George Pitcher: Consignia’s name is only the start of its problems

Consignia recently announced that it is to axe 30,000 jobs in order to cut costs. Can this state-run service ever turn a profit in an inflexible market? asks George Pitcher

I can’t be alone in thinking that the timing of the news that Consignia – the re-styled Post Office – is deep into crisis manage

ment is far from coincidental. If you wanted to choose a time to demonstrate that our postal system is close to collapse, then Advent is the time to do it.

This is when the Post Office and its Royal Mail arm have traditionally been at their loveable best – overstretched, but working hard to bring the nation’s seasonal greetings to one another. The sentimental image is that of an army of ruddy-faced Postman Pats, their warm breath clouding as they struggle through snowdrifts, so that our children receive their Christmas book tokens from their aunts.

We know that this is not quite true, rather as we know that reindeer can’t fly. Last week, postal workers threatened to go on strike in the face of Consignia’s seasonal greeting to the effect that some 30,000 of these Postman Pats would be known in future simply as Pat – their jobs being abolished in an effort to save some £1.2bn in costs.

But it’s still a shrewd piece of timing to have this industrial fight in the Christmas rush, when people are likely to notice and care about the state of the postal service. In news management terms, it’s the opposite of what Jo Moore did at the Department of Transport, when she notoriously tried to bury bad Government news under the September 11 atrocities (MW October 18).

In any event, if Consignia chief executive John Roberts wanted to get the story noticed, he certainly achieved his ambition. Consignia has received so much attention over the past fortnight that it’s almost impossible to deduce what the story is about.

First, let’s decide what it is not about. It most certainly is not about the company having a silly name. Far too much attention has been directed at Consignia’s corporate identity, rather than its corporate circumstances.

Those circumstances consist of a state-owned public utility, facing the loss of its historical monopoly – the delivery of packages for up to £1 per item, nationwide at a single price – and having urgently to address its cost-base in order to do so.

This is what the online generation call the “snail mail” – though it is what is used to deliver goods ordered online, as Elton John reminds us in television ads that he has undertaken to address his own peculiar cash-flow requirements.

This observation, in turn, leads us to the root of Consignia’s problem. It has been slow to address the threat of competition from on-line and traditional telecommunications companies, while it has allowed itself to be distracted by arguments about its status and constitution.

Companies being pushed into hostile environments before they are equipped to cope is a familiar tale. They include BT, which was privatised during the fanatical years of Thatcherism, but so heavily regulated that it couldn’t effectively compete.

They also include Railtrack, which was told to get on with the business of running our railway infrastructure for no better reason than the Government couldn’t work out how to do so itself. And look at the mess that made.

But to point out that Consignia has an identity crisis beyond that of having an unusual name, which is about its very function in our post-wired society, is also to miss a bigger point. Were we to stop at this observation, we would be assuming that corporate vitality and growth are to be found in the online environment.

They aren’t. I don’t just mean that the casualty list in the dot-com world remains a long one (though it does). I mean that other companies of a very similar function to Consignia in the world of revolutionary communications are also facing similarly straitened times.

I’m surprised, frankly, that the stories about Consignia and NTL, the cable operator, are being treated as entirely separate ones. Like Consignia, NTL delivers low-cost communications in volume at a fixed price to households nationwide – in fact, I have used NTL to deliver this column to its publisher. And, like Consignia, NTL is staggering under a financial burden that threatens to put it out of business.

NTL’s financial problems are, admittedly, a little different to those of Consignia. NTL is suffering from the years of hubristic investment in telecoms and now has a debt mountain of some £12bn.

But my overall point is a sound one. Both companies are in the business of servicing a highly fragmented, domestic communications infrastructure. One is in the traditional means of communication through a postal service; the other is very largely in the business of e-mail, which is only the modern equivalent of “snail mail”. And both are struggling to find a method of operating with financial viability.

Clearly then, Consignia’s problems are not simply about being old-fashioned, any more than NTL’s are about being caught up in the dot-com collapse. We have to look to other causes for their misery.

I believe their problems ultimately lie in the capital markets, which are inflexible and out-dated. I intend to return to this subject in the new year. Let me only say now that 2002 has to be a year in which, not only do we see equity markets revive, but in which we deliver more effective means of accessing the loan markets. Meanwhile, have a happy Christmas.

George Pitcher is a partner at communications management consultancy Luther Pendragon


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