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POSTAL REFORM MUST RE-DIRECT EMPLOYEE INCENTIVES The following is a perspective by postal commentator Gene Del Polito prepared for Target Marketing magazine. The comments are the author's and do not necessarily reflect the views of the Association for Postal Commerce. Throughout the past six years' discussion on the need for postal legislative reform, one topic has been considered taboo. I'm referring, of course, to the matter of postal personnel costs. The proponents of postal reform operated under the assumption that the support of postal employees was essential if reform were ever to be enacted. Consequently, little time was spent examining whether the incentives that were a part of the Postal Service's contracts with its workers were conducive with the needs of a postal enterprise that was required to function within a competitive marketplace. The nature of the incentives that underlie today's Postal Service, unfortunately, are not commensurate with those you would expect to find in a competitive enterprise. In fact, they are totally misdirected. This, however, should not come as a surprise since Congress never intended the Postal Service to be a competitive enterprise. Rather, it intended to insulate the Postal Service from private sector competition. That's why it gave the Postal Service a statutory monopoly over the carriage of mail and the deposit of mail in letter-boxes. So, instead of being a business, as some past postal executives were fond of proclaiming, the U.S. Postal Service remains as it always has been--an agency of the federal government, with all that entails in terms of the way its governed and the forces that drive it. To some postal executives' chagrin, the environment in which the Postal Service finds itself has changed tremendously since the reorganization of some thirty years ago. Today, the Postal Service must contend with competition presented not only by others within the private sector who offer comparable express or package delivery services but also with electronic communication alternatives to hand-delivered printed matter. As a result, the real marketplace impact of the Postal Service's statutory monopoly has seriously eroded. Forget what Congress intended, if the the Postal Service is to survive, it must begin to function as a competitive enterprise. Unfortunately, the U.S. Postal Service is driven by incentives that are antithetical those you would expect to see in a competitive private sector enterprises. In the private sector, businesses strive to minimize their costs and maximize their gains. Maximizing gains has no meaning within the Postal Service, since, by law, it cannot be operated at profit. In addition, the process that governs postal ratemaking clearly was designed to insulate the Postal Service from the caprice of a competitive marketplace by empowering it to raise postal rates as costs increased. So much, then, for an incentive to minimize costs. In short, for an enterprise that now finds itself within a competitive marketplace, the incentives that drive it not only are misdirected, they're perverse. Unfortunately, this misdirection of behavior can be found at all levels within the U.S. Postal Service. One of the best examples was the one served up by Anthony Frank in a speech he delivered while he was postmaster general. It pertained to the framework that governed workplace behavior and compensation for the Postal Service's city letter carrier workforce. To paraphrase Frank, if you give a city letter carrier eight hours worth of work, and if he completes it within six and a half hours, if he returns to the office, he's given more work. On the other hand, if it takes him ten hours to do eight hours worth of work, he'll get overtime. The incentive clearly is not to work with speed or efficiency. In fact, it's quite the opposite. A similar anomalous incentive can be found in the compensation provided to postmasters (managers) as well. If a postmaster reduces the size of the complement he supervises by improving efficiency and productivity, his standing as a postmaster is lessened and he's downgraded. These are the sorts of things that make the Postal Service the unproductive mess that it is today. These are the sorts of things that Congress and the next presidential administration must face, if this nation is to be assured of cost-efficient, reliable, universal mail delivery. Is addressing such issues as misdirected incentives beyond the reasonable? Absolutely not! In fact, the Postal Service already has more appropriate compensation models from which to design more appropriately directed incentives. One of the better examples can be found in the rural letter carriers compact. To stretch former PMG Frank's analogy, if you give a rural letter carrier eight hours worth of work that is completed in less time, he can go home. If it takes ten hours to get the work done, he's still only paid for eight. In other words, cost-efficient and productivity are positively rewarded, not discouraged. Let's get one thing straight. I'm not chiding anyone about how much they're paid. I simply believe that whenever they're paid, no matter how much they're paid, they ought to be rewarded for "doing the right thing." This may seem like a fine distinction to some, but it's an important distinction to make and understand, if this nation is ever to make any headway toward the enactment of meaningful postal legislative reform.
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