Saturday, October 5, 2013

Nine Ways the Postal Service Is Not Like a Real Business

The hand wringing about the U.S. Postal Service’s broken “business model” doesn’t fool us. The “dot com” at the end of “usps.com” doesn’t fool us. The nagging of politicians and pundits who say USPS should operate more like a business doesn’t fool us.

Despite all the talk about the Postal Service being a business, regular people understand it has the soul of a government agency and in fact is not allowed to act in a businesslike manner. Here are nine examples of how USPS is not like a real business:

  1. Real businesses underfund their pensions. The Postal Service overfunded its pension plan (to the benefit of the federal government, not postal employees).

  2. When a too-big-to-fail business gets into financial trouble, the federal government often props it up with interest-free loans in the name of economic stimulus. When the Postal Service ran into financial trouble, Congress insisted that it continue lending interest-free money to the federal government in the guise of prepaid retiree health benefits. 

  3. A real business with thousands of employees might pay its CEO $50 million a year, and no one bats an eyelash. But if the Postmaster General, who oversees 600,000-plus workers, earns 1% of that amount ($500,000), watch the politicians fall all over themselves lambasting the Postal Service’s lavish spending.

  4. Real businesses are governed by a board of directors, generally consisting of about a dozen leaders who are or soon become intimately familiar with the enterprise. But the supposedly independent Postal Service in reality is governed by a 535-member board known as Congress, whose members generally know nothing about the USPS’s operations except how to get a post office named and how to prevent it from closing.

  5. Board members of a real business have powerful incentives, like stock options, to make the company run more efficiently. But a member of the Postal Service’s real board (that is, a Congressman) only has incentives to preserve inefficiencies that maximize the number of postal employees and facilities in his district.

  6. When the board of a real business fails to act, board members get punished with a lower stock price and the prospect of not being re-elected. When the Postal Service’s real board of directors fails to act, postal customers get punished with higher prices.

  7. Real businesses make money on monopolies – at least until the trust busters come along. The Postal Service has a government-protected monopoly on the mailbox, but it comes with such onerous conditions that the monopoly is unprofitable.

  8. Real businesses make campaign contributions and use lobbyists to curry favor with members of Congress. The only “campaign donation” USPS makes is the franking privilege, which enables Congress members to send free mail to constituents (usually just before election time). USPS's lobbying efforts are limited severely by law.

  9. A real business that is billions in debt, has too many locations and employees, and is subject to strong union contracts would have declared Chapter 11 by now. The law would be on its side as it tried to walk away from most of its debts, scale back its operations, and even slip out of its union contracts. The Postal Service, however, apparently cannot turn to the bankruptcy courts – one more example of how the law treats it as just another government agency even though it’s supposed to operate like a business.
Do you know of other ways in which USPS is not like a business? Add a comment to this blog post or email them to me at dead.tree.edition@gmail.com. I can keep your comments anonymous if you'd like. And please see the follow-up article, 17 More Ways USPS Is Not Like a Real Business, which is based on insights from Dead Tree Edition readers.

For background information on some of the items listed above, please see:

22 comments:

Anonymous said...

No real busines would have this many layers of redundant management. (bureaucracy)..

Anonymous said...

All you got out the article which wasn't even discussed is there are too many layers of management. Here's another point which wasn't discussed. No real business would pay a union steward to file grievances. No real business would condone workers who come to work and just breath, complain and file grievances. Instead of closing plants, reducing hours; money can be saved by eliminating the distinction between mail handlers and clerks. Restructure the union agreement requiring the union to pay for the investigation for all grievances. The teamsters don't get paid to investigate grievances. They protect the "workers" and will not protect individuals who don't work or don't come to work. Allow first line supervisors to touch the mail and work along side there employees. It will result in teamwork. These things are taboo because it would involve dethroning top union officials along with their big pay checks.

RandyF said...

I have one quibble about this article. In it you state:

"
Real businesses make campaign contributions and use lobbyists to curry favor with members of Congress. The only “campaign donation” USPS makes is the franking privilege, which enables Congress members to send free mail to constituents (usually just before election time). USPS's lobbying efforts are limited severely by law."

Congressmen indeed pay for Franked Mail and, the Franking privilege is prohibited from being used for any sort of campaign material.

Anonymous said...

Real businesses don't have 2 Private Police Agencies who have to enforce thousands of Federal rules and regulation WITHOUT reimbursement.

Anonymous said...

Anonymous, how about getting rid of most of the first line supervisors, and hiring more clerks. If you have time to work the mail. You have too much free time on your hands. You're the type of supervisor that thinks the rules don't apply and do what you want.If you don't like grievances filed against you, stop violating the national agreement.

Mailman said...

There is only one difference that matters.

No other business is saddled with unqualified, incompetent UNACCOUNTABLE management.

End of story.

Liam Skye said...

Real businesses report long term liabilities, like retiree health benefit liability, on their balance sheet, and only report them as an expense when money is set aside to fund the liability. USPS is the only organization that is required by law to report fixed amounts of the liability as expense, whether they put the money aside to fund the liability or not!

Anonymous said...

Real business management incompetence is usually delt with a demotion or termination. Postal incompetence is rewarded with a promotion.

@dryMAILman said...

A real business might investigate why I think flats are NOT particularly difficult to sort, process, and deliver; instead the USPS and its unions continue to kill employees and customers while sorting, processing, and delivering flats.

Anonymous said...

Well well well,just put the usps on stock market and 100% privatization, it would solve the issue between magmt and labor.

Anonymous said...

What other business is required to work on behalf of their competitors? Having USPS workers deliver packages for UPS and Fed Ex makes about as much sense as Burger King selling Big Macs and giving most of the profit to McDonalds.

Anonymous said...

real managers attend harvard business school and maximize profit each quarter. po mismanagement gives away 3rd class bulk mail for pennies on the dollar. 99% have no university education.

Anonymous said...

The postal service cannot pick and choose profitable areas of delivery. It is mandated to serve all areas of the country, every address, every day.

Anonymous said...

The article is essentially a "blinding glimpse of the obvious"! Some of the commenters make good points, but far too many resort to the old bromides about redundant management and the number of first line supervisors. If they are going to work at USPS, they should at least have the sense to delve into what really drives the organization. They should also recognize (perhaps they do) theta a "free management" would pose a significant threat to many of their jobs, in that they would slash the networks (retail and processing) dramatically.
You would do more of a service to the issue if you focused on real solutions and not just the problems.
One final thought: the current legislative proposals are not even close to solutions.

Anonymous said...

If that were true Scott Adams would not have made a fortune on Dilbert.

Anonymous said...

Real businesses are not required to invest ALL their pension assets in low interest government bonds but instead can choose to invest then in a balanced portfolio.
The difference in average returns on pension assets of the USPS and the average returns of a typical businesses pension assets amount to over $10 billion per year.

Frank said...

A real business does not under charge customers that do a lot of business with their company and pass the costs onto small customers. Every customer is a source of revenue for the company. According to PMG Donahoe, the post office gives below cost discounts of between $14 and $18 billion a year, from his congressional testimony earlier this year.
Their is a standard for how letters are addressed and where not to put printing. There are dozens of reasons that mail has to be handled an extra time or two because mailers do not follow these standards. This affects millions of pieces of mail everyday. Management almost never charges the mailer for the extra handling.

uncommon sense said...

Item 2 is not quite correct. The USPS is required to provide low interest loans to the government not interest free ones.
The USPS is paid interest on the pension and retiree health care funds held by the US government just at a much lower rate than they would make if they were invested like a real company would invest pension assets.

But it is not really big deal. The low interest rate on the more than $330 billion dollars works out to only about $10-$12 billion a year on average less than what a real company would earn in its pension asset investment program.

Anonymous said...

Publishers and big mailers should be glad we aren't acting like a real business. If we were, you wouldn't be getting ANYWHERE NEAR the discounts you are today. Right? And i really don't know who the mailers are who actually believe this fairy-tale idea that if the post office cuts workers and such that the prices will come down, or even stay the same. How often does a company say, "Well, we're making too much money now that we've gotten lean. Let's cut prices." Rarely, if ever. They find new excuses to raise prices (more compensation, more expensive machines, maintenance costs, etc). The top boys just buy themselves a bigger private island.

Jack Clark said...

Mailman is 95% wrong, and so is the person who says a front line supervisors that handle mail should be removed and replaced with more clerks. The supervisor only needs to touch the mail because the existing clerks are non-productive. Put "Mailman" on a piece count (with other factors considered), and you'll see where the real waste is. And make the unions pay for all grievance investigations, and hold their members accountable.

Uncle Ben said...

Most of the waste is the BS policies Upper Management (USPS HQ) makes the front line supervisors jump thru hoops to accomplish...all for service scores. Another waste is workers who dislike their job so they move at a snail's pace or don't come to work....also requiring more supervision. The stereotypical government waste happens in the USPS!
Also the USPS was profitable but was not allowed to make a profit, therefore the federal govt benefitted. Now that the USPS needs legislative reform, Congress is clueless and can't make time to look at the postal issues...therefore the workers(clerks, carriers, supervisors, managers, mail handlers, postmasters) all suffer the affects of this, plus the American public. This is not good for anyone!!! Stop fighting among yourselves.

Anonymous said...

The USPS should STOP the "last mile" delivery for UPS an FEDEX.
This is when these private companies drop off their packages at the local Post Office for te end of the delivery in order to save themselves money. IE a package that has to be delivered miles out of town will be dropped off at the post office, UPS or FEDEX pay a minimal delivery fee in order to reduce the miles their drivers have to go therby reducing labor and fuel costs.