Government Operations Committee on Nov. 2nd, 2016

[Deepak Chopra]

As I mentioned in the last committee hearing, the management payroll is in the range $200 million to $220 million, and management accounts for less than 5% of the workforce. This is in relation to almost $3 billion of payroll for the whole corporation.

[Karine Trudel, NDP, Jonquière, QC]

You are giving percentages. It's normal for there to be fewer supervisors.

Does Canada Post still have 22 vice-presidents? Is the management still made up of a single president and 22 vice-presidents?

[Deepak Chopra]

We currently have 17 vice-presidents.

[Karine Trudel, NDP, Jonquière, QC]

You said that senior management represented 5% of the workforce. It's normal for there to be fewer managers than employees. Could you give us the overall amount of the proportion of employees and not a percentage?

[Deepak Chopra]

There are many questions. Is having 17 vice-presidents appropriate for the size of the organization? We have an organization of 60,000 employees, and we are probably one of the top 10 postal administrations around the world. Our business covers coast to coast to coast, with three different lines of businesses. We have over 16,000 vehicles. We cover over 15 million addresses. We manage a cost structure of $6 billion. We have the largest transportation network. We use the largest air transportation network.

When you look at the complexity, whether we're talking about sales, marketing, engineering, managing a transportation network, procurement, or finance, an organization of this size with a consolidated revenue of $8 billion requires the best talent. In order to manage and organize in such a way that functions have the right leadership at the top to provide them the best guidance, we need what we believe to be the right structure for the corporation.

[The Chair, Conservative, Tom Lukiwski]

I'm afraid we're going to have to stop there. Thank you.

We'll go to Madam Ratansi for seven minutes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you, Mr. Chopra.

This is an interesting juxtaposition. We have heard from the field and we have heard from you, and now we have to do a gap analysis. We also heard from E and Y, and they are not very confident that your figure of $700 million in the 10th year is viable, but you know, things change, environments change. Also the financial statements showed top management at $650 million, but if that's wrong, maybe you can correct me later.

So there is some incongruence, and I just want to see how we can assist change management. You say change management, and change management is very important. Did you have change champions, from both management and labour, to take the vision over, to say that this is the vision for Canada Post? Did you have such a group? Could I just get a “yes” or “no”?

[Deepak Chopra]

Yes, we did.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Okay. And they were functioning well? We heard from CUPW that there was no consultation, and that their ideas were never taken into consideration. We hear that they had very good ideas, but they were not taken into consideration.

[Deepak Chopra]

I think this deserves a little bit more than a yes or no answer, so let me give you the context. With all of our unions, we meet on revenue and financials, on technical changes, and on health and safety issues. At the very high level, twice a year with all unions, we meet for what is known as a semi-annual financial update. The senior leadership of the union and senior leadership of Canada Post sit across the table from each other. We tell them what's going on in our business, the challenges we are facing, and then all of the revenue ideas that we are considering. As I mentioned earlier in one of my answers, the Delivered Tonight product would never have materialized if it had not been done in consultation with the Canadian Union of Postal Workers. It was a great breakthrough for us to be able to try something that we would otherwise have been unable to afford.

With regard to changes, if we're making a change anywhere in our operations, there are constant consultations going on at the local, regional, and national levels. We have local health and safety committees, the LJOSH, and national committees. In terms of revenue ideas, recent discussions we had with our unions led to a solution for a weekend delivery. Weekend deliveries are something that Canadians are asking for. So we have found common ground in many areas.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Okay, fair enough. This is your chance to rebut whatever we heard from the field, and we don't have to buy everything they say, and we don't have to buy everything you say. We have to look at the gap.

The assessment we heard from academics and other businesses was that Canada Post lacks vision, that management lacks vision. You're from Pitney Bowes and Pitney Bowes has been reinventing itself. You were there, reinvented it. What are some of the factors that are preventing you from reinventing Canada Post in areas that will generate revenue? For example, we were told you unilaterally said no to postal banking despite the fact that when we spoke to Oliver Wyman and EY, they had not even done a review of the Australian model, which is so similar to the Canadian situation.

Could you give me your thoughts on it, please.

[Deepak Chopra]

There are two points to that. I'm going to ask my colleague to answer the banking question first, and then I'll answer your question on the vision and our ability to grow.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Okay.

[Wayne Cheeseman]

Certainly on banking we looked at banking over the years. We had a couple of pilots on banking many years ago. The second one ended in 2006. Coming out of the 2008 economic recession we lost almost 20% of our assets in our pension plan; it was a general worldwide economic recession. In 2009 we lost $300 million in revenue on a year-over-year basis. We were looking at opportunities to improve our self-sustainability. One of the areas we looked at—it wasn't the only one—was banking and we did some reviews on that.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

What bank areas did you look at? What geographic context did you look at?

[Wayne Cheeseman]

We looked nationally across the country and it was retail banking. What we found when we looked at the analysis, what we realized, was that the risks from a financial and reputational view were not worth looking after the potential benefits. On a cost-benefit—

[Yasmin Ratansi, Liberal, Don Valley East, ON]

I'm sorry, I'll have to stop you because there are two minutes and I think Mr. Chopra needs to answer a question. That's where you said you did not look at tactics from outside, internationally, like in Australian banks. All the postal offices across the globe have faced what you're facing.

I'll leave it at that and let Mr. Chopra answer that question.

[Deepak Chopra]

In terms of innovation, if you talk to our customers, if you look at the retail innovation that we have been part of—and the proof is in the pudding, as you would always say—you would not have been able to grow a business by half a billion dollars when you are competing in a highly competitive marketplace if you were not innovating.

As I mentioned earlier on to Mr McCauley's questions, Delivered Tonight, FlexDelivery, drive-through, retail concept stores, self-serve, and fully integrated products with Shopify or Magento or IBM platforms, these are innovative products that none of our competition offers at that level. We continue to do that. In fact, this is not a one-time job, and we believe that there are ways to reinvent Canada Post, one way being e-commerce, which plays to our strengths, and we're winning in that space.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

I have a last question, which is a sensitive question. As a civil servant, when a government is changed, would you follow the mandate of the government, because we were at a place where we really got hammered because community mailboxes were put in six days after the election?

There is this perception that you were following the previous government's mandate of dismantling Canada Post or privatizing.

[Deepak Chopra]

The CMB program is a large infrastructure program. A program of this size.... As you know, we converted 840,000 addresses in the period in which we were implementing those, and the process is almost a nine-month process of planning, construction, delivery, and ultimately reassigning employees to their new routes where they will be delivering. This is something you cannot stop in six days. In fact, we had a plan and out of our overall plan we were able to stop two-thirds of the addresses that were scheduled out of respect for the mandate of the new government. One-third were in the stage that had to be implemented to avoid disruption of service.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Monsieur Clarke.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being with us this afternoon. We greatly appreciate it.

Mr. Chopra, here is my first question for you. Is Canada Post a symbol of national unity for the country?

[Deepak Chopra]

Canada Post is one of the most respected brands and institutions for Canadians, indeed.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Right. Thank you.

I almost forgot; I want to correct a fact for the members of this committee. The Conservative government never gave the mandate to dismantle Canada Post. I don't really agree with my colleague.

Here is my second question for you, Mr. Chopra. I ask it in all due respect. In fact, it's even to your benefit that I'll ask the question so you can defend yourself to this committee.

Throughout our travels, I have repeatedly heard that you had a hidden agenda. The Canada Post unions accused you of pursuing an ideological objective, which was to move toward a kind of privatization.

I would like to know what you have to say about this statement we have heard many times. I'm giving you, sir, the opportunity to express your thoughts on that to this committee.

[Deepak Chopra]

The mission and the responsibility that I was given when I was hired by the board of directors was to run a financially self-sustainable Canada Post as a great institution. It was at a crossroads. The mail volumes were declining, and it was facing a serious challenge.

The mission at no point has been to do anything other than to run an efficient, profitable, self-sustaining postal institution. In fact, I would like to say we have done a good job of carrying out that mission. If you look at our business, our letter mail business is about $3 billion, and it's declining at about 6% a year. That's $180 million that we know we're going to lose from day one. If you take 2% inflation in our cost structure of $6 billion, that's about $120 million. The day we start, on January 1, we know we're facing a challenge of roughly $300 million.

If you look at our track record over the last five years, after facing some challenges in 2011 and 2012, we have managed to turn the business around. It is profitable. It has a growth agenda. It has an innovation agenda. It has a transformational agenda. It's now going through a period where your committee is reviewing what its mandate should be.

That remains our sole purpose: to deliver the postal mandate that we have been asked to do.