Connell takes on tough challenge at An Post

Pay talks just one of many issues facing the new chief executive, writes Ciarán Hancock

Donal Connell is what you might call a safe pair of hands. The An Post chief executive comes across as someone who doesn't ruffle too many feathers.

This is perhaps what is needed at the State postal company, which has often had strained relations with its trade unions, postmasters and consumer groups who constantly gripe about the need for improved customer service and more reliable postal deliveries.

Connell took the reins at An Post last August and has a fairly full in-tray. Top of the pile is probably ongoing discussions with its hundreds of postmasters around the State, who are browned off at what they see as their derisory levels of pay.

Under the umbrella of the Irish Postmasters Union (IPU), they are planning a demonstration next Tuesday and have even threatened to run 10 candidates in the upcoming general election, a move likely to concern Minister for Communications Noel Dempsey and his colleagues around the Cabinet table. "You'll have to ask the Minister about that," says Connell.

He says discussions with the IPU are continuing but declined to say when they might conclude. There are currently about 1,300 post offices around the State, a number that has declined by 300 over the past few years.

The IPU has warned that a similar number will close in the next three or four years, potentially laying waste to many rural towns. "The network is always changing but I wouldn't like to put a number on that [ those closing]," Connell says.

The saviour for the post office network could be An Post's €112 million banking joint venture with Fortis, a group that has linked up successfully with post offices in Belgium and the Netherlands to sell a range of financial products. The deal with Fortis was signed in October and approval from the Central Bank is expected within the next couple of months, with a launch around the summertime likely.

Connell says it will offer mortgages, credit cards, loans, and savings and investment products. Its OneDirect insurance subsidiary is also being folded in to the new entity, which is projected to employ 500 people within five years.

The bad news for rural post offices is that they are likely only to get the crumbs from the table. "The top 200 branches [ in large population centres] will do 70 per cent of the transactions," Connell explains. "The rest will have differing degrees of banking services. We'll also have internet and phone banking." Only about 1,000 post offices here have fully computerised services.

Connell hopes that the Fortis deal will be transformational for An Post, which still draws the bulk of its €753 million annual revenue from its mail business.

Regular users of post offices will be familiar with the less than salubrious outlets, the long queues, closed-for-lunch signs and stamp dispensing machines that often don't work.

And that's to say nothing of the culture of post-office workers, which could never be described as dynamic.

"I disagree," he says. "We see this as having great potential. There's a great opportunity in retail banking at the moment and we have a fabulous brand with fantastic potential to grow."

Really? It's 72 per cent rate of next-day delivery of post is far from fantastic and the public perception of the company, which directly employs 10,000 people, is that it is bloated and inefficient.

"There are all sorts of areas that we need to improve our customer service in, and we need to be more customer focused. We're in the process of coming up with a plan for the best configuration of our network."

There is also a danger that An Post is coming to the banking market too late. Danske Bank and Bank of Scotland/Halifax last year upped the ante in banking, launching a range of mortgage and savings products here. Connell disagrees with this view.

"The timing is still very good for us," he says. "The economy is growing at about 5 per cent in GDP terms, among the highest in Europe, and there's a big credit market still to be tapped."

To be fair to Connell, An Post's issues are legacy ones that he inherited on taking the hot seat seven months ago. A change programme that will see about 500 staff leave the company and new work practices introduced is under way. Full liberalisation of the postal market will come in 2009.

An Post was given the green light by ComReg this week to increase the price of an ordinary stamp for the first time since 2003 from 48 cent to 55 cent.

Future price increases will be linked to improved services, with Connell aiming to boost the next-day delivery target to 94 per cent over the next two to three years.

"I have no problem accepting that challenge on behalf of An Post," he says. "We recognise that there have to be significant improvements in our next-day deliveries."

The volume of mail delivered in 2006 rose by 4 per cent, according to Connell, which is surprising given the popularity of texting and e-mail. He says, however, that the internet revolution has had a positive spin-off for An Post.

"Internet shopping means we are moving a lot of web-related packages around the country, which is good for our business." This area of the mail business increased by 14 per cent last year, Connell says.

We will have to wait until April to discover what impact that had on An Post's bottom line. In 2005, the company reported an operating profit of €16.5 million, while the sale of two non-core electronic transaction subsidiaries boosted its overall profit to €40.7 million.

It was an encouraging turnaround on the previous year, when An Post posted an operating loss of €3 million.

All Connell will say about trading was that the company has "got off to a good start this year".

Given An Post's difficulties in recent years, both in terms of trading and industrial relations, the role of chief executive was seen by many as a poisoned chalice. Connell, an electrical engineer by trade, has no regrets about his decision. "People have a lot of trust in this company," he says.

"There's a great opportunity here to grow the business."

This is not his first dalliance with the postal group. In 1970 he joined the old department of post and telegraphs (P&T), which comprised what are now known as An Post and Eircom, as a student engineer. And his father spent almost his entire working life with P&T.

Connell spent eight years with the company before heading off to take up a number of posts in the technology industry, latterly as general manager of Maxtor Ireland, a US-owned company with a base in Bray involved in making components for personal computers.

Seven months into the job, does Connell feel like he is constantly firefighting?

"There's always something happening," he says cryptically. "You'll have to wait for my memoirs."

Factfile

Name:Donal Connell

Position:Chief executive of An Post

Age:53

Family:Married to Anne with two sons and two daughters

Education:Studied engineering at UCD

Hobbies:Cycling, golf and reading

Why he is in the news:Mr Connell, who has been in the post about seven months is talking for the first time about his vision for the group. This week An Post was granted a rise in price or ordinary stamp, its first increase in four years. It is also putting final touches to banking joint venture with Fortis.