SHORTLY after he was appointed, An Post chief executive John Hynes, in the course of a newspaper interview said: "Show me unsatisfactory industrial relations and I will show you that management is bound to have contributed either in part, or in whole, to them."

These words must have come back to haunt him in the past few weeks, as the company's unions and management clashed head-on, with the situation threatening to turn into what could have been a protracted and very bitter strike, before a last-minute solution was agreed.

Observers on both sides say that management's decision to take out advertisements firmly laying the blame on one union official for the threatened strike and late postal deliveries was a major tactical error. The official concerned, branch secretary Mr Brian Shanny, is consulting his legal advisers on the publication of the advertisements.

"It was an extraordinary decision - the company was taking out advertisements to publicise an internal matter," a political source said.

The incident, which had been brewing for some time, may be indicative of deeper problems in a company which is trying to prepare itself for competition but, according to some observers, is not quite sure exactly how to go about it.

In fairness to Mr Hynes and An Post, the semi-state is under no illusions that it faces increased competition when the EU liberalises postal services. It argues that it already competes successfully in several areas - general post office services, special postal services, savings, etc - but if private companies were able to compete for direct mail business then An Post would be seriously disadvantaged.

Revenue from letters forms a very important part of An Post's income accounting for 62 per cent of its business. Last year revenue from letters and parcels combined was £216 million. It has been predicted that An Post could lose up to £60 million a year if forced to cede its monopoly on international mail and direct marketing mail deliveries.

Mr Hynes and An Post argue that if the private sector was able to compete in direct mail in large urban centres such as Dublin, Cork and Galway, then it would no longer be able to deliver mail at a universal cost.

Rural services are heavily subsidised. Delivering and collecting mail in rural areas accounts for 65 per cent of its collection and delivery costs, although it only accounts for 25 per cent of deliveries.

If An Post lost its monopoly in this area, it would be forced to drop its prices in urban areas to compete and would then have to cut back on rural services.

The EU is earmarking the year 2000 as the target date for opening up postal markets to competition, although nothing has been finalised. John Hynes has said competition could come as early as next year or 1998, if the Commission was aggressive about the matter.

Mr Hynes has already gone some way to reforming the organisation to prepare for the challenges ahead. Appointed to An Post in 1990, Mr Hynes was no stranger to controversy and confrontation. He came to An Post from Dublin Bus, where he oversaw over 1,000 redundancies. He had previously worked for Dublin Gas, where he was also involved in several major disputes with unions.

In An Post he has overseen a series of cost-cutting moves and changes in the organisation. These include the transfer of the Central Sorting Office from Sheriff Street, Dublin, to a new £15 million high-tech sorting office on the Naas Road, the Dublin Mail Centre, which was the centre of the dispute which ended earlier this week.

However more remains to be done and last year the Minister for Transport, Energy and Communications, Mr Lowry commissioned a report on the semi-state.

The investigation, on which the report was based, was conducted by consultants Price Waterhouse which made 400 recommendations, aimed at improving the company's profitability competitiveness and customer services. Among the recommendations were that the company should be restructured into three divisions - Letter Post, Post Office and SDS (special delivery service). It also said that the cheaper 28p postal rate should be abolished and management should be radically restructured.

A telling recommendation was that the company should have a less autocratic style and the unions should be brought on board for a more customer-orientated culture. An Post says it is committed to implementing the report, which also recommended strengthening John Hynes' team. To this end, several appointments have been made recently, including the appointment of Mr Alan Goddard, as director of letter post. He previously worked for Royal Mail in Britain.

Achieving the necessary changes will not be easy. Sources say the company has so far failed to implement change by bringing employees on board, in the way that the ESB and Telecom have done.

Mr Hynes is seen as a tough, uncompromising operator and one of his missions in life seems to be to sort out unions.

"He is very able, but also very confrontational," says a source who worked with him for several years. "He can be awkward and inflexible, when dealing with people, and doesn't always seem to appreciate that you have to bring people with you when trying to implement change.

A self-proclaimed FCA fanatic - he joined it as a 14-year-old - he developed a passionate interest in what the military calls "command". He said previously that the army has figured out how to manage their organisation and he often finds that many businesses would be better run if they had set management standards and worked hard to achieve them.

On a personal level Mr Hynes can be very charming, says another source. "He is a great networker, meets lots of people and does a lot of corporate entertaining. He is very PR conscious."

Others say he wants to be known as a "tough guy". Another source who has had business dealings with Mr Hynes says he has a textbook management style, but again is very confrontational. "He is a very smooth operator, a product of the Irish Management Institute. He has all the management jargon," says the source.

An Post's financial performance has improved under Mr Hynes guidance, although there have been severe criticisms of its postal deliveries service.

In 1993, An Post made a £4.8 million post-tax profit, its first since 1989. Its 1995 results showed a £11.5 million pre-tax profit, on a turnover of £297.1 million. However, the figures were boosted by an exceptional profit of £2.6 million from the sale of the Central Sorting Office in Sheriff Street. Operating profit actually fell from £10.9 million to £9 million.

Indicating the scale of the challenges ahead, former An Post chairman Philip Lynch, chief executive of agri-business group IAWS, resigned earlier this year after just three months in the job to move to Bord Bia. The extensive time commitment necessary at An Post is believed to have been an important factor in his decision.

New chairman, Stephen O'Connor, former managing director of Waterford Foods, said earlier this year that the company was still not making enough profit. He said it would have to double its margins if it was to successfully compete after markets were liberalised. Mr O'Connor said further business growth and cost reductions are needed.

These are the challenges facing Mr Hynes, the management team and the workers as the EU prepares to liberalise the postal service.

Whether the most recent industrial dispute is a harbinger of things to come as the company tries to radically restructure itself is a question which Mr Hynes and his senior management team will have to consider when the chief executive returns from his holidays in a couple of weeks' time.