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Bpost: what are the challenges facing the future CEO?

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The news just came out: Dirk Tirez will be the new CEO, a.i. of Bpost. He replaces Jean-Paul Van Avermaet, who was dismissed by the Belgian postal operator’s board of directors. In this article, I dissect the figures, the legacy of Van Avermaet and identify the challenges that will await his successor.


Why was Jean-Paul Van Avermaet kicked out?

There are many reasons for the ousting of Jean-Paul Van Avermaet. But they cannot reasonably be linked to the evolution of the share price. Under the leadership of Koen Van Gerven (February 2014 – February 2020), the share price lost 48%. Under the management of Jean-Paul van Avermaet it has gained 4%.

In my opinion, Jean-Paul van Avermaet is paying for the legacy of his predecessor on the one hand, but also his mistakes as a person.

The legacy of Koen Van Gerven

Van Avermaet did not start as CEO under the best of auspices. He took over a company whose cash reserves had melted like snow in the sun. Before the takeover of Radial, Bpost had a cash position of 5 billion Euros. Today Bpost has “only” 1.6 billion. The failed takeover of PostNL (which made sense) is the brand of Van Gerven, who will never stop trying to forget this failure by buying another company at any price. I had predicted this in an interview given on December 9, 2016. At the time, I clearly announced that Bpost would look for another quarry. The problem with having too much money is that you think too little about your purchases. And that’s precisely what happened.

The personality of Jean-Paul Van Avermaet

Van Avermaet’s personality was not unanimous. That’s the least we can say. He started his mandate badly with a first mini-scandal, that of his double salary. He then alienated the unions and was dragging the accusations of price-fixing (cartel) when he was CEO of G4S, like a ball and chain.

Disappointing results … but not van Avermaet’s fault

And then, of course, the last straw was the bad financial results. But I would like to say that Van Avermaet is not to blame. He plays the role of a fuse. Suppose Bpost’s results are indeed below expectations. In that case, it’s because of the combination of 2 factors: on the one hand, the sudden increase of the volumes of packages (537.000/day, up 56,2% compared to 2019), and on the other hand, the inadequacy of the distribution network with such volumes. It was necessary to use very expensive subcontractors, and this is what led to the result. By prioritizing service to customers (you and me), Bpost shot itself in the foot by being forced to explode its costs.


Bpost’s 2020 in figures

2020 was a year for Bpost that propelled it several years ahead in terms of the evolution of the mail and parcels market:

  • 5,780,000 letters were delivered each day, down 12%. This decrease is much higher than expected (7-9%).
  • 537,000 packages were distributed each day on average, up 56.2%. Inaugurated at the end of 2017, the new automatic sorting line was sized for 300,000 packages per day. Currently, it can absorb up to 400,000 packets, but the installations in Charleroi and Antwerp had to be restarted to absorb the difference.
  • Revenues (4154.6 million Euros) have increased less quickly (+8.3%) than costs (3635.5 million up 10.2%).

What challenges for 2021 and beyond?

Koen Van Gerven left the company in a difficult position. We cannot say that Van Avermaet has turned the situation around. Several significant issues need to be resolved before an acquisition can be considered again.

Challenge 1: finding a good CEO

The first challenge will be to find a permanent CEO (Dirk Tirez is only appointed ad interim). The last great CEO, the one who turned Bpost into a well-oiled machine, was Johnny Thijs. I mourned his departure, and the future proved me correct. Jean-Paul Van Avermaet objectively did not have the perfect profile because he had no experience in logistics. So, we had to try to find a CEO with a strong logistics culture. But also, with negotiating skills.

Challenge n°2: to re-establish the dialogue

The dialogue with the unions is broken, and many managers had lost all confidence in Van Avermaet. A parastatal business can only function based on an excellent social exchange. Bpost has 25,000 employees in Belgium, and the postal workers (and therefore, many “statutory” employees) are still the business’s visible face to the population. The Covid crisis has shown how fragile the distribution network is, but also how important it is.

Challenge 3: Dare to reform

Royal Mail and Post NL are often held up as examples of postal operators that took advantage of the Covid crisis to replenish their coffers. This was possible because their cost structure is not the same as that of Bpost. Distribution costs them much less because postal workers are much less well off. Therefore, improving Bpost’s competitiveness requires a review of the status of postal workers (in particular those who still benefit from the “statutory” system) and a more flexible work environment. I am not saying that this is good. I’m just saying that if the State expects more efficiency, this is the work that needs to be done.

Challenge n°4: resize the industrial tool

The industrial tool (the New X sorting center) is already outdated. This is due to the Covid crisis, which will have saved several years of evolution in 9 months.

Challenge n°5: to solve the Radial problem

Whatever one may say, Radial remains a rock in Bpost’s shoe. Although internally the situation is improving, the promised synergies are not yet there. The distance undoubtedly adds to the difficulty of managing and controlling the company, and I still think that acquiring a company on another continent is not an excellent idea. “Out of sight, out of mind,” as the saying goes. Van Avermaet may have embraced the group as a whole when he spoke of 35,000 employees, but he will have remained in posture and will not have succeeded in a little more than 12 months at the head of Bpost forging actual links with the North American subsidiary.

 

 

 

 

Author: Pierre-Nicolas Schwab

Pierre-Nicolas est Docteur en Marketing et dirige l'agence d'études de marché IntoTheMinds. Ses domaines de prédilection sont le BigData l'e-commerce, le commerce de proximité, l'HoReCa et la logistique. Il est également chercheur en marketing à l'Université Libre de Bruxelles et sert de coach et formateur à plusieurs organisations et institutions publiques. Il peut être contacté par email, Linkedin ou par téléphone (+32 486 42 79 42)

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