2009 week 22
TNT in the media - week 22
First things first
23 May 2009
Interview with Peter Bakker (CEO of TNT), translated from Dutch
Every company has its responsibilities is what the CEO of mail and express company TNT feels. And so Bakker combines his sharp sense of zeitgeist with heartfelt idealism. But not just now: “To be sustainable your business first has to stay afloat”.
Peter Bakker wants to make TNT a success, fight hunger and save the climate but at the same time faces laying off hundreds if not thousands of postmen and women because there is no longer any work for them. And this can lead to conflict. There are staff wondering why he is not giving the 10 million euros he spends each year trying to banish world hunger to his own employees instead. That would, after all, save a lot of jobs. Bakker is only too glad to discuss the matter with them, but not for too long. “You can have a decent dialogue for a time but eventually I say: wait a moment, every five seconds a child dies of hunger and you surely agree with me that no matter how awful it is to lose your job – with good guidance and a good social plan incidentally – watching your child die of hunger tonight would be a problem of a different order. Wouldn’t it? And as a company we have a responsibility to keep.”
Bakker has been CEO of mail and express operator TNT for eight years now, yet he is still pretty much the youngest director of a major Dutch company. When he set out, he liked to describe his work as a game of Risk, gradually taking over the entire world country by country. In fact, he is still doing just that. Bakker took the greatest stride in his career when in 1996 he took on command of the PTT army – as the company was then called – which acquired Australian parcel business TNT. Ever since, the company has been conquering the world little by little. Bakker is keen to discuss the “wickedly smart” strategic move TNT made recently. “We already had a major company in southern and eastern Brazil and now we’ve bought ourselves coverage in the north and west too, making us by far the biggest parcel and freight carrier in the country. We’ve also just acquired a company in Chile. Give us a few years and we’ll have a network spanning South America that nobody else has.”
TNT’s CEO has become especially well known for his efforts towards creating a better world, proving his refined sense of zeitgeist time and time again. When his great hero U2 frontman Bono put fighting hunger back on the agenda at the start of the new millennium, Bakker took the initiative of starting a partnership with the United Nations World Food Programme. When Al Gore jolted the world awake with his visions on climate change, Bakker was the first to launch Planet Me, rapidly turning TNT into the world’s most sustainable business (according to the Dow Jones Sustainability Index at any rate). And when Barack Obama came along with his optimistic message, TNT seemed to merrily ride the wave with its new company strapline Sure We Can (although in this case Bakker was so well keyed in to the spirit of the times that he launched the slogan months before Obama).
But now Bakker has other things on his mind. “In recent years boardroom discussions have centred on growth, getting bigger and conquering new countries. Today it’s all about how much cash we have in the kitty and whether it’s being emptied a bit too quickly. Or about customers going bankrupt. Or whether things are going to get even worse and how we should deal with that. Sustainability will remain important, but first things first: your own business has to stay afloat in order to be sustainable.”
He has therefore decided to hold back more when it comes to parading himself as an idealist. “A few weeks ago we laid the foundation stone of our new head office, the greenest building in the Netherlands, and perhaps even the world. Normally, we would have organised a whole event to celebrate: just look at us. Now I’ve said we should wait until the building is finished. It doesn’t cost much to organise a gathering but it would send out strange signals when you are having problems with your staff. There’s goes Peter Bakker again about green buildings, they’ll all be thinking, while I have to sacrifice part of my salary.”
Bakker has to put up a fiercer fight than his fellow CEOs. On top of the recession, which is also sinking its teeth into TNT’s profits, the postal business has for years been witnessing falling volumes in the Netherlands. And to make matters worse, the Dutch government opened up the postal market on 1 April, allowing others to compete freely with TNT, despite TNT being unable to do the same in other countries, much to its displeasure. Staff are becoming more and more frustrated at all the reorganisations being carried out by TNT and recently decided to dig their heels in. The 15% salary cut that TNT agreed with the trade unions in a bid to save jobs is not going ahead.
Bakker formulates things calmly and carefully. Since exchanging his Porsche for a Toyota Prius and having an extra green house built for his family in Rotterdam, he appears to have settled down. He recently went on a strict diet and now drinks mainly green tea.
What have we actually achieved by privatising the national postal service and liberalising the postal market? Three postmen visiting each house instead of one: is that a gain?
“That is more of a question for our politicians, who want to see competition in the postal market. Competition theoretically leads to more choice for customers, encouraging companies to innovate and pushing quality up and costs down. This is fine in a growing market, as with the mobile phone breakthrough several years ago, but the postal market is shrinking due to e-mail and the Internet. If the pie becomes smaller, you can ask yourself whether it is a good idea to share it out among several players.
“If TNT’s performance were middle-of-the-road you would have had a good argument for allowing competition, but TNT is the best postal company in Europe. The Dutch parliament seems to have a problem with this however. Whereas other countries are worrying whether mail will actually get delivered everywhere in the future, Dutch MPs are worrying that TNT may be making too much profit. And while all other European countries are saying ‘Come on, wait a minute, should we really allow competition?’, Dutch parliamentarians have already taken the plunge.
“We did warn them to tread carefully. If you fail to make clear agreements on minimum wages for delivery staff, you may end up with a race to the bottom, with postmen and women earning less and less. Wage costs at TNT Post amount to between 20 and 24 euros per hour. Our competitors Sandd and Selektmail incur between 6 and 7 euros per hour. That’s all well and good, but it forces us to cut costs too.”
Why has the Netherlands always been at the forefront of liberalisation? We were the first to divide up and sell our power companies and the first to open up our postal market. Are we clever or are the other countries in Europe just dumb?
“I think more focus is placed on the interests on a nation’s own trade and industry in the countries around us. Our politicians tend not to do that. We could do with a bit more Dutch spirit. We set out the arguments against liberalisation but democracy decided otherwise. I wouldn’t have done it, but I have to face reality and so we’ll just have to continue reorganising the company.”
But why so heavy handed at this stage? You are still making a 15 percent profit on mail delivery in the Netherlands. You could accept the lower profit and say that it is irresponsible to turn people out into the street in times of economic crisis.
“If this were a normal crisis that was only going to last a year you could say ‘guys, let’s not make a fuss, wait a year before shedding jobs’. But who knows whether this is a normal crisis. More importantly, this reorganisation has nothing to do with the crisis. The market is now open. If we don’t prepare the company now, our revenues will drop by 10 percent because we simply can’t compete. And if volumes fall, the cost of delivering a letter will soar and you’ll find yourself in the red before you know it. You have no choice but to reduce costs. We suggested lowering salaries but this was rejected by the staff, so now we have to make cuts. That is never a nice thing to do, and is doubly painful in times of crisis.”
Aren’t companies now being overly enthusiastic when it comes to restructuring? Wouldn't it be better to accept a little less profit and keep the job market buoyant?
“That’s not an easy decision to make on your own. If you’re the first CEO to go to the shareholders and say ‘look guys, I’ve had a good think and you’re going to get a smaller share of the profits because we want to take better care of our people and the environment’, the shareholders are going to say ‘that’s all well and good, but I can invest in any company in the world I like, so I’m not going to invest in you any longer because this is all just too progressive for me’. Your share price will plummet and you’ll soon find yourself out of business. You first need a wide-ranging public debate on the matter. You cannot expect a particular company to tell its shareholders that the wind has changed and that they can forget their share of the profits.”
Haven’t shareholders been given too much power?
“In some cases they have. There have been lots of takeovers in recent years where shareholders have earned a lot of money from the acquisition premium and then massive reorganisations have been announced to recoup the premium. But have the staff had enough say in the matter?
“It’s the ordinary employees that are taking the brunt of the crisis, which has prompted many companies to start restructuring, and it’s usually the blue collar workers who are shown the door first. This is unavoidable to a certain extent, but you do wonder whether there is a proper balance between staff, staff motivation, employment and shareholder return.”
You are running two electric delivery vans in Rotterdam and fifty in London. That costs money and eats into profits. What do the shareholders think?
“If you’re smart enough sustainability can actually earn you money. We’ve recently taken a good look at our packaging. We offer boxes that people can use to send their goods with TNT. Couldn’t they be produced with lower carbon emissions and fewer harmful substances? In fact, they could and, would you believe, it turns out that this can save us 800,000 euros a year.
“The same is pretty much true for the electric vehicles in London. The expensive batteries means they cost twice as much as your average delivery van but because they are virtually maintenance free and because their purchase is tax exempt in London, they work out cheaper to run per kilometre. This is not yet the case in the Netherlands, where we are going all out to find good sustainable solutions. Our Planet Me launch met with a lot of furrowed brows. ‘What is TNT up to now?’ people were asking, but at the end of this year in Copenhagen agreements will ultimately be reached on reducing carbon emissions, the price of CO2 and how companies will have to demonstrate how much they are emitting. We’re already set.
“We have developed an accounting system that shows exactly how much CO2 we emit every day. All companies will need one sooner or later and we’ll be happy to assist them. We have produced a USB stick. If your newspaper wants to become more sustainable, the information on the stick will tell you exactly what to do and, if you need help, all you need to do is call and we’ll come and lend a hand.”
I found a letter from TNT Post on my doormat telling me how I could see how sustainable I was. Shouldn’t things like that be left to government information services?
“I’m not familiar with that letter. Those kinds of campaigns happen spontaneously within the company. Through our partnership with the World Food Programme we have found ways of arousing people’s enthusiasm for a particular cause right through to the heart of the organisation. We are now using those methods for climate change. It often starts with an account by me, for example the now well-trodden story about me selling my Porsche in favour of a Prius. We then set up all kinds of programmes to encourage people to come up with ideas, which now happens naturally. In fact, things come up that I am not aware of, which is a good thing because it becomes more than just a head office initiative.”
You always come across as having a good sense of zeitgeist. Are you going to be the first to scrap bonuses or at least make substantial reductions?
“I believe we are already taking the lead. For 2009 we have made significant cuts in the Board of Management’s overall remuneration, with members earning between 15 and 25 percent less and me, the CEO, between 25 and 35 percent less. We have also pledged to come up with a new remuneration policy this year.
“A few years ago we decided to exercise restraint because of all the reorganisations we carry out in the Netherlands but also because we believe in socially responsible business. Now basic salaries cannot grow more than the average under seven collective labour agreements in countries where TNT is active. And when we award a bonus we also look at non-financial targets, such as employee satisfaction, customer satisfaction and carbon reduction.”
All your colleagues always look at similar companies (their peer group) and then set salaries just higher than the average, creating a leapfrog effect and pushing top salaries ever upwards to infinity.
“It’s not like that at our company anymore. But the debate is far from simple. On the one hand you have people saying that it’s all too much, and on the other you have the shareholders thinking the more shares those guys have, the more they’ll act in my interests. You don’t have to listen to all that talk of course, but you cannot simply ignore it either.
“At the same time, something has to be done and we are all very conscious of that fact. The business world, including TNT, cannot turn a deaf ear to people’s criticism of top incomes. The debate hasn’t done directors’ credibility any good, an issue we cannot keep putting aside for long. It wouldn’t be wise.”
But do bonuses actually help? Do they really make you perform better?
“Well, erm, I don’t know. If you’re at the head of a company, I expect you, and therefore myself too, to try and do your best for the business. So bonuses do not influence my personal performance, but they do provide a tool when it comes to discussing with the supervisory board what will be important over the next year: our employees, the climate or something else. What do you find important, what do we find important and do we agree with each other? But during the year I never look what’s on the piece of paper. At the end of the year an appraisal rolls out and I accept the outcome.”
But if the end result is that you get no bonus, will the criteria be adjusted as happened recently at Shell?
“That’s not possible at TNT. These days you have to account for everything in such great detail that that would raise a lot of questions. It is simply distracting.”
Are the days when managers were considered prosperity makers now finally a thing of the past and are we going back to the seventies and eighties when CEOs were seen first and foremost as job destroyers?
“That could well be the case. During a crisis people have to make more unpopular decisions than popular ones. You can partially deal with this by showing that you’re looking beyond shareholder value, bearing other interests in mind and making choices based on a wider social perspective. You can also build that into your remuneration system.
“Even then, decisions will still not always be popular but they will at least be taken in a better way.”
Source: Volkskrant, www.volkskrant.nl
Pleasant surprise on the cards for African youngsters
27 May 2009
Poverty-stricken youngsters in Tanzania are set for a wonderful surprise when a giant present is delivered to them.
Redditch resident David Walker, head of communications at TNT Express Services, has organised for a 280kg (600lb) airlift of goodies to the children after witnessing first-hand the struggles they face every day.
He flew out to the country six months ago as part of a group from TNT, to support the United Nations' World Food Programme, feeding and educating children suffering in poverty.
David said: "My time in Tanzania was very humbling, especially after spending time with young orphans and children who survive on just one bowl of rice and maize a day.
"Once we had returned to this country both myself and my TNT colleagues wanted to do something on a personal level to try and help the children we had met."
The package, containing colouring books, pens, paper, books, crayons, cuddly toys, T-shirts, football strips, globes and mugs, is due to leave London Heathrow for Dar es Salaam in Tanzania at the end of this month (May).
He added: "I felt privileged to have spent time with some remarkable children - they have so little in life and yet they never seemed to stop smiling.
"They melted our hearts and it put into perspective how fortunate we are."
Source: The Redditch Standard, www.redditchstandard.co.uk