The U.S. Parcel -- uh, Postal -- Service Presents Its Wish List to Congress

The U.S. Postal Service presented a long wish list to Congress today, along with a subliminal message.

“Despite challenging marketplace conditions, an inflexible business model imposed by federal law and financial issues caused by legislative constraints, the Postal Service is moving forward with a lot of momentum,” Mickey D. Barnett and Postmaster General Pat Donahoe wrote in a joint letter appearing in the agency’s annual report to Congress.

Even in the report's only photo showing letters,
(Can you spot them?) packages take center stage.

Translation: “Hey, Congress, the Postal Service is scrambling to keep its head above water because you’ve created a helluva mess. Now could you get off your butts and do something more useful than naming post offices?”

Donahoe and Barnett can afford to be forthright. Donahoe is retiring Feb. 1, and Barnett’s term as chair of USPS’s Board of Governors expired earlier this month.

As for the subliminal message: The 84-page report has 14 photos featuring parcels, one that (barely) shows letters, and none depicting flat mail. Guess what postal officials think is the key to the agency’s future? After all, USPS’s parcel business grew 9% during Fiscal Year 2014, while revenue from other sources declined slightly.

Here's how the report spelled out “What’s Needed” from Congress:

The Postal Service is urging Congress to pass comprehensive postal legislation. Among the provisions we seek are those needed to ensure that the Postal Service is self-sustaining and financially strong as well as a reliable, low-cost partner to the American people and the communities it serves. These provisions include:

• Require within the Federal Employees Health Benefit Program a set of specific health care plans that would fully integrate with Medicare and virtually eliminate the retiree health benefits unfunded liability.
• Adjust the FERS [Federal Employee Retirement System] payment amount using Postal Service-specific demographic and salary growth assumptions and refund any existing surplus.
• Adjust delivery frequency (six-day packages/fiveday mail). 
• Streamline governance model and eliminate duplicative oversight.
• Provide authority to expand products and services.
• Require defined contribution retirement system for future Postal Service employees.
• Require arbitrators to consider the financial condition of the Postal Service.
• Reform Workers’ Compensation.
• Allow the Postal Service the right to appeal EEOC class action decisions to Federal Court.

The Postal Service continues to do its part within the bounds of existing law to place the organization in a favorable financial position, and we are proud of the achievements we have made to reduce costs while significantly growing our package business. Despite these efforts, however, we cannot return the Postal Service to profitability, nor can we secure our longterm financial outlook without the passage of comprehensive reform legislation.

The bottom line is that the Postal Service is ready to make the necessary changes to keep delivering for America. We just require the freedom to make it happen.

Donahoe Will Be in Good Shape When He Leaves U$P$

Last fiscal year, even before she was chosen to be the future the Postmaster General, Megan J. Brennan was the U.S. Postal Service's highest paid employee.

But don't fret for retiring Postmaster General Pat Donahoe. He will leave USPS on Feb. 1 with a pension having an estimated present value of more than $4 million, according to a financial report the agency filed Friday.

Brennan's FY2014 base salary of $236,536 was $42,000 less than Donahoe's. But with a $20,000 bonus and a $77,000 gain in the value of her FERS retirement plan, her total compensation of $351,655 came out $3,000 ahead of Donahoe's.

Before some grandstanding politicians tries to score points by blathering about overpaid postal executives, consider this: The CEOs of USPS's slightly smaller competitors, FedEx and UPS, earned more than $14 million and $10 million, respectively -- versus $1.8 million for the top five USPS executives combined.

Related articles:

• Brennan Will Be First Woman To Lead the U.S. Postal Service
• The Postmaster General's Scandalous(?) Salary
• Potter Quitting the Worst CEO Job in America

Brennan Will Be First Woman To Lead the U.S. Postal Service

With Postmaster General Patrick Donahoe announcing his retirement today, the U.S. Postal Service's Board of Governors named USPS Chief Operating Officer Megan J. Brennan as his replacement.

When Donahoe ends his 39 years with the agency on Feb. 1, Brennan will become the first woman to hold the position of Postmaster General, 240 years after the Continental Congress appointed Benjamin Franklin to the job.

Megan J. Brennan

Donahoe started with USPS as a clerk and became PMG four years ago. He gave no reason for leaving what Dead Tree Edition has called "the worst CEO job in America".

Here is Brennan's biography as it appears on the Postal Service's web site:

Megan J. Brennan was named Chief Operating Officer and executive vice president in December 2010. Brennan leads the continuous improvement of the entire postal network operation as well as the allocations of people and resources. She reports to the Postmaster General.

Brennan has responsibility for the day-to-day activities of 491,000 career employees working in more than 31,000 facilities supported by a fleet of over 200,000 vehicles. She is responsible for Post Offices, delivery and retail operations, facilities and the mail processing network. Reporting to Brennan are the vice presidents of Delivery and Post Office Operations, Facilities, Network Operations, Retail Channel Operations and the seven vice presidents of Area Operations.

Previously she was vice president of Eastern Area Operations. As the senior postal official she oversaw an area that encompassed Pennsylvania, Ohio, West Virginia, Delaware, Kentucky, Central and South Jersey, Western New York and parts of Virginia and Indiana. Reporting to the deputy postmaster general and chief operating officer, she was responsible for postal operations, including processing and distribution, customer service and administrative operations.

A 27-year veteran of the Postal Service, Brennan served as vice president of Northeast Area Operations from May 2005 until being named vice president of Eastern Area Operations. Prior to that, she was manager of Operations Support for the Northeast Area. In this capacity, she was responsible for coordinating and integrating processing and distribution, transportation and delivery operations throughout the Northeast Area.

Brennan also held the headquarters position of manager of Field Support and Integration, where she worked directly for the Chief Operating Officer.

Brennan joined the Postal Service in 1986 as a letter carrier in Lancaster, Pennsylvania, and began her management career as a delivery and collection supervisor. She has in-depth experience in both line management and support positions, having worked at the district, area and headquarters levels. She served as district manager, Springfield, Massachusetts, and plant manager for the Lehigh Valley and Reading, Pennsylvania, processing and distribution facilities.

Brennan is a graduate of Immaculata College in Pennsylvania. She is a Sloan Fellow and holds a Master of Business Administration degree from the Massachusetts Institute of Technology.

Postmaster General Wins Dubious Publishing Honor

In just two and a half years, Postmaster General Patrick Donahoe has gone from hero to villain in the eyes of a leading publishing-industry magazine.

Disruptor General

Folio: named the U.S. Postal Service’s CEO this week to its Folio: 100 list of the 100 most influential people in the magazine industry, in the “disruptor” category.

“Donahoe raised postal rates by 6 percent in December, making magazine delivery more expensive at a time publishers are carefully managing their print costs,” Folio: noted. Periodicals mail volume declined more than 6% in the first six months after the “exigent” rate increase was implemented.

Folio:’s slap at the PMG was a far cry from April 2012, when the magazine hailed Donahoe because “he has pledged to support the magazine industry.” He was awarded a place on that year's Folio: 40 list of the magazine industry’s “most innovative and distinguished professionals.”

Folio: quoted him back then as saying “You don’t hear me walking around saying we need an exigent price change — that will push you, bill presenters and standard mailers out of the mail.”

To be fair to Donahoe, almost everyone in 2012 thought Congress would have to do something to relieve the Postal Service’s financial burdens, after squeezing billions of dollars from the agency in the form of pension overpayments and prepaid retiree health benefits.

But in fact Congress has been unable to do anything more meaningful than name additional post offices, leaving Donahoe few options in his efforts to keep the agency solvent.

Related articles:

• Wanted: New Postmaster General; Must Be Able To Kiss 535 Backsides Simultaneously 
• Folio: Magazine Honors Donahoe As Innovator
• The Postmaster General's Scandalous(?) Salary 
• Potter Quitting the Worst CEO Job in America

 

The Postmaster General's Scandalous(?) Salary

What USPS's top executives were paid last year

The U.S. Postal Service reported Friday that Postmaster General Pat Donahoe received total compensation of $436,540 last year. Some people will see that as a shocking amount for a government employee.

But here’s the real shocker: The CEOs of the Postal Service’s two chief rivals, FedEx and United Parcel Service, at last report each earned more than 27 times what Donahoe made.

The most highly compensated postal employee in Fiscal Year 2013 was actually Ellis A. Burgoyne, the Chief Information Officer & Executive VP. His $230,000 salary, $233,000 pension gain, and $7,000 in other compensation gave him a total package of $470,000.

Top executives pay at FedEx

Burgoyne's counterpart at FedEx made 10 times that amount, and the CIO at UPS made nearly seven times Burgyone’s pay. Both FedEx and UPS have smaller workforces than USPS and generate slightly less revenue (though more profit).

From time to time some grandstanding Congressman (annual salary: $174,000, plus really sweet health coverage and pension deals) will complain that the PMG’s compensation is exorbitant and unfair. And then in the next breath he’ll opine that the Postal Service should operate in a more business-like manner.

That brings up a question we’ve asked before: Is the Postal Service a public service or a business? Should it be run by people with MPAs (Master’s of Public Administration) or MBAs (Master’s of Business Administration)?

Do you measure postal executives’ compensation on a fairness scale in comparison with other public servants? Or do you measure it on a competitive scale in relation to other business leaders?

Top executives' pay at UPS

One thing is clear: USPS cannot afford to hire executive talent from the private sector. A middle manager in information technology at FedEx or UPS would probably have to take a pay cut to become the Postal Service’s CIO or Postmaster General.

As a result, USPS executives will continue to be drawn mostly from people who have risen through the ranks. That’s not all bad because it means they understand the unique complexities of the Postal Service and how legislation and politics have boxed the agency in.

But it also means that, to access the private sector’s best thinking and technologies, the Postal Service will continue to be overly reliant on consultants rather than the experience of its own people.

Related articles:

• The Oxymoron at the Root of USPS's Woes 
• 17 More Ways USPS Is Not Like a Real Business
• Wanted: New Postmaster General; Must Be Able To Kiss 535 Backsides Simultaneously

 

On the 5th Birthday of Dead Tree Edition, It's Time To Reveal the Real D. Eadward Tree

Five years and 601 articles ago today, a magazine-publishing veteran took on the identity of D. Eadward Tree and launched the Dead Tree Edition blog.

Rarely has the blog focused on Mr. Tree himself, under the assumption that the 700,000-plus unique visitors (some more unique than others) who have visited over the years were looking mostly for advice, insight, or maybe even entertainment. But the true identity of Mr. Tree has become a subject of great speculation and discussion in some publishing and printing circles, prompting a few of the blog’s followers to request that Dead Tree Edition celebrate its fifth birthday by spilling the beans.

A thorough reading of all 601 of those articles provides many hints as to Mr. Tree’s identity. It’s also a great cure for insomnia, unless you are that rare bird who happens to share all of Mr. Tree’s obsessions – such as making print more environmentally friendly, getting accurate benefits information to potential U.S. Postal Service retirees, reforming the way USPS calculates the cost of Periodicals mail, exposing “black liquor” government subsidies to U.S. pulp mills, and battling “go paperless” greenwash.

So to save you the trouble, here are some clues we dug up about Mr. Tree from his writings:

In 2010, a postal executive startled a meeting of postal officials and mailers’ representatives by announcing that Mr. Tree was none other than Patrick R. Donahoe, then the #2 man at USPS. Five months later, Donahoe became Postmaster General. A coincidence? You decide.

A couple of months later came another clue – that Mr. Donahoe, aka Mr.Tree, had starred in those “If it fits, it ships” Postal Service commercials. But Mr. Tree soon pooh-poohed that by claiming he was actually married to a prominent publishing-industry pundit.

Confused yet? Just wait.

Only a Jew could have written this headline: Call a mohel, this baby's growing!. But the article Re-Righting The Bible: No More Namby-Pamby Peacemaking suggests a familiarity with the New Testament that only a Christian would have. And articles like Playboy and Virgin Fail to Hook Up suggest a total lack of spirituality.

An object of fantasies?

What’s clear is that he works in the magazine industry and is a self-described “print guy” (even a printing geek) and “an environmentalist who buys a lot of paper.” But he’s definitely not part of what he calls “the New York publishing elite.”

His LinkedIn profile places him in Hawaii, which should narrow things down a lot. But he claimed in an interview that the Hawaiian thing was a (lame) joke and that he actually inhabits a parallel universe.

He hangs around bookstores and doesn’t date Cosmo readers, he told us three years ago. And regarding a magazine cover of Rosie O’Donnell that has now appeared three times on Dead Tree Edition, we note Mr. Tree’s comment, “Hubba, hubba, Rosie in a bathrobe!” Perhaps a glimpse of his secret, twisted fantasies?

In early 2010 he revealed that he has a nephew – and an apparent appreciation for James Brown. An article he wrote last year for Publishing Executive magazine pays homage to The Who (See me, Sniff me, Touch me, Peel me) and Madonna. And the opening sentence of his next PubExec article ripped off “should threaten to undo us” from Martin Luther’s “A Mighty Fortress.”

Rather diverse musical tastes for one person, wouldn’t you say?

Has it ever occurred to you that Mr. Tree is confused about his own identity?

The Biggest Stories of 2012, the Year of No

It's been a year of "no" in this little corner of the universe -- no postal reform, no big paper merger, no more listing on the RISI Top 50, no major bankruptcies. There was even a double negative: no No Print Day.

The hot topic this year for Dead Tree Edition readers has been retirement: Nine of the 10 most-read stories dealt with efforts (or lack thereof) to downsize the U.S. Postal Service workforce by getting more employees to quit.

Here's a brief recap of the year's highs and lows:

• Most popular article: By a landslide it was USPS Planning Retirement Incentives To Help Downsizing, Donahoe Testifies, with 42,000+ page views, more than double that of any other story.
• Most commented article: 8 Reasons USPS Productivity Is Declining: The Employees Speak Out, with a whopping 74, including many insightful responses from the Postal Service's front lines.
• Most influential article: Some would say it was Greenpeace Sticks It To Toshiba: Company Has No Paper Policy because an embarrassed Toshiba pulled the plug on its hypocritical No-Print Day the next day, but I suspect that was a coincidence. My vote is for 10 Questions About Toshiba's No-Print Day, which nine days earlier brought Toshiba's greenwash effort to the attention of a fairly small audience, but an audience that quickly spread the word to more influential writers and

Employee Buyouts Surpass USPS Projection

At least 23,000 APWU-represented employees have signed up for incentives to leave the U.S. Postal Service, according to Postmaster General Patrick Donahoe.

Donahoe provided that number at a "State of the Postal Service" presentation last week to leaders of the Mailers' Technical Advisory Committee (MTAC), according to notes released yesterday by Idealliance, a trade organization of publishers and their suppliers. Postal officials had predicted that 15,000 to 20,000 of the approximately 115,000 eligible employees would take the buyout, which includes $15,000 and for many the chance to take early retirement.

Full-time employees had until yesterday to accept the buyout or to change their minds if they had already signed up. Part-timers' deadline is Jan. 4.

Donahoe also told the MTAC leaders that USPS is urging the lame-duck session of Congress to take action on postal reform and not start over in 2013, according to the Idealliance summary. The key issues are removing the burden of prefunding retiree health benefits and allowing five-day delivery, he said.

Related articles:

• USPS Underestimates How Many Employees Will Take the Money and Run, Poll Says
• Congress Is Fixin' To Fix the Postal Service  
• USPS Planning Retirement Incentives To Help Downsizing, Donahoe Testifies

Is the Postal Service Really Broke?

The U.S. Postal Service would be in Chapter 11 if it were a business, the Postmaster General points out, but others claim he and some political conservatives are manufacturing a crisis.

There has been much debate and confusion regarding USPS’s financial status. It helps to break the issue down into three questions:

Question #1: Is the Postal Service broke?

This is a debatable point, though the Postal Service’s financial reports show that it is indeed broke and about to exhaust its ability to borrow.

Those who say USPS’s finances are OK point out correctly that it has prepaid billions of dollars to the federal government to cover future retirees’ health benefits and overpaid billions more into a joint federal/USPS pension fund. A Congressional accounting game designed to mask the size of the government’s budget deficit basically has the Postal Service borrowing billions of dollars each year so that it can turn around and lend billions back to the government in the form of prepaying into the retiree-benefits fund.

Business-style accounting would treat that $21 billion loan to the federal government as an asset, giving USPS about $2 billion in net capital at the end of Fiscal Year 2011 rather than the -$19 billion net value it reported.

It's Time for Liberals To Rethink USPS Downsizing

Thurgood Marshall Jr.

Liberal conspiracy theories about the Postmaster General’s plan to downsize the U.S. Postal Service ran head on into reality yesterday.

The plan “would return the organization to sustained profitability,” Thurgood Marshall Jr., chairman of USPS’s Board of Governors, said in a prepared statement. In contrast, legislation recently approved by the Democratic-controlled Senate would “not provide the Postal Service with the flexibility and speed that it needs to have a sustainable business model.”

Marshall reiterated his support for "the tremendous job" being done by PMG Pat Donahoe, commending him ”for his excellent work in communicating internally and externally about the changes that we are implementing, the long-term future of the Postal Service and the future of mail” and for ”keeping our eyes focused on the long-term horizon.”

Scion of a liberal icon
If you’re going to attack a plan as an anti-labor Tea Party plot, it doesn’t help to have the name “Thurgood Marshall” singing its praises. Marshall’s father is an icon of the Civil Rights Movement for creating and implementing the brilliant legal strategy that gradually dismantled Jim Crow education laws before becoming the first African-American Supreme Court justice.

Marshall Jr. has his own liberal credentials, having served under Bill Clinton, Al Gore, and Ted Kennedy.

Unlike bleeding-heart senators who can’t stand the thought of closing a single post office, Marshall has actually looked at the numbers. The math is simple: The Postal Service’s expenses are billions of dollars higher than its revenues (even if the retiree-benefits and pension accounting games are excluded). Without aggressive action, revenues will continue declining faster than expenses.

Folio: Magazine Honors Donahoe As Innovator

Postmaster General Patrick Donahoe was named today to Folio: magazine's "2012 Folio: 40" list of the magazine industry's "most innovative and distinguished professionals."

The Donahoe article, published online today and to appear in an upcoming issue of the magazine, cited Donahoe's "continued commitment to magazine media, while also remaining steadfast on the realities surrounding the challenges the USPS is combating."

Donahoe has reassured publishers that the U.S. Postal Service won't try to solve its financial problems by jacking up their postage rates, the article said. He's trying instead to cut costs, it added, by reducing the number of employees and postal facilities and by eliminating Saturday delivery.

USPS Planning Retirement Incentives To Help Downsizing, Donahoe Testifies

The U.S. Postal Service will offer retirement incentives if it is allowed to make cost-cutting moves like eliminating Saturday delivery, its CEO told a Congressional panel today.

Rep. Dennis Ross, chairman of the House subcommittee overseeing postal legislation, stated that USPS needs to lose nearly 150,000 employees via attrition "to rightsize the expenditure side of the Postal Service." He asked Postmaster General Pat Donahoe whether he would offer employees retirement incentives to make that happen.

"We do plan on issuing some incentives based on the fact that we make some changes in our operation," Donahoe responded during a hearing. "As we shrink the network, as we move from six- to  five-day delivery, we would put in some incentive money to move people along."

He did not specify what sort of incentives would be offered or how they would be funded. Nor did he state whether retirement incentives would be offered if Congress blocks some of his cost-cutting proposals.

USPS Seeks 'Soft Landing' For Downsized Employees, Donahoe Says

The U.S. Postal Service plans to provide a "soft landing" for employees affected by downsizing and is looking for ways to avoid closing rural post offices, the Postmaster General will testify Tuesday.

"The Plan to Profitability focuses on workforce reductions through employee attrition versus layoffs or wage reductions, meaning impacted career employees would be able to retire or find another job in the Postal Service," PMG Pat Donahoe will tell a House subcommittee. USPS released his prepared remarks today.

"In response to declining mail volumes and to increase productivity, the Postal Service consolidated over 200 mail processing facilities in the past five years from our peak number of 673 facilities in 2006. In doing so, we have customarily provided a 'soft landing' for employees through retirements and reassigning staff, in an effort to minimize impacts on employees. We have been, and continue to be, a responsible employer."

Donahoe will largely reiterate his plea that Congress enable the Postal Service to adjust to declining mail volumes with such cost cuts as eliminating Saturday delivery, closing facilities, and letting it leave the federal government's inefficient employee-healthcare plan. But he will also provide hints that USPS's plan to balance its budgets is still a work in progress.

Greece Is the Word for USPS, Donahoe Says

The U.S. Postal Service’s financial situation is starting to “look like Greece,” the Postmaster General told mailers last week, because of resistance to changing the agency's obviously unsustainable cost structure.

If Congress doesn’t allow USPS to change, Postmaster General Pat Donahoe told the Mailers Technical Advisory Committee (MTAC), by 2016 it will have $60 billion in annual revenue but $90 billion worth of debt.

Donahoe was updating the mailers on his plan to reduce the agency’s cost structure through such measures as eliminating Saturday delivery, closing many post offices and distribution centers, slower deliveries, and ending the accounting games surrounding retiree health benefits and pensions.

“We have to act on this now. Putting a couple of pieces together and holding your breath is not the solution. We will be in an untenable position in 5 to 6 years,” one account of the meeting quoted Donahoe as saying.

“It is hard to get the message across. Everyone can’t have their cake and eat it too. When you look at our outlook and do nothing, we look like Greece,” he said, referring to the country that faces default on its debt and massive upheaval after years of obviously unsustainable budget deficits.

Wanted: New Postmaster General; Must Be Able To Kiss 535 Backsides Simultaneously

Now the Congressional silliness regarding Postmaster General Pat Donahoe has gone bipartisan.

Rep. Dennis Ross indicated a few days ago that Donahoe should be fired – apparently for bowing to pressure from 20 senators and agreeing to a mostly meaningless moratorium on the closing of postal facilities. The Republican subcommittee chairman’s attack comes less than two weeks after Democratic Congressman Peter DeFazio said the PMG should be canned for trying to save money by lowering the Postal Service’s delivery standards.

All this reminds me of what we tell little children: Every time you point a finger at someone else, four more are pointing back at you. Congress is largely to blame for the fix the Postal Service is in, and any meaningful reform requires Congressional action.

Can Donahoe focus on building new revenue sources or developing long-range plans, the way the CEO of any other multibillion-dollar business would? Nope, what passes for a business model at the Postal Service these days boils down to two strategies:

1) Persuade Congress and the general public that the Postal Service will soon go broke unless Congress makes some significant changes. (I’d say Donahoe is doing pretty well in this department.)

2) Suck up to the Postal Service’s dysfunctional 535-member board of directors -- Congress, that is, not the USPS Board of Governors -- in hopes of getting it to make the tough decisions necessary to save the agency. (A well nigh impossible task, I'd say.)

With the Postal Service’s finances hamstrung by Congressional inaction, Donahoe was forced to propose radical and unpopular cost-cutting measures like reducing service standards. And when 20 senators pushed for the moratorium, Donahoe would have been a fool to brush them off.

Ross’s response, via Twitter to postal blogger Alan Robinson: “PMG is trying to delay an [sic] deflect. First Brac management change may have to start at the top.”

“BRAC” refers to a Ross-proposed commission that would determine which post offices and processing centers are closed. The irony is that, even with the moratorium, Donahoe has the Postal Service on a fast track to close facilities "at least a year earlier than any BRAC could act," Robinson notes.

“In reality, the moratorium has little practical effect,” noted Postalnews Blog, “the USPS is continuing all of the processes it must go through in order to close the facilities, and few would actually have been shuttered by May.”

Related articles:

• Donahoe's Downsizing Plan for USPS Yields Huge PR Coup
• 6 Points Donahoe Left Out of His Bailout Rebuttal 
• Potter Quitting the Worst CEO Job in America

Mailers Getting Cold Feet About Postal Service Cuts

Recent problems with slow deliveries are causing some mail-dependent companies to think twice about supporting the radical downsizing of the U.S. Postal Service. Good idea.

An influential group of publication printers sent a letter to postal management last week to “express our concerns over the recent increase of customer complaints related to the late delivery of their catalogs and magazines."

“SCF drop shipments have increased from 3-day to 5-day at a large percentage of facilities,” stated the letter from Idealliance’s POISE committee. The POISE printers produce and distribute more than 70% of the Postal Service’s flat mail. Mailers typically look to these printers for help navigating operational issues with the Postal Service, including late deliveries.

The letter, which was distributed via Idealliance to numerous mailers, notes that postal management has asked the printers to support its “aggressive network optimization initiative.”

“To date, we have publicly supported the efforts of the US Postal Service, but the POISE group feels this is becoming increasingly difficult as we face these delivery issues and concerns from frustrated and unsatisfied customers.”

If they think things are bad now, they should take another look at what might happen if all of Postmaster General Pat Donahoe’s recently announced cuts are carried out. The USPS’ Radical Plan: Good in theory, potential chaos in reality, my article in the new issue of Publishing Executive magazine, explains why.

In short, it’s not that there aren’t plenty of opportunities to make the Postal Service more efficient, as noted in yesterday’s article Why Mailers Support Radical Downsizing of the Postal Service. The problem is that the groundwork hasn’t been laid for successfully restructuring USPS and ramping up its efficiency.

Real productivity improvement is built on a foundation of investments -- in equipment, technology, training, procedures, etc. Donahoe’s plan to downsize the USPS workforce by 30% in the next four years is like trying to install the roof before the foundation has been laid.

Mailers should expect more customer service problems in the next few years if politicians force the Postal Service to make huge cost cuts without giving it the resources to work more efficiently.

Related articles:

• How Congress Bankrupted the Postal Service in 3 Easy Steps
• Donahoe's Downsizing Plan for USPS Yields Huge PR Coup
• USPS Retirement Mess: A Major Barrier To Downsizing

Donahoe's Downsizing Plan for USPS Yields Huge PR Coup

The past week capped off an astounding publicity coup for the U.S. Postal Service, which is not usually known for its adroit public relations.

Years of conferences, letter writing, study reports, and publicity campaigns by mailers, postal unions, and postal management had largely failed to draw much attention to USPS’s financial plight – or to Congress’ role in causing that plight.

Suddenly last week, it seemed, news of the Postal Service’s dire straits was everywhere – on front pages, leading off network newscasts, featured in one of David Letterman’s famous Top 10 lists, and the subject of a hilarious “The Daily Show with Jon Stewart” bit.

What turned the tide wasn’t highly paid lobbyists, high-powered PR consultants, ot clever slogans. (Remember efforts to brand so-called prepaid retiree health benefits as a “Stamp Tax”?)

The key was a bit of Reality Therapy, in the form of postal executives spelling out what they would have to do to keep the Postal Service solvent in light of Congressional policies.

It started with a small dose of reality in late July when USPS announced a list of 3,700 underperforming post offices being considered for closure. The small post offices represent less than 1% of USPS’s budget, and their closure would not be as momentous as recent consolidations of processing and distribution centers.

The news media and general public, however, know little of P&DCs, but everyone knows what a post office is. Post office closings, along with the Postal Service's financial problems, became a hot topic-- with some articles even mentioning that Congress’ failure to yield on USPS’ pension and benefit overfunding as a major culprit. The timing was perfect: After the debt-ceiling debacle, the public didn’t have a hard time believing that Congress was to blame for much of USPS’s trouble.

Then the big dose came last month when Postmaster General Pat Donahoe announced his radical transformation plan, which called for laying off an estimated 120,000 postal workers and closing more than 300 P&DCs over the next four years. The prospect of having to rescind no-layoff clauses in union contracts and putting so many postal employees out of work got Congress' attention.

The news-media pack started smelling a juicy story. It couldn’t resist the opportunity for multiple sound bites from a Congressional hearing this past Tuesday.

“We have NEVER seen this many cameras for a #Postal hearing,” Washington Post reporter Ed O’Keefe tweeted a few minutes before the hearing began.

Despite the praise from mailer groups, Donahoe’s plan is deeply flawed. For example, smoothly transition from more than 500 P&DCs to fewer than 200 in only a year? Not likely.

But the proposal has succeeded in drawing attention to what Not-In-My-District politics, Congressional accounting games, and White House inaction are doing to an organization that touches every American without spending taxpayer money. Perhaps from all this notoriety and discussion, real solutions can emerge.

Related articles:

• Pensions: Another Government Rip-off of the Postal Service 
• Congress Hears the Truth About Postal Service Finances  
• 6 Points Donahoe Left Out of His Bailout Rebuttal
• A New Slogan for the Postal Service: "Just Say No"

USPS Will Not Seek Exigent Rate Increase

The U.S. Postal Service will not seek an "exigent" (higher-than-inflation) rate increase this year, Postmaster General Pat Donahoe told the Mailers Technical Advisory Committee today.

USPS asked the Postal Regulatory Commission last month for special permission to raise most postal rates by more than 4%, in addition to the usual rate increases that are capped by changes in the Consumer Price Index.That proposal came in a court-ordered reconsideration of the financially strapped Postal Service's request for rate hikes to help it overcome the effects of the recession.

But Donahoe told the mailers group today that USPS would pursue that case only to get the PRC to clarify its position on when such exigent rate increases are allowed.

It will, however, implement CPI-capped rate increases in January, he said. Based on current inflation numbers, those increases will probably be a bit above 2%.

6 Points Donahoe Left Out of His Bailout Rebuttal

In Donahoe’s Answer to Postal Bailout Criticism, we noted the Postmaster General’s recent article explaining that the U.S. Postal Service’s financial straits are a creation of Congress rather than actual financial losses. But the article omits key points, partly because the Postal Service can’t afford to offend Congress right now with the unvarnished truth.

Here are six more things that ignorant critics in Congress and the news media need to consider about USPS finances:

1) Congressional game: The Postal Service is the victim of a Congressional accounting game. What Donahoe diplomatically labels “prepayment to the Retiree Health Benefit fund” was more accurately described by the Office of Inspector General as using “Postal Service funds to make the President’s budget seem smaller.” (See How USPS Could Bypass Congress on Saturday Delivery.)

2) Real conservatism: Why are so many conservatives criticizing efforts to end the “prepayments” when they also claim (correctly, in my view) that the President’s budget is too large? If they understood the situation, I suspect they would conclude that the truly conservative approach would be to end this shell game that misleads taxpayers about the size of the federal deficit. But that would require searching for the truth rather than sound bites.

3) Reforming the “prepayments” is no longer enough: Although accurate accounting of the prepayments, as assets rather than expenses, would have put USPS in the black in recent years, that no longer seems to be the case. The rapidly declining volume of highly profitable First Class mail is overwhelming the Postal Service’s cost-cutting efforts. USPS must find additional efficiencies to balance its books.

4) Not much light in there: The people who claim that the recent APWU labor contract is a giveaway by the Postal Service are engaged in “rectal-cranial explorations”. (That’s a polite way of saying they’ve got their heads up their – well, you get the point.) As someone who works in the news media, I’m embarrassed by many of the news articles and editorials on the contract, which clearly were written by people who hadn’t bothered to look at the contract or to do even a few minutes of research. The pundits tut-tutted about the pay raises for current employees without noticing the more significant efficiency gains, such as pay-scale reductions for future employees and greater use of part-time and temporary workers. (See Is the APWU Eating Its Young? and Junk Journalism and the Bogus Postal Statistic for more on the groundbreaking contract.)

5) Hypocrites: Any member of Congress who criticizes the Postal Service for not cutting expenses enough is a hypocrite. Have you ever heard of a Congressman supporting the closure of a rarely used post office in his district? Donahoe’s article pointed out cost cuts in recent years totaling about 15% of annual USPS expenses and plans for another 25% in cuts. How many members of Congress have advocated specific cuts in the federal budget that even approach that kind of scale?

6) Penny wise, pound foolish: The Postal Service has foregone some investments that would have easily paid off, such as replacing some of its aging, high-maintenance delivery vehicles and revamping some of its facilities. (See Here's How the Postal Service Can Get Back Its Pension and Benefits Overpayments for more on this issue.) But its cash crisis, brought about by the bogus retiree health benefits accounting, has prevented it in recent years from spending a little money to save a lot more.

Donahoe's Answer to Postal Bailout Criticism

In a recent article for Deliver magazine, Postmaster General Pat Donahoe provided an excellent rebuttal to claims of some ignorant Congressmen and commentators that the U.S. Postal Service is seeking a bailout. (But also see 6 Points Donahoe Left Out of His Bailout Rebuttal for the truths he was too polite to mention.)

The article, "The Postal Service Needs Relief from Congressional Mandates", notes that the Postal Service would have been profitable the past few years if not for an unusual financial burden placed on it by Congress. And he calls on Congress "to reform the unfair and onerous mandates that hinder us from competing in today’s environment".

Believing that the Donahoe article needs to be read by people other than Deliver's target market of corporate marketing managers, Dead Tree Edition is providing the entire text of the article below. (And if the Postal Service objects that this is a copyright violation, we'll take the article down in a heartbeat.):

Last year, the United States Postal Service® delivered 171 billion pieces of mail. That’s 563 million pieces processed each day. Those numbers, however, are not the figures some of our critics like to talk about. The number they like to cite is $20 billion — the Postal Service’s total net financial losses from 2007 through 2010.

Twenty billion dollars is a staggering sum. But you might be surprised to learn that those losses are due to an unusual requirement in the 2006 Postal Accountability and Enhancement law. The impact of this requirement is significant: The Postal Service paid $21 billion in the past four fiscal years to fund retiree health benefits for future retirees. Were it not for this provision of law, the Postal Service would not be operating in the red; it would have turned a profit of $1 billion from 2007 to 2010, a period when mail volume declined 20 percent due to the recession.

Unlike other American businesses, the Postal Service must pay cash today for health benefits that will not be paid out until a date far in the future. Other federal agencies and most private sector companies use a “pay-as-you-go” system, paying premiums as they are billed.

Consider that the Postal Service had to borrow $12 billion from the U.S. Treasury so that it could make the $21 billion prepayment to the Retiree Health Benefit fund over the past four fiscal years. This is capital that would have allowed us to invest in new products and innovation, lower postage rates and remain profitable.

We are resolutely committed to paying our fair share for our employees’ and retirees’ health care costs and have set aside more than $42 billion for such future costs. But these accelerated payments constitute a hidden tax that is neither fair nor responsible. It’s time for Congress to act to eliminate this burdensome mandate.

If action is not taken to address this situation immediately, the Postal Service will default on payments to the Retiree Health Benefit fund — and possibly on other government payments — on or before Sept. 30 of this year.

In the meantime, we are doing our part. Over the last four years, Postal management has eliminated more than $12 billion in costs and has committed to cut another $16 billion over the next several years. We are working diligently to dramatically improve our internal processes, including how we manage our workforce. Our recently ratified contract with the American Postal Workers Union is a good example of this. The contract gives the Postal Service much greater flexibility to manage work hours — where and when we need them — rather than bind us to static work shifts and significant overtime costs. The provisions of this agreement will provide the Postal Service with future cost savings of $3.8 billion.

The Postal Service is the heart of a $1 trillion mailing industry and is essential to the American economy. And we are committed to cutting costs within our statutory authority. But Congress must act to reform the unfair and onerous mandates that hinder us from competing in today’s environment.

With Congressional action to address retiree health benefit pre-funding and other legislative and regulatory constraints, the Postal Service can more nimbly adapt to meet customer needs and better fulfill its mission: to deliver value, convenience and innovation to the American people and our nation’s businesses.