This article first appeared in The Edge Malaysia Weekly on December 20, 2021 - December 26, 2021

HIS arrival at Pos Malaysia Bhd had raised eyebrows as he is the first non-Malaysian CEO of the national postal service company. Some pointed out that the appointment of Charles Brewer, a Briton, to helm Pos Malaysia could indicate a complete change in the way the group has been run all these years. Others opined that Brewer was brought in to do what Malaysian CEOs could not do — cull the workforce.

While change, especially at a group that has been suffering years of financial losses, could be good, it is also true that it is human nature to be averse to change.

Pos Malaysia’s strong workers’ unions could be a big obstacle to Brewer’s plan to turn around the group. However, the biggest challenge could be to change the culture of having multiple layers of bureaucracy and chains of command at Pos Malaysia.

When this writer interviewed the past few CEOs of Pos Malaysia, there were no fewer than three representatives from the company present — signifying the bloated bureaucracy typical of a company with a history of government ownership. (Pos Malaysia was corporatised in 1992 and listed via a reverse takeover of Phileo Allied Bhd in 2001.)

But this time around, it was just Brewer. Dressed in a dark blue T-shirt and jeans, Brewer, who clocked in in August, seems at home at Pos Malaysia. Throughout the last five months, he has been working on his plan to transform the group.

“When I first started, I talked to as many customers as I could, to listen to what they felt about Pos Malaysia and PosLaju. I spoke to as many employees as I could to understand their perspective, and to a lot of the couriers. The frontliners know what’s wrong with this business.

“So [I] really try to understand from their perspective what’s good and what’s not good. I’ve read every prepared presentation in this room; there are probably about 30 transformation and turnaround documents.

“And when I presented our turnaround and transformation plan to the board, Datuk Jezilee (Datuk Jezilee Mohd Ramli), who is on the board, asked me: ‘So Charles, that’s transformation 2.0?’ And I said that’s transformation 14.0, because we’ve had 13 previous ones,” says Brewer, whose last post prior to this was chief operating officer of Canada Post.

The 56-year-old has over 35 years of experience in the logistics and postal services, with most of them spent at DHL Group.

It is no secret that Pos Malaysia, which is controlled by Tan Sri Syed Mokhtar Al-Bukhary, has been struggling in recent years, and none of the previous transformation plans had worked. However, it is worth noting that there had been three Pos Malaysia CEOs prior to Brewer in over five years, which means their transformation plans were likely not fully executed.

Brewer notes that any transformation plan is as good as its execution, and therein lies the challenges and opportunities for him in his effort to revamp Pos Malaysia. He stresses that his transformation plan is focused on execution.

“So for the most part, in a business, as in sports, as in life, success is a function of how well you execute, and for us, I think a big difference, if I may say so, [with regard to] our plan, vis-à-vis what we’ve seen previously, is 80% of the focus is on how we execute,” says Brewer.

In the financial year ended Dec 31, 2020 (FY2020), the group recorded its largest net loss in history — RM308 million. It was the third consecutive year of losses for the group, starting with RM165.75 million net loss in the financial year ended March 31, 2019 (FY2019). Pos Malaysia changed its financial year-end to Dec 31 in 2019.

While declining mail volume could be the reason for the big losses at Pos Malaysia, the company should have been able to capture a large chunk of the parcel delivery business, owing to its extensive network and infrastructure throughout the country.

Pos Malaysia is arguably the company with the largest number of branches in Malaysia, as it has a presence in almost every town. Its large fleet of post mail riders also means that it is the only company in the country which delivers to every single address in the country, from Mont’Kiara to Ba’kelalan.

With e-commerce getting a boost from the Covid-19 pandemic, there should be no reason why Pos Malaysia is not successful in the small parcel delivery business.

The parcel delivery business is lumped together with the postal mail business; therefore, it cannot be ascertained whether the former had been turning a profit for the group. However, Brewer concedes that the performance of the parcel delivery business has not been satisfactory.

When asked how he found Pos Malaysia when he first joined it, Brewer says on the positive side, employees have a lot of pride in the group, far greater than he initially thought.

He says while he knew Pos Malaysia and PosLaju were not performing as well as they should, the situation was bad. This was because Pos Malaysia had taken its eyes off the ball when it came to what truly mattered.

“We stopped focusing on what’s really important. If you have a restaurant, there is no point focusing on your signboard outside — you need to focus on your food first and foremost. So I think for Pos Malaysia, we perhaps had lost sight of what was really important,” says Brewer.

Pos Malaysia’s most important job is to make sure its 21,000-strong workforce is really motivated and super engaged with what it does, and that its services are as good as they need to be and please its customers.

“If you focus on those three things right, profit comes; there is no question about that. In my humble opinion, Pos Malaysia and PosLaju had taken their eyes off the ball in terms of what’s important, and then you add into that mix a lot of new competitors coming into the market who are really focused on their service to their customers, and then you have a problem.

“That is why fixing the issue doesn’t worry me because the [difference between the] tipping point for where we are and where we need to be isn’t so great. And we have the infrastructure, we have everything in place to be very successful. It’s just the execution.

“Great plans are useless if you don’t execute them. For us, we have good plans, but perhaps [they were] not executed very well, but now we are doing both. We have a good plan, and we are executing it well,” says Brewer.

However, note that past CEOs had had short stints, with their contracts either short to start with or cut short for some unknown reason.

The immediate preceding CEO, Syed Md Najib Syed Md Noor, was at the helm for only about three years, having been appointed in October 2018 and ending his tenure in June this year. Before that, Al-Ishsal Ishak held the top post for eight months from February 2018.

Al-Ishsal had taken over from Datuk Mohd Shukrie Mohd Salleh, who was CEO between November 2015 and December 2017. Before Shukrie, Datuk Iskandar Mizal Mahmood helmed the group between July 2013 and February 2015.

Brewer has a three-year contract, extendable by another three years.

“One of the reasons why Pos Malaysia and PosLaju got themselves in a bit of difficulty is the turnover of CEOs, because you have 20,000 employees who are looking upwards to the voice of whoever.

“And if they just expect that voice to change every one year, it’s like, we’ll wait until he’s gone. You need that consistency in leadership. Not forever, but three plus three is a good time for us to do what we need to do,” says Brewer.

At the same time, Pos Malaysia’s employees’ unions are also very strong, so much so that any changes or transformation must get the buy-in from all the union members.

There are seven Pos Malaysia employees’ unions. They are the Union of Pos Malaysia Bhd Uniformed Staff Peninsular Malaysia, Union of Pos Malaysia Clerical Workers, Pos Malaysia Junior Executive Union, the Sabah Pos Malaysia Clerical Workers Union, the Union of Sabah Postal Uniformed Staff, Postal Clerical Staff Union Sarawak and Union of Pos Malaysia Uniformed Staff of Sarawak.

When asked whether he would be able to persuade the unions to support his transformation plan, Brewer says the group has been engaging with them.

“The unions within Pos Malaysia have been very engaged, very receptive and supportive of our plans. As an example, we extended our operating hours to seven days a week, including seven-day pickups and deliveries, and the unions fully supported us and stood side by side as we communicated the change to our operations team.

“We will only deliver our turnaround if we operate as one, internally and with our stakeholders, and to date, I have been overly impressed with the level of engagement, discussion and support,” says Brewer.

Pos Malaysia’s transformation plan comes in three stages, says Brewer. The first stage is to fix the basics, by having a highly motivated and engaged set of people, delivering a great service and delighting its customers.

Getting the foundation right is the first ingredient in Pos Malaysia’s journey back to profitability, he says. One aspect to fixing the basics, according to Brewer, is to reduce the unit cost of parcel delivery for Pos Malaysia.

This could be done by leveraging the infrastructure that it already has more than it does currently. For instance, while mail volume is declining and unlikely to make a comeback, post mail riders could be used to pick up and deliver small parcels, says Brewer.

“If you get your service level right and you leverage that infrastructure, you can provide a fantastic service level, and you can also leverage that to lower your cost.

“We have more than 4,000 postmen and women; when they deliver a letter to your door, if they deliver a parcel with it, the unit cost of delivery is significantly lower than if we have a dedicated parcel round.

“So one of the biggest advantages that a postal operator has is reach and unit cost. We can get really great reach and potentially really, really great unit cost,” says Brewer.

However, the group still has to rethink what is the best way of delivering parcels and the best vehicle to use, as parcel volume is increasing.

“So there are complications, it is not a slam dunk. A lot of what we are doing is reconfiguring our infrastructure. It is moving away from being a mail company that also delivers parcels, to a parcel company that also delivers mail,” says Brewer.

Stage two of the transformation journey is for Pos Malaysia to become great in the market that it is operating in. It is about optimising what the group already has, without looking too far out or in different geographies, but to just make sure that it is the leader in Malaysia, says Brewer.

This second stage will take the group to becoming the leading company in terms of parcel logistics in Malaysia, and the work towards that will go on until the end of 2022, he says.

In the third and final stage of the transformation journey, Pos Malaysia will be looking at creating accretive value for the group and its shareholders, says Brewer.

“And then stage 3 is accretive value — what activities either in Malaysia or outside can add value to our worth, to our shareholders and stakeholders as we go forward,” he says.

As many had expected, the appointment of Brewer comes with a rightsizing initiative. Brewer admits that there has to be a rightsizing of Pos Malaysia’s workforce; however, this will only be at the head office level rather than the frontliners.

According to him, there are 1,800 Pos Malaysia employees at its head office, and this is a third too many. While rightsizing is often seen as a way to reduce costs, for Brewer, it is more about making the business more agile and simplifying the organisation.

“I would have done it if this was DHL, FedEx, J&T; I would have done it under any circumstances because if you’ve got 1,800 people, it is at least 600 too many, based on the indirect costs as a percentage of revenue. It doesn’t matter who you are, sometimes you have to make tough calls.

“So it is not just about the turnaround of the business; even if we were making a profit, I would have made that decision. It is not just about having fewer heads or lower costs, it is also about simplifying our business,” says Brewer.

He explains that when an organisation has too many people at the head office, it creates bureaucracy and problems for the frontline. Pos Malaysia has to move as fast as its competitors and it has to be as agile; it cannot do so with 1,800 people at the head office, Brewer says.

This might be the first unpopular decision that the CEO has to make as laying off people will never be popular. However, he claims that he has the backing of the board and DRB-Hicom Bhd — the group’s largest shareholder with a 53.49% stake — to do what is necessary to turn around and transform Pos Malaysia.

The most important question now is whether Brewer will be able to get the support of Pos Malaysia employees, especially those at the head office, where 600 people will be cut from the payroll.

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