He's got mail

Canadians love to hate it, but Canada Post’s CEO has plans to rebuild the service and keep it relevant and up to date.

Deepak Chopra hardly looks like the bogeyman of senior citizens and postal carriers that he is often portrayed as in the media. Dressed for a Friday full of meetings in a gray suit and blue oxford shirt, the 51-year-old postal industry veteran has the air of a calm, competent midlevel executive. If Hollywood were to cast the role of an uncaring CEO out to terminate thousands of jobs and end home mail delivery to millions, Chopra would not be called back for a second audition.

Still, Chopra finds himself as the lead in the big-budget disaster epic that is Canada Post. The $8-billion Crown corporation was showing early signs of obsolescence in 2011 when he began his five-year run as CEO. Since then he has dealt with bitter labour negotiations, a postal workers’ strike and lockout, a doomsday pension shortfall, ice storms, angry reaction to his decision to end door-to-door mail delivery and calls for his head from various local politicians and seniors’ organizations.

Through it all Chopra, the accountant, has stuck to his numbers and core message: Canada Post has to evolve. What’s threatening the national institution, he says, is a technology revolution sparked by the organization that laid low the once-mighty Canadian tech stalwart BlackBerry Ltd. Just as the iPhone exposed the BlackBerry lineup as hopelessly outdated, the 2010 introduction of the iPad tablet would prove to be a ready substitute for paper — and snail mail. "We saw a dramatic correlation to mail volume declines with what I would call a real competitor to paper," Chopra says.

Thanks, Steve Jobs, and welcome to Canada Post, Mr. Chopra. The previously worrisome but minor annual letter mail volume declines that still added up to more than 11% in the four years prior to his arrival accelerated with the rapid acceptance of wirelessly connected digital devices into people’s everyday routines. "We kind of knew acceleration would happen, but it picked up in earnest," he says. "What was declining at 1% or 2%, picked up 4%, 5%, 6%."

While the Internet is strangling the postal business, it also holds promise and opportunity for the smaller but fast-growing parcel delivery operations. All those online retail purchases have to be physically delivered to customers and the corporation is determined to play an industry-leading role in that market. But the dramatic decline in the approximately $3-billion letter-delivery foundation of Canada Post’s business model is "almost $200 million in revenue evaporating right before your eyes," says Chopra. Add in annual inflation and you have a $300-million hole blown in the corporation’s finances.

This was the unhappy math that greeted Chopra in his first year, although it was not immediately apparent, as his first months on the job were consumed by rancorous labour negotiations with the Canadian Union of Postal Workers. The showdown with the union resulted in 12 days of rotating strikes, followed by a June 2011 lockout of its nearly 50,000 unionized employees that ended less than two weeks later with back-to-work legislation introduced by Ottawa.

That, however, was just the midpoint of two years of labour negotiations. It was not until October 2012, and two independent arbitrators, that the two sides reached a tentative agreement. It’s hard to make a case that the union won the day. While it kept pensions intact for current employees, the historically militant union agreed to concessions that included two-tier wages and pensions for new hires. CUPW president Denis Lemelin explained, no doubt wearily, that it was the best that posties could hope for. Citing the large pension plan deficit, annual losses, dropping mail volumes and "very favourable" conditions compared with other postal and courier outfits, he urged his members to grab the deal. Given that an arbitrator would have to make an all-or-nothing pick between the positions of the two sides and would be selected by the Conservative government, Lemelin concluded that "the arbitrator would be bound to impose provisions much worse than the settlement you are being asked to ratify."

The tenacity of Canada Post’s management, plus the tacit backing of Ottawa, won out in the end. "It was difficult for us because in 2010 we made more than $300 million in profit," says Chopra. "So here you are in 2011, gone through a strike and a lockout, and the union is saying, ‘We have had 16 years of nonstop profits, why do we need to give you concessions?’ " That victory over the union, which reversed the tide of years of accommodation by management, is "a significant pillar in the rebuilding of Canada Post and making it sustainable," he says.

While obtaining labour concessions was critical, that did not do enough to outrun the revenue decline in letter mail. Chopra turned to the Conference Board of Canada, of which he is a board member, to assess the postal outfit’s future prospects. Its evaluation was grave: it concluded that Canada Post could ring up annual financial losses of $1 billion by 2020. It also deduced, based on a cross-country feedback tour of Canada Post management, that Canadians would support an end to door-to-door residential letter delivery, higher stamp prices and other measures.

The Conference Board report would form the basis of the turnaround strategy Chopra introduced in 2013: it revolved around price hikes for stamps, more postal franchises, more technology to move mail and parcels faster and a dramatically smaller workforce. (The post office said it expected to shed up to 15,000 employees through attrition over a five-year span, which would allow it to trim its total workforce by 6,000 to 8,000 employees over five years.)

But the centrepiece of the five-point plan that Canadians zeroed in on was the decision to end the cherished tradition of door-to-door mail delivery and substitute it with community mailboxes over a five-year rollout. The company argued logically that only one-third of the country currently gets home delivery, so the change was one of fairness as well as efficiency and cost savings. Needless to say, Canada Post underestimated the furor that its announcement would create and Chopra, no politician, only made matters worse.

He earned his 15 minutes (and much more) of infamy when he told federal politicians that senior citizens would embrace the idea of community mailboxes. "The seniors are telling me, ‘I want to be healthy. I want to be active in my life,’" Chopra told a government committee. "The citizens and the seniors I spoke to, they want to be active. They want to be living fuller lives." The tone-deaf comment provoked an all-too predictable firestorm of controversy from seniors groups and local and federal opposition politicians.

Despite being shielded by a large public relations team, the corporation and Chopra just can’t avoid controversy. Canada Post’s inability to cope with the ice storm and power outage in December 2013 that crippled much of Toronto forced it to apologize for failing to notify customers of delivery delays over a three-week period. It also exposed poor morale at the corporation. Rather than rising to the challenge of rain, sleet and snow, many of Canada Post’s full-time and relief workers took leaves of absence during the storm and power blackout, worsening its response. The CEO did not comment during the troubles in Toronto and later trotted out spokesman Jon Hamilton to deal with the Toronto Star. "We should have notified those customers, and that’s why we’re apologizing completely." He was asked by the newspaper whether the apology included the "embattled" Canada Post boss: "Yes, Chopra, and all of Canada Post."

Soft-spoken, with a wry sense of humour, the Indian-born accountant and former head of Pitney Bowes Canada and Latin America has proved to be a lightning rod for controversy and invective, partly because of his own actions and partly due to strategic changes. He is assuredly the first boss of the post office that average Canadians know by name — although they may confuse him with his more famous namesake, the New Age spiritual guru. Aside from his unwanted high profile due to the changes he is implementing at the Crown corporation, the married father of two university-aged children is hard to find outside the walls of Canada Post: he sits on just a few outside boards and shuns the limelight. Easy to do when living in bureaucratic Ottawa.

"He is very unassuming, but he is very enthusiastic about the job that he has," says Jerry Tomberlin, dean of the Sprott School of Business in Ottawa, who counts Chopra as a member of his advisory board. "[Canada Post] has obligations that most businesses don’t have and it is faced with a huge disruptive change in the industry. Throw all that together and you have a huge challenge, but he is really relishing it." Tomberlin applauds the postal CEO for the hard and necessary decisions he has taken. Whether he is working in Ottawa or, nearly as often, in Toronto, there doesn’t seem to be much downtime for the postal chief. "This is a pretty demanding job, and I take a lot of pride in spending time to meet with our employees and do talent development and so on. It doesn’t leave a lot of time for what I call discretionary time. If there is downtime, I try to spend it with the family and watch a movie or two."

A history buff, Chopra makes mention of the fact that he is running a 250-year-old institution that, like the railroads and telephone companies, is being forced to deal with broad social and technological change on the fly. He appears to have the patient temperament to initiate the open heart surgery on Canada Post that’s necessary to keep the corporation alive, although he lacks the slick salesmanship that might persuade the union and seniors to endorse his cuts and changes. It is never mentioned by the media or the corporation’s critics, but in some ways Chopra was dealt a lousy hand when he took over as CEO. The corporation was in the midst of sinking $2 billion into state-of-the-art mail sorting equipment near the peak of its mail volumes — not anticipating the iPad and other technological bottom-line torpedoes to come — and its pension plan shortfall was ballooning to the $6.3 billion it stands at today.

Michael Warren, a former Canada Post CEO who has long called for the corporation to be privatized, is sympathetic. "The government has really missed the opportunity because four or five years ago it was profitable and had very little debt and was a going concern. Today it has an enormous amount of debt and is struggling for profitability." Recent quarterly profits for Canada Post in mid-2014 were no surprise to Warren given price hikes and staff cuts. "If you put up your prices, reduce your service, you are bound for a short period of time to realize some profit." He is pessimistic about a turnaround. "It is a situation that will look all right for a year or two and then Canada Post will again be back to the fundamental problems." (Chopra predicts "sustainable profitability" will not occur until 2018-2019.)

Warren is most worried about the impact of that iceberg-sized pension shortfall. The pension plan is hammered by the increased longevity and low interest rate environment that other defined benefit plans face, as well as an aging workforce and a fully indexed benefit scheme. Call it the perfect pension storm. Chopra has started working with the union "trying to figure out a long-term sustainable solution. That is an issue that is front and centre in our conversations."

Given the scary math that threatens Canada Post’s existence, Chopra has found his accounting background to be an essential part of his skill set. "It becomes part of your DNA, it is who you are. It has to be your second nature to constantly look at the financial side of your decisions, which continues to be the backbone of your decisions. Absolutely, you use every single aspect of your training and I’m pretty proud of that."

Now in the final 11 months of his five-year term, Chopra is coy about whether he will stay or go in 2016, when the path to profitability will be only half complete. "I have always believed that institutions are bigger than individuals," he says, stressing that he is just one of many steering the 66,000-employee enterprise. "If the board of directors wishes me to carry on the mission, I will carry on the mission."

Even if he leaves next year, he’s confident the hard work — and hard feelings — are mostly behind the organization. "The institution is so strong and so great, with the talent, that the change will continue whether I am here or not."

About the Author

Paul Brent


Paul Brent is a freelance writer in Toronto.

comments powered by Disqus

Highlights

Gain practical organizational insights and learn from industry experts at this annual event for not-for-profit financial leaders.

Our Firm Directory allows you to search for Canadian CPA firms using our interactive map as well as other criteria.