Donald Lander, President and CEO, Canada Post Corporation
SERVING CANADIANS BY SERVING CANADIANS
Chairman: Harold Roberts President
Honoured guests, ladies and gentlemen:
In a country as expansive as Canada, nothing is more important than the ability to communicate reliably and effectively. The rapid development in electronic communications and especially the Fax machine, have revolutionized the speed of delivery and response to the written word.
And yet, we all still most favourably enjoy receiving a letter in the mail (unless it's a bill). 1 don't know about you, but if when I get home I find the mail box empty, I wonder if the post delivery person is sick, which almost never happens, or if someone took my mail, again which almost never happens. The reality is, we all value our mail, and not to receive it is to hurt.
As Canadians, we take it for granted. We become angry when strikes or technical difficulties disrupt its flow. And, if it is cut off for any length of time, businesses suffer severely.
In the not too distant past we seemed to have a strike almost on a monthly basis. Businesses failed and Canadians were angry.
Into this situation came a man of solutions and action. His name? Donald Lander.
His background? Business, industry and sales.
He knew how to get a product to market cost effectively. Mr. Lander was born in Oshawa and started work in the automobile industry. He started with General Motors. After serving in the Air Force during the Second World War, he returned to G.M. before moving to Windsor and becoming Chrysler's passenger-car sales manager. He served in various capacities in Chrysler until he retired as President in 1980.
Retirement at the age of 55 was not in the cards for Mr. Lander. He joined Canada Post in 1985 and a year later he took over as President. His approach was to encourage union consolidation to clean up the process of negotiations, improve equipment to speed delivery and to install a system of evaluation to overcome glitches in the system.
The result has been a much more reliable system that in 1988-89 turned a profit for the first time in 30 years. A great change for the new Crown Corporation.
Canada Post is not perfect. There is still much to be done, but the customers are happier and the mail is more reliable. Mr. Lander has been given a new five- year contract.
Mr. Donald Lander, we welcome you to The Empire Club of Canada and invite you to address us now.
Thank you, Mr. Chairman and members of The Empire Club for inviting me to address this distinguished audience. It provides me the opportunity to talk about my favourite subject, Canada Post Corporation. It also gives me the chance to thank you, as customers, for your business. It is appreciated.
These are challenging times for Canada and for all Canadians. We once again find ourselves in a difficult recession. Business failures in Ontario have nearly doubled in the past year. We've got double-digit unemployment, yet inflation persists.
We're into the difficult adjustment phase of the Canada-United States Free Trade Agreement. A wider free trade deal including Mexico will soon add a new level of complexity, as well as opportunity.
Governments, especially at the federal level, find themselves hemmed in with little room to manoeuvre. They're burdened with massive debt service costs. Their tax base is eroding. Yet demands for services continue to mount--from an aging population, from a public hungry for education and retraining, and from the poor and disadvantaged in our society-We are again embroiled in fractious debate over the shape of our country. The uncertainty of the outcome makes investors nervous, adding one more risk to our economic future.
Small wonder that pollsters are reporting that Canadians feel a deep malaise about our country. Many no doubt fear we are at risk of losing our cherished position as one of the wealthiest and most fortunate countries in the world.
While we in Canada are preoccupied with domestic issues, the rest of the world is organizing itself for the 21st century. The European Community is creating a single market for its products and services and is becoming a new world trading force. Everywhere, new technologies, shifting patterns of investment, and trade are bringing major change to our economic environment. It's been said, I think quite accurately, that the world is in the midst of a revolution--one of global competition.
If we, as Canadians, are to protect our way of life, we'll have to get "street smart" fast. The pressures of global competition are closing in on Canada. Although opportunity abounds out there, the business streets of the world have become dangerous places indeed. The unwary and the unwise can get mugged. Not only can you lose your wallet, you can lose your country's prosperity.
The challenges are monumental, in particular for business leaders. For it is business that must lead Canadians safely down these mean streets and into the 21st century. We must create the jobs needed to support Canadian families. We must create the tax base to provide our social programs. We must implement the efficiencies that will keep our prices down and make us more competitive. We must improve our customer service and transform the dismal picture painted for us by Angus Reid's latest customer service poll. Without strong Canadian businesses, Canada will no longer be the country we know.
Today, I would like to tell you a little about the reshaping of the postal business in Canada I want to talk about global strategies, about research and development, business partnerships, meeting the needs of customers, and about changing to prosper instead of just changing to survive.
I speak as a business person with more than 40 years' experience in business, in Canada and overseas. Yes, even as a business person who has been mugged a few times.
I'd like to give you a quick overview of Canada Post today. We're a $4 billion operation. With 58,000 employees, we're the fourth largest employer in the country. We process 10 billion pieces of mail a year. We deliver to over 11 million domestic addresses and reach every country in the world. Once a laughing stock, Canada Post Corporation is making headway in meeting the needs of our customers and the expectations of our shareholder.
We've learned a lot about corporate reshaping over the past ten years. We took what we inherited from a government department, stripped it back to basics and rebuilt it. We did this because we believe in a postal communications system capable of supporting the business infrastructure of Canada so it can compete domestically and globally. We believe in providing the public at large with reliable and cost-effective postal communications.
Let me take you back a few years to describe how we got to where we are today. The modem Canada Post began in 1981, when the government took fully one quarter of the Canadian public service--some 63,000 employees--and said: OK, Post Office, you're a business. Act like a commercial corporation.
The postal service had become increasingly unreliable. Strikes denied Canadians their postal service for weeks at a time. Annual deficits had reached $600 million, which today would be close to a billion.
Our plants were inefficient. The equipment was outdated, if not obsolete. Governments had always found more pressing needs for their limited resources than investing in capital assets for the Post Office.
The new company lacked infrastructure. Labour relations, purchasing and even a billing system had been provided by government departments.
This new company had annual revenues of more than a billion and a half dollars, but no bank account. It operated from one end of the country to the other, but no-one knew where the mail was at any given time.
Our first task was to build an infrastructure. We hired people from the private sector. We opened bank accounts. We drew up a balance sheet. We created a finance department and all the support services a large business needs.
But most important, we had to start thinking like a business. Words like customer-sensitivity, quality and reliability roll easily off the tongue, but these values are not easily achieved.
They must become part of the corporate culture, something we live day-today. Most of all, the values must be meaningful and understood by everyone in the company.
By 1986 we were ready for the difficult job of regaining credibility by proving our service reliability. We standardized operations across the entire country. We forged a mail processing system that had standards, and could be monitored and measured.
We made our people accountable so we both knew when they were doing a good job and when they were not. And, for the first time, we were able to thank them for a job well done. But we all know the job is never done, because horizons must be expanded constantly for us to be challenged again and again and again.
We demanded that all our suppliers meet our new business standards. In fact, we negotiated penalty clauses to let them know their services were critical to our success.
We hired outside auditors to measure our delivery performance, the first postal administration in the world to do so. The first public report in December of 1987 showed we were delivering the mail on time less than 85 percent of the time. Today, I'm pleased to say Ernst and Young reports indicate that we're nudging 98 percent.
If imitation is the sincerest form of flattery, then we accept the compliment from the U.S. and the British Post Offices who have just hired independent performance auditors to do the same thing.
It's no exaggeration to say the changes we've experienced are truly staggering. We've stood everything on its head, examined every process, questioned every assumption. We had to challenge our people every day. We demanded their creativity and their complete commitment. The process was tough on everyone, from the executive offices to the plant floors. Some left. But most have soldiered on. This is a tribute to the quality of our people. They've done a fine job.
Not only has it been tough on our employees, it has been equally tough on our unions. Some of our union leaders cut their teeth on confrontation. The challenge for unions is to recognize that we are all in business together. If the business fails, then we all fail. If we win as a company, so do our employees and the unions who represent them.
I believe union leaders must recognize that global competition applies to them too. It pits their own attitudes and their abilities against those of the unions of the world.
At Canada Post we had to negotiate flexibility in our union contracts to increase our efficiency and re-establish our right to manage our business. That didn't come easily. It took a strike in 1987 for us to regain the right to tell our letter carriers what types of mail they would deliver on a given day. This had to be done so we could meet our delivery commitments to our customers.
It was a major turning point in our evolution from the mentality of an old government department to a customer-oriented business.
Another corporate milestone occurred in 1988 when for the first time in 30 years we turned a profit.
This year our total volume will hit some 10 billion pieces of mail. That's an increase of 50 percent since our first full year of incorporation--and half of that is in the past two years. Yet we're doing it with 5,000 fewer employees. Our mail processing efficiency increased by almost 5 percent over last year and for each year since incorporation. That compares with Canadian manufacturing productivity increases of less than 1 percent last year.
It means that we've been able to hold increases in the price of basic lettermail to less than the rate of inflation since 1982/83.
Yes, we are making progress at Canada Post. But we feel our competitors breathing down our neck every day, not just in Canada, but from around the world. Our sales force is slugging it out with the courier businesses and the telecommunications companies. Even our basic lettermail is under threat from facsimile machines and new technologies such as Electronic Data transfer. If you've paid any bills lately using your bank machine, you know what I mean.
Competition is getting tougher in Canada and globally. We know because we've gone global at Canada Post in a couple of ways. I am currently Chairman of the Board of the International Post Corporation, which was formed three years ago. It groups 23 of the world's largest postal administrations to ensure competitive distribution of parcels and courier products among Europe and North America and the Far East. We can no longer be restricted by national borders. Federal Express certainly isn't. Nor are United Parcel Services, DHL or Loomis.
To help us beat the competition we have invested more than $1 billion in our company in the last three years. Some of it has gone into new trucks and street letter boxes. About a quarter billion is going into new-generation sorting equipment that is faster, more accurate and more versatile, replacing equipment that is 25 years old.
Before committing to these major investments we established a research and development centre to develop new applications of technology for the postal system. Instead of equipping our postal system with off-the-shelf technology as we did 25 years ago, we went to the manufacturers and told them to build to our specifications. We documented our postal system and then shopped Canada and the world for companies willing to adapt their technology to our needs.
For example, we built a National Control Centre in Ottawa linked with control centres in nine divisions across the country. These control centres are equipped with the latest computer-based technology. They monitor our collection, processing and delivery networks, our transportation carriers, and even the national weather office. We can pin-point the movement of mail everywhere in Canada, 24 hours a day, seven days a week, and ensure that it moves to meet delivery standards.
When word got around to other businesses about our systems, they clamoured to see how we did it. Now through a new subsidiary, Canada Post Systems Management Ltd., we are selling our technology world-wide. We've discovered a huge market out there for the systems that we have put into place over the last few years to get our operations under control. We've closed a multi-million dollar deal with New Zealand Post and we are implementing control systems there. Proposals have been issued for over $40 million to postal administrations in Europe and Central America. It promises to be a profitable sideline, not only for Canada Post, but for our suppliers and partners as well.
Let me tell you about just one. A few years ago we decided we needed a way to track and trace our Priority Courier parcels and envelopes through the postal system to ensure that valuable documents didn't go astray. We turned to SHL Systemhouse, an Ottawa-based systems integrator. They delivered a track and trace system on time and on budget--a system that helps Priority Courier consistently achieve its 99.7 percent on-time reliability.
Systemhouse used their experience to bid on a trace mail system for the United States Postal Service. They won a $270 million (U.S.) contract--the largest ever won by the company. I'm pleased that we had a part to play in the success of that bid.
A person who is also playing a major part in our turnaround is our vice-president of marketing and sales, Bob Sirois, who is here with me today. Bob has been charged with developing innovative products that the market wants and needs, and with increasing our market share dramatically.
We're structuring our products to be cost-effective and to meet customers' requirements for reliability. We provide different speeds of delivery on a time-price scale. We'll move hard goods, facsimiles, electronic messages or a combination of both called hybrid mail.
Following a recent overhaul of our parcel business, our new expedited parcel service is earning new customers in ever-increasing numbers.
We adopted just-in-time inventory disciplines from the manufacturing and warehousing sectors to support our industrial customers, so they have minimum capital tied up. We work with businesses to show them how to save money and ensure timely delivery by pre-sorting mail and scheduling its arrival at our plants.
With some large-volume customers it's hard to tell where their operations end and ours begin. We work closely to reduce mailing costs and share the benefits through incentive rates and discounts.
Business after all provides 80 percent of our volumes and revenues. In meeting the needs of businesses we are attracting the volumes that support our business and allow us to serve all Canadians with basic lettermail costs that are the second lowest in the industrialized world.
We are committed to building a total postal communications system for the electronic age. Working closely with telecommunications and electronic suppliers, we've built one of the largest data networks in Canada. Remember we move 40 million pieces of mail a day.
Additionally, we're equipped with data transfer capability through an international protocol known as X400. This protocol allows us to manage electronic mail movement. It benefits customers because it allows us to link their computer technologies with others regardless of the differences in sophistication or compatibility.
We know that the future lies in electronic messaging and that more and more data will be transferred that way, not just between businesses, but from businesses to residences as well. But the future won't arrive all at once. Growth of electronic sending and receiving capabilities will be gradual. At Canada Post, we will be able to deliver in whatever way our customers request.
At many times in history, postal systems have been the users of leading-edge technology. Think of the pony express, the fast mail steamer ships that connected empires spread around the globe. Remember the special mail trains. The Canadian post office first tried air transportation in 1918 between Toronto and Montreal.
And we have to continue to be innovative with the postal system in Canada to meet the communications needs of businesses and individuals, not just during the '90s, but well into the 21st century.
Use of state-of-the-art technology will become an integral part of every successful business. Most Canadian businesses will adapt well. More, I suggest, must.
Necessity leads to innovation in business. I believe there are elements in our turnaround that can provide an example for other Canadian enterprises in search of renewal. Canada Post Corporation is well-positioned to provide the best postal system in the world. Our goal is to provide Canadian businesses with the support they need to be the best in the face of global competition, not just for their own benefit, but also for the benefit of our country.
I am confident that Canadian businesses can compete. They will compete. And they will prosper. Not simply because they can. But because they must.
Thank you again for having me, for your kind attention, and for your postal business.
The appreciation of the meeting was expressed by Doug Todgham, Director of Development, Art Gallery of Ontario and a Director, The Empire Club of Canada.