Measuring Postal Performance

In the private sector, performance criteria is clear. We call it the bottom line (profits). We can look at profit performance over time, use various popular formulas (earnings per share, etc.), and we can compare it to other companies. While some firms can spin their results to the investment community for a while, the truth comes out eventually. Even “most admired” companies decline if they cannot keep up an acceptable flow of profitable revenue.

We don’t yet have that same luxury of a common “bottom line” for the Postal Service. How do we determine whether or not the organization is successful?

Picking and Choosing Performance Measures

What often happens is that a commentator picks among several available issues and lets loose with critiques of postal policy and, often, postal management. One day it is pricing. The next day it is service. Another day it is something else. Critics can have a field day since the Postal Service is so huge that it is always easy to find something to talk about.

The task is made easier by a flow of reports from the Postal Regulatory Commission, the Office of the Inspector General, the Government Accountability Office, and, of course any number of comments from members of Congress who are pushing particular preferences (cut costs, but not in my district). Not to mention local newspapers catching every last service problem, employee organizations fighting downsizing initiatives and industry interest groups hammering on their particular concerns.

How Does the Postal Service Measure Performance?

The Postal Service has several measures of organization-wide performance. While these were developed on its own, beginning with an internal Malcolm Baldrige National Quality Award assessment with an eye on the “Balanced Scorecard” concept,[1] the criteria developed were also consistent with the Government Performance and Results Act.

The results are publicly reported annually, and the PRC conducts a detailed review (Annual Compliance Determination Report). It is interesting that very little discussion is given to these results by the postal community, especially since a critical requirement has been the development of valid and reliable performance indicators and measurement systems.

1. Delivery Service Performance

When this process started out, the Postal Service was essentially a “black hole.” Although the Postal Service had delivery standards, nobody really knew what the performance was for any class of mail. Industry segments had to develop their own measures (Phoenix-Hecht for remittance mail, Red Tag for magazines, etc.). The Postal Service began with a sampling system conducted by an independent vendor that focused on a portion of First-Class Mail. Over time, this was expanded. In addition, measures were developed until almost all major categories of mail were covered.

The results have been impressive. While measurement systems have become more inclusive and rigorous, actual delivery performance has steadily increased. Detailed data is available on a quarterly basis, and is discussed regularly with the mailing community. Simply said, delivery performance has never been so closely scrutinized, and, not surprisingly, has never been better.

These objective results are confirmed by customer perspectives. The Postal Service sponsors one of the largest customer survey programs in the nation, conducted by a leading independent service provider. This program is supplemented by “mystery shopper” programs and other indicators (complaints, feedback from customer service programs). The results consistently show high ratings for interactions with the Postal Service, its employees, and services. Independent surveys, such as the American Customer Satisfaction Index, consistently rates USPS performance highly.[2]

2. Financial Performance

As noted, the Postal Service does not have a true “bottom line.” The Postal Service uses “net income from operations.” Using this as a proxy avoids the impact of the “tax” uniquely placed on the Postal Service by Congress to pre-fund retiree health (RHB) benefits. But that is not the whole story either. The Postal Service is also “taxed” to provide a number of public services and funds governmental operations such as the Postal Regulatory Commission and the Office of the Inspector General. In addition, the Postal Service bears the cost of providing universal service, which the PRC estimates to be about $5 billion annually.[3]

Given the pricing and product development restrictions placed on the Postal Service, it is not impossible to develop a picture of a reasonably profitable organization. As it is, it has made tremendous strides in its financial viability since the Postal Reorganization Act of 1970. It absorbed the previous public subsidy which once represented about a quarter of its budget while keeping rates at about the rate of inflation and among the lowest in the developed world. It was able to fund a massive mechanization and automation program, and, until the imposition of the RHB pre-funding in 2006, was financially stable. Productivity has been steadily increasing.

Furthermore, while there have been missteps along the way, postal operations and finances have been reasonably free of major scandal or failure.[4] The Postal Service is required to submit independently audited annual financial statements (10K), supplemented by detailed quarterly reports. The Postal Service is subject to the requirements of Sarbanes-Oxley Act and to other extensive oversight.

3. Workplace Performance

According to some sources, the Postal Service is a terrible place to work.[5] At one time, “Going Postal” was the definition of a dysfunctional workplace. While the Califano Commission disproved that popular designation years ago, the Postal Service has worked to improve the work environment and to provide effective support for its employees. It is subject to oversight by the U.S. Occupational Safety and Health Administration (OSHA), and uses the OSHA Illness and Injury report as one of its corporate goals. The performance is well within industry standards and has been consistently improving.

The Postal Service also conducts one of the largest employee surveys in the nation, again relying on an independent expert firm. Every employee has the opportunity every year to provide their anonymous feedback, and the results have been surprisingly positive even during the recent period of employee reductions and disruptions in the workplace. Postal employees are generally highly motivated and loyal, committed to their customers, although they do express a healthy skepticism that leadership will be able to develop strategies that will enable the organization to succeed in the future (part of this is related to the apparent inability to influence Congress).

4. Corporate Social Responsibility

The last general area of accountability is broad and in some areas defies strict measurement. One area of focus is sustainability, where the Postal Service has won recognition as a leader in environmental actions. It has established a rigorous process for measuring and reducing energy use and Greenhouse Gas emissions, and has seen early successes in these areas.

In an area of increasing concern for privacy and security, the Postal Service is regularly recognized as one of the most trusted organizations in the country.

The Universal Service Obligation is another key requirement, and the Postal Service adds nearly a million new deliveries a year.

The public service functions, including, for example the law enforcement and consumer protection activities of the Postal Inspection Service, are also part of the unique value of the Postal Service to the nation.

Conclusions and Recommendations

How do we determine whether or not the Postal Service and its management team are successful in the absence of a convenient “bottom line?” Context is important, and the context is the framework of goals, indicators, and measurement systems the Postal Service has established. The case can be made that the Postal Service and its management team has been remarkably successful as measured by these goals despite the obstacles presented by the market and by Congress.

It is critical that management and industry attention should be paid to those measures that represent the best foundation for future success for the Postal Service and the industry.

I’d like to see a bit more industry discussion around these questions:

  • Are these the right goals? Are they measured correctly? Are there other goals that should be included? Is the Postal Service giving the right priority among the goals?
  • Are postal strategies and initiatives supporting these goals? Are they receiving sufficient resources and making progress? Has the Postal Service worked closely enough with the relevant customer, industry and stakeholder segments to ensure success?
  • Are the programs designed to go beyond incremental improvements to create new capabilities which will position the Postal Service and the industry for future success?
  • What are the metrics that represent the health of the mailing industry? Are there results-oriented metrics relevant to the value chain (average total cost of mailing? Percent of cost represented by postage?) that should be reviewed? Are there industry or channel wide metrics that are useful for comparing the value of mailed messaging against (or in conjunction with) other channels?

These are worthwhile discussions that the industry is not really having.

By Kent Smith
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Kent Smith is Research Director, Ursa Major Associates / Postal Vision 2020. His 38 year career in the Postal Service included Rate Classification Research, Market Research, and Strategic Planning. Ursa Major Associates / Postal Vision 2020 is dedicated to taking a broader, longer-term perspective on the future of the mailing industry ecosystem. The thoughts expressed in this “Point of View” are his own.

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[1] The Postal Service was inducted into the “Balanced Scorecard Hall of Fame” in 2006, and its Management System (then called CustomerPerfect!) was used as a case study in success by the IBM Foundation for the Business of Government.

[2] The ACSI rates the Postal Service as “one of the most improved” among all the firms tracked since the study began in 1994 (www.theacsi.org).

[3] It is interesting, but rarely mentioned, that private sector telecommunications firms receive a public subsidy of about $7 billion to provide universal service while the Postal Service receives no appropriations for this purpose.

[4] It is interesting to compare even some of the most troubled postal initiatives, such as the implementation of the Flat Sequence Sorting program, with other notable government efforts (say the Coast Guard’s Deepwater program, the IRS computer modernization program, various Dod projects, etc.). Let’s not forget that the private sector has plenty of similar examples. The point is that the Postal Service has kept such failures to a commendably low level.

[5] Employee blogs and some union commentary often give this impression. Yet, there is relatively little employee turnover and the few postal vacancies that exist generally attract crowds of applicants.

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