Delivering on its promises?

One year after our report on the disastrous state of the Israel Postal Company, ‘In Jerusalem’ reinvestigates.

By BERNARD ELLOUK
Israel Postal Company mailbox (photo credit: MARC ISRAEL SELLEM)
Israel Postal Company mailbox
(photo credit: MARC ISRAEL SELLEM)
The Israel Postal Company is known more for what it isn’t than what it is.
It isn’t timely, it isn’t efficient, it isn’t capable of delivering a package, it isn’t well-staffed, it isn’t in enough locations, and it supposedly isn’t surviving. But now it is trying.
Over the last two years, the IPC has been undergoing reforms intended to address a plethora of dysfunctional operations that brought the government-owned company to near total financial collapse in 2014.
For many Israelis, the reforms are coming a bit late. Over the last decade, and especially over the last few years, the IPC has experienced a degree of malfunction that has led to tens of thousands of lost packages and bills, and millions of lost shekels as the result of goods never being delivered, as Israelis increasingly turn elsewhere for their delivery needs. This is compounded by the company’s notoriously difficult and even confrontational staff, long lines, sporadic service and lack of reliability.
To bring up the subject of the postal company is to elicit jeers and spiteful incredulity from people experiencing problems all over the country.
“Um, is this a legit question?” was one response In Jerusalem received in regard to a question posted on Facebook asking about problems with the postal company.
“Who hasn’t!” wrote Yael Amir.
Tamara May responded, “In Elazar in the Gush, mail arrives approximately three months after being sent [in Israel].”
And Daniel Mednick said that he “never received mail from the UK quicker than six weeks, and stuff sometimes never arrives. It’s more reliable to go to the UK and pick it up yourself!” “Waited over a month to get a package from America and then had to pay over $60 for them to release it to me,” complained Tracey Sher.
“Wedding gifts sent to us from the US were returned to sender because the IPC took so long to deliver,” said Batnadiv Weinberg.
“Last summer, none of my packages arrived. There were at least three that I was aware of. When I went in and offered to go in the back and check each package for myself, they shouted at me and said, ‘No package slip, no package!’” recounted Doc Leora Leeder.
“Last week a Chinese businessman was almost in tears because the original documents he sent via registered mail did not arrive to the location that was just 15 minutes away from the post office. He had been waiting two months,” said Debra Nussbaum Stepen.
“They never brought my notices, costing me thousands of shekels in late fees – and I mean thousands,” said Mike Bensusan.
“Someone from the US sent me a bar mitzva invitation. She just got it back, two years later to the day it was sent. It was addressed correctly and had made it to our city here in Israel and was returned to her for some strange reason – never delivered,” said Shelly Tannenbaum.
“I sent my dad a birthday card... and he died before he received it. Yes, that is true,” remembered Stephanie Freud.
These are only some of the hundreds of similar comments collected by IJ for this report on Facebook and via interviews.
Similar comments can be found on The IPC’s Facebook page, which is largely filled with the griping of angry customers.
In 2015, the Israel Postal Company was the second-most complained about government agency.
NONE OF this would come as a shock to Israelis and long-term residents. The Israel Postal Company has had a checkered past.
Established in 1948, the Israel Postal Authority was initially a part of the Communications Ministry. But in 1986 it was allowed to break off and become independent of the ministry.
Huge operating losses incurred due to the rise of the Internet and political scandals brought the company to near collapse, and in 2006 the Postal Authority was brought under the Finance and Communications ministries. Although it was allowed to run independently and maintain its own budget with revision by any ministry, it was regulated by both ministries and obligated to be financially balanced and provide “universal mail coverage” to all residents of Israel.
The independence also allowed the company to hire and fire its employees.
However, it did not permit the company to set the rates for packages and parcels; that power still rested with the overseeing ministries.
At first, the transition into a government- owned but independently operated company seemed to mitigate many of the Postal Authority’s problems. Services were expanded, and soon the postal service began selling cellphone cards, office equipment and insurance, and providing bank services. A total of 25 new services were added, with the aim of boosting revenue and making the post office a onestop shop for all incidental needs.
Things seemed to be going well for the postal company. In 2009, three years after the reestablishment of the authority as a company, the IPC reported it brought in NIS 460 million in revenue, while having only NIS 73m. in long-term liabilities. In 2010 the ratio was NIS 75m. in long-term liabilities and NIS 438m. in revenue. But in 2011, liabilities skyrocketed. The IPC brought in NIS 466m. but had NIS 402m.
in long-term liabilities. In 2012, the ratio was NIS 433m. in long-term liabilities compared to NIS 473m. in revenue.
In 2013, revenues were outpaced by liabilities for the first time. That year, the postal company owed NIS 1.347 billion in liabilities, while it brought in only NIS 508m. in revenue.
Between 2012 and 2014, the IPC lost close to NIS 200m. In 2012, subcontractors almost sued the company for failing to pay supplementary benefits that their counterparts who were directly employed by the postal company were being paid.
Hundreds of millions of shekels were saved as a result of the non-payment, though the burden fell on the workers, many of whom lived at the lowest end of the socioeconomic spectrum. In 2013, postal workers went on strike.
The continued decline in traditional mail services, a bloated workforce and restrictions on what it could charge for packages and parcels pushed the IPC further into the red. In 2014, the company once again entered a crisis.
For years, the IPC had been selling bonds to prop up revenue, but over the few years prior to 2014 the company increasingly failed to make payments on the bonds. Thus in 2014 Hermetic Mutual, a trustee of the bonds issued by the IPC, filed suit against the IPC in the Tel Aviv District Court.
Tel Aviv District Court judge David Mintz presided over the case and appointed an outside observer to investigate the claims made by the bondholders that the postal company was not financially solvent and would no longer be able to meet its bond payments. The investigator, a former government official named Eyal Gabay, found that if “an urgent efficiency program is not carried out, [the IPC] will reach a state of default.”
Dysfunction, an excessive number of postal branches and gross inefficiency were leading the company to default on its bond payments. Gabay found that the company was unlikely to make the NIS 30m. payment due in April 2015, thus protests from bondholders could culminate in a default by the IPC.
After Gabay’s discoveries were presented to the court, Mintz threatened to strip the state’s control of the postal company for not fulfilling its obligations to guarantee that the company was able to provide its services and was financially healthy. The government was still acting too slowly, the court determined.
TO MANY who use the postal company, the crisis that took hold of the company in the last few years was definitely felt.
Late or often lost packages, damaged goods, limited hours, long lines, frustrated, unhelpful postal employees, fewer and understaffed post offices, and no way to deliver mail to some parts of the country were among the many ways in which the crisis manifested itself.
By 2014, the crisis had come to a head, and the IPC was nearly broke.
But after numerous crises, how did it get there again? “The digital revolution,” says Shimon Shoham, department manager at the Communications Ministry and the ministry’s point man for the reforms being implemented at the IPC.
However, while it is likely that the explosion of digital communication is what may have started the crisis, it is not what has perpetuated it, Shoham clarifies.
For that one must understand the unique mission of the IPC. Its license requires that it provide “universal service” to all Israelis, whether they are in Tel Aviv or Ein Gedi. A daunting task, but not a surprising one for a government agency.
But for a company that operates independently and is responsible for its own profits and debts, the task is complicated at best and, at worst, insurmountable.
Couple this mandate with a steady decline in profits over decades due to declining interest in traditional mail services, and you have an overextended and underfunded company.
Add to that fixed prices for parcels and letter delivery, a 30 percent increase in package shipping but no system in place to manage it, new competition for delivery from companies such as FedEx and TNT, declining profits from its incidental services and a large and expensive workforce, and you have a full-blown postal crisis.
This is the situation in which the IPC found itself in 2014 when its bondholders sued it.
But this can be only partly explained by these factors because between 2006 and 2011, the company was financially solvent, yet many people still suffered lost packages, damaged goods and long lines.
Sometimes waiting at the post office could take hours.
The reforms currently being implemented are the best sources of insight into what has been causing these problems.
In January 2015, the Communications and Finance ministries began investigating the IPC. To better understand the issues with the postal service, the Communications Ministry sent teams of employees around the country.
Shoham and his team focused on understanding two overarching issues – the wait time to receive mail and lost or delayed packages. They found that most post office branches had no mechanism to monitor wait times; many people still lived too far from a post office; and the system in place to monitor packages was outdated and relied too heavily on manpower – a strain that would only be exacerbated by the gradual layoffs that had been occurring for several years since 2006.
The postal company essentially had no systems to monitor many of its essential services and had a workforce that it could not sustain with declining profits, but it needed desperately to manage the growing demand for parcel delivery, which Shoham labeled its “engine of growth.”
The investigation concluded with a public committee that proposed a series of recommendations aimed at addressing the financial and customer service issues facing the IPC. Most significant among the recommendations was a call to change the license, which is where the IPC’s mandate is defined, and the tariffs or postal rate for letters and packages. The Communications Ministry admitted that for a long time it did “not reflect the real cost of delivering items,” a common complaint of the postal company.
By April 2015, the Finance and Communications ministries accepted in full the committee’s recommendations. Soon after, the tariffs were raised and the license was changed to accommodate new services aimed at shortening wait times and decreasing the number of lost, late and/or damaged packages.
The first of such services was the expansion of a tracking system to monitor wait times. Initially, the electronic tracking system existed in only 50 post offices, but since 2014 they have expanded to 400.
The measuring system is helping the IPC meet its goal of wait times no longer than 10 minutes. And although it is decreasing the number of mailboxes in the country from 4,000 to 2,500, the company has increased from 700 to 1,000 the points at which a person can mail a package or letter. This has been done largely by establishing agreements with several stores such as Office Depot, which will allow anyone to pick up or mail a package from their many stores. This is also part of the IPC’s goal of having every citizen live within 1,500 meters of a post office. Post office hours are also being increased. Three days a week, post offices around the country will be open from 8 a.m. to 8 p.m.
The IPC is also targeting wait times through digital tools. It has recently rolled out an app that allows Israelis to be notified when a package arrives.
In regard to lost packages, the Communications Ministry is compelling the IPC to establish a tracking system for all packages.
Each parcel will have a tracking code imprinted on it that will allow the company to track it from mailbox to post office to the destination address.
The IPC is also expanding on what will be delivered to individual addresses and not require going to the post office. Their hope is that by 2018, some 90% of all parcels will be delivered directly to a doorstep and, hopefully, there will be many fewer lost and damaged packages or late arrivals.
Moreover, the IPC is completing an 18,000-square-meter package sorting facility in Modi’in, which it says will shorten delivery time.
The emphasis on securing and improving parcel delivery is part of the transformation taking place within the IPC.
“You don’t make money from letters anymore,” says Communications Ministry spokesman Yechiel Shabi.
In 2015 alone, around 40 million packages entered Israel, 11 million of which were delivered in November to December, says IPC spokesman Yoni Hefetz.
THE DESIRE to make package delivery more accurate and timely conflicts with a more controversial reform currently being implemented: massive employee layoffs, or what the postal company calls “retirement by consent,” a decision they claim is made by the employees themselves.
The postal company hopes that in the next few years it can reduce the number of employees from 6,700 to 5,500, letting go of 1,200 postal workers. The Finance Ministry has provided it with NIS 500m.
to finance the pensions of the soon-to-be laid-off postal employees.
However, this contrasts greatly with the experience of the postal workers interviewed by IJ. One such employee works in the main post office in Jerusalem, who asked that his name not be revealed.
“It’s so sad, and you can’t see a smile from the people you are working with,” says the worker, who has been with the company for nearly 12 years.
“People expect more from us. The change is not good for us and not good for the customers,” he continues. “I work seven hours a day, and four hours on Friday. I make NIS 4,000 a month. You can’t do much with that. Its very, very hard. People ask me why I work so hard for next to nothing. I say I have no choice right now. I need the money.”
While it may seem paradoxical to expect better service with greater layoffs, the IPC is relying on contractors to fulfill its many ambitions.
Over the last several years, the IPC has increasingly relied on contractors to meet the increased demand in parcel delivery.
“They [the contractors] get paid much less, and they don’t get insurance or any benefits. It works for the company but not for us,” says a postal employee who is familiar with the contractors.
The Communications Ministry claims that “while painful, the firings are a good thing. We have to look at the whole picture. The public deserves to get good service, and this is the only way to make [the IPC] work in the future,” says Shoham.
Hefetz says, “For the last 18 months, the Israel Postal Company is in the middle of a major process of reform, during which we had to reduce the workforce. We had to adapt the company to new growth channels as well as to the world of electronic consumption and lowering the cost of living in Israel.”
It seems that the layoffs and other reforms are paying off. Last year, when the reforms began, the IPC saw 4% higher revenues of NIS 1.84 billion. It had an operating profit of NIS 84m. for the year, and a net profit of NIS 42m., in contrast to a NIS 6m. operating loss for 2014 and a net loss of NIS 55m.
The first half of 2016 saw revenue down to NIS 901m. from NIS 921m. in the corresponding period in 2015. But the company still reported a net profit of NIS 19.5m. in the first half of the year, an increase from the corresponding period.
The IPC hopes to complete all its reforms by 2018, though many are already in place. For example, wait time has been reduced to nine minutes on average. Its other reforms will be phased in slowly, including the layoffs.
Ultimately, whether the IPC succeeds in its reforms and if those reforms repair its reputation have yet to be seen. It has stiff and growing competition, but also has an incredible opportunity in the growing demand for package delivery. All that can be said is that a battered company with a history of failure seems to finally comprehend what went wrong.
Hopefully for the local clientele, it means that their packages will finally start to arrive. And, if they’re lucky, they’ll arrive on time.


Related Tags
mailbox