The Dashboards - A Sea of Red or Fountains of Opportunity?
We should all know by now that our payment arrangements with Australia Post are under reformation. Stage 1 was focused on mail related payments, and introduced the new, and increased banking payments.
2,860+ LPOs have now received their 9 month YTD dashboards. These dashboards show pretty much the payment reform as it would have impacted the LPO payments, had the payments been paid under the new scheme from 1 July 2018.
Suffice to say there is a wide range of reactions to the information provided in the dashboards. The ''sea of red'' being one of the loudest complaints. So to put it into perspective, we are looking at 267 negatively impacted LPOs out of 2,860+ LPOs.
67 LPOs have a negatve impact of less than $1K annually, and for 58 of them, that is less than 1% of their total business revenue. 45 LPOs have a negative impact between $1K-$2K, and for the majority of those LPOs, it is less than 1-2% of their total business income from Australia Post. With parcel volumes rising every month, there is a strong possibility that the lodgement scans alone will offset that negative impact for 100+ LPOs.. That is not to make light of the negative impact, but the potential to improve the business outcomes is far greater and it is exactly why this method to remunerate licensees was endorsed. When the business grows, so too does our remuneration.
130 LPOs have a negative impact between $2k-$10K, which obviously will need different solutions to overcome and move these LPOs into positive territory. 25 LPOs have lost more than $10K and it is to be expected that Australia Post will be doing a lot to understand how these LPOs have fallen short of the line. And what the solution is for those LPOs.
This is not quite the sea of red that is the prevailing claim across the network. Granted if your LPO is in this group, you would be disappointed. There are a few big losers, but there are far more winners overall across the network. Anyone that is negatively impacted will find themselves being given far more attention in the next 12 months, as work progresses to find solutions to lift as many as possible into a positive position. However, it is a fact, that some of the big losers, are losing funds that quite possibly should not have been received in the first place, if the LPO was operating as per the regulations. So that will be tricky for those Licensees in that situation, as well as Australia Post.
On the positive side 227 LPOs had a positive increase of up to $2k, 727 LPOs had increases between $2k-$5K and 1,517 LPOs had increases between $5K-$25K with 103 LPOs with increases greater than $25K. More than 72% of these LPOs have seen increases greater than 5% of their total business revenue from Australia Post.
For almost 2,600 LPOs, this reform is a good start to a long overdue realignment of the business outcomes for the LPOs we operate today. The current scheme was established in 1993, before any digital devices, including computers, existed in our LPOs. Since 1993, the way people communicate, and shop, and transact has change dramatically. Yet we were still dealing with a payment structure set more than 25 year ago, with no inbuilt provisions to meet the changing shape of our industry. Licensees started calling for changes to the payment scheme as early as 1995, citing unfair payments and lack of definition within the terms and conditions of the payments. The majority of the mail related payments were linked to the BPR, so there was no provision for increases to those payments unless the BPR was lifted. The BPR was purposefully stagnated for more than 11 years during this period, and the impact of that was well understood by the management of Australia Post, but ignored as inconsequential. It was far from inconsequential for those of us who operated through that period. It was a very stressful period for LPOs, and saw the establishing of LPOG to try to save ourselves.
So in 2019, our mail related payments have been reformed to align more closely with the work we do in our vastly different range of LPOs. It is abundantly clear that a "1 size fits all" payment scheme doesn't fit all, and finally we have seen the start of change. And it is change that we desperately need. Probably continual change, that will keep pace with our changing business. Even in the last 2 years we have seen a raft of new initiatives, new products and services, changing customer and transaction numbers, innovative technology and changes in every sector of Australia Post. So it stands to reason that we should have a dynamic, flexible and agile payment structure that will move with our times.
LPOG set out more than 6 years ago to bring about change to our payments. Those of us that made that call more than 6 years ago, probably did not quite grasp the complexities of the reality of achieving a new payment scheme. It is very complex, and is not something that will be done and dusted in a few months, or even years. It is probably the reason no one has ever actually done it before now.
For better or worse, we now have established change. Many Licensees are delighted with their results, because they have been our very poor cousins for years, disadvantaged and underpaid because of the type of their LPOs, for doing exactly the same work many others have been well rewarded for providing, for the same amount of years. A non street delivery (affectionately known as "F Troop") LPO that could have relocated to a region with parcel contractors may have earnt an additional $40 - $80K per year, delivering their parcels via a different payment. Stuck where they were, they got no payment. Very unfair. Now they get paid to deliver parcels like the rest of us. Finally they have received a win.
There is another bucket of Licensees that have ups and downs on a raft of different products and services through out their payments. Many of these Licensees are concerned at the loss of our stable payments that have now been replace with activity based payments. These payments would be the POB payments, MMFs, and thousands of parcels that earn us no payment. During the period of stagnated BPR, Licensees received around 60% of the customer payment for our POBs. The payment is now set at 90%. How we would have longed for that % 10 years ago. The MMF has long been termed the sink, anything can be shoved into that bottomless pit, and Licensees have just been expected to suck it up. Now a parcel is a parcel is a parcel, with their own fair payment. The bottomless pit has been cleaned out somewhat. How we longed for that for 20 years. Our payments are now decoupled from the BPR, and increases are linked to the GRIA, and happen annually in line with the same index that we must apply to our staff costs. It is not perfect, but far better than a stagnated BPR, or the CPI which is usually far less than our annual staff increases, or rent and utilities increases.
There is a lot more of our payments that need to be reformed, and there are obvious areas that missed in this work, the primary sort work being the most obvious. Discussion on how that is to be resolved remain robust, and ongoing.
We are transitioning to a new payment scheme, bit by bit, area by area. The results will be under everyone's microscope for years to come. The aim of this work is to provide a sustainable future LPO network. We are beginning at stage 1. This could be like painting the Sydney Harbour Bridge. You start at one end and paint to the other end, then go back to the start again, doing it all over again. So they say.
So let us see how the dust settles when this new scheme is actually put in place, and the bugs are taken out. Lets see what else is heading our way by way of new business with our new banking partners, or government services. Lets see what our new CEO, Christine Holgate and our new EGM, Nicole Sheffield have in play for our future.
We also need to consider that we have not finished this job, we have only just begun the job. Change is a long term project.