eight years for it to be wiped out,” said Fahour.
“And it is not like the communications market was shrinking – not at all. 40 billion SMS messages and 400 emails were sent at this time. The market was exploding with growth but not in a way that was aligned with our core business.”
When you think about it, it took 200 years for us to reach our peak and only eight years for it to be wiped out.
The business needed to transform, not only the products and services it was offering customers and the community, but also its process for adapting, changing and creating new business models quickly. The “how” as Fahour described it is by far the most important factor:
“The most powerful tool of the how is in the cultural settings in the organisation.”
Under the leadership of Fahour, who was later joined by John Stanhope FAICD as chairman in 2012, Australia Post has changed tack. In the past year its letters business has undergone significant reform with the introduction of the two-tiered letter service – and now only makes up 28 per cent of the business’s revenue.
Today, Australia Post is by and large an eCommerce company dominated by parcel delivery that has grown to meet the increasing demand made by online transactions. Its parcel business now contributes $300 million in profit. For financial year 2016 Australia Post registered a profit, turning around the previous year’s $222 million loss, with the added bonus of being able to pay a dividend to its sole shareholder – the federal government.
On Tuesday this week, Standard & Poor’s upgraded Australia Post’s official credit rating from negative to stable.
“One of the most satisfying things for a CEO is when you identify an opportunity and the team sits around and lays out a strategy and you work with your management team, the board and the organisation to reach an outcome,” Fahour said.
Joining the AICD’s Victorian Division President, David Bayes FAICD, on stage at the Trans-Tasman Business Circle event, Fahour and Stanhope shared their insights on the importance of culture, agility, strategy and the significance of the chair/CEO relationship.
On workplace culture
“One of the greatest and most important assets that our organisation has is, we have been living this adage that happy staff lead to happy customers and then they in turn will lead to happy shareholders and a happy community.
“We start with our people. If you want the customer to be happy and for your shareholder to see returns, who is going to be able to make that happen?” Fahour said.
On business agility
“We have learnt over the past four years together, there is no question that a culture of agility is very important. You have got to be able to turn one way or another very quickly,” Stanhope said.
“I’ve noticed that our customer’s behaviour has changed at least four or five times in the four years that I have been here. Growing the agility to meet these behaviour changes has been part of our transformation.”
On responding to digital disruption
“The source of revenue we make today is so rapidly changed even compared to what it was six years ago,” Fahour explained.
“In terms of our retail business, today 60 per cent of the profit we make is from sources of business we didn’t have in 2010. We have to replace $200 million to $300 million of profit with business initiatives every year…But the culture of the organisation that we have set up is allowing us to keep reinventing this thing every day.”
On strategies for success
“There are three strategic questions that as a business we must answer in order to succeed,” said Fahour.
“Number one is how do we manage for the decline in the mail business? Number two is how do we grow the commercially attractive businesses in front of us, like online shopping and eCommerce? Number three is how do we go about this transformation? How do we bring our people and our stakeholders along on the journey?
“Too many times organisations and executives focus on the ‘what’ – but the how is important and the how determines the outcome.”
On the chair/CEO dynamic
“One of the main reasons I have stayed in this job is the relationship. It is authentic and genuine, it is based on trust and…we are able to have difficult conversations,” said Fahour.
“In the first instance, it was important we understood each other and each other’s background…to ease into the relationship. And there’s a level of mutual respect and friendliness,” Stanhope added.
“Though I must say that we still keep an appropriate level of chair/CEO objectivity. It is balanced.”
“Boards are there to govern and management are there to lead the operation…and the day that becomes confused…is the day that you lose your authority as a CEO,” Fahour said.
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