Tweak Your Biz » Management » The Post Office: Lessons Learned From A Leadership Catastrophe

The Post Office: Lessons Learned From A Leadership Catastrophe



Recently the U.S. Postal Service (USPS) announced it would stop delivering mail on Saturdays.  It is expected to save $2 billion a year, a drop in the bucket compared to the $16 billion loss reported in 2012.  Besides the staggering annual loss, the USPS twice defaulted on payments totalling $11 billion in 2012 and it exhausted a $15 billion line of credit from the U.S. Treasury. So…what can you learn about leadership from such a sad story?

Leadership

First, let’s look at the situation.  There are three key problems that would cause the reasonable person to believe the USPS is irreparably flawed:

# 1. Bureaucracy

The recent no-Saturday delivery decision has been kicked around for years, but when it was approved recently by the House Oversight and Reform Committee, some members of Congress questioned the authority of that Committee.  Interestingly, Saturday service was cut in 1957, only to have President Eisenhower reverse the decision only three days after it was announced; bowing to political pressure.  Net, clear authority is non-existent.

The federal government also demands that the USPS provide “affordable” service to remote locations.  For example, a 4 pound package from New York City to White Owl, S.D. costs $20.51 via UPS, but only $12.07 via USPS.  Don’t you think that someone living in a remote area realizes there are plusses and minuses to living there?  Like the fact that it will be expensive for someone to deliver a package there!

# 2. Nonsensical Business Model

Decades ago, the USPS decided to build its future on a lucrative 1st class letter business, and to deliver junk mail and magazines well below cost.  Today things are just as bazaar.  For example, it is estimated that delivery of a first class letter costs more than twice what we pay today.  Additionally, business journalist Dale Eggar recently noticed that for a piece of oversized and overweight junk mail he received the sender had only paid 15 cents for its delivery.  He took it to the post office and found that if he sent such a piece, the USPS would charge him $1.08.  What justifies such a huge discount for junk mailers? Basically the USPS has never really developed a reasonable pricing strategy.

The package delivery business has exploded over the years, and while the USPS ignored it, companies like Fed EX and UPS have ridden it to glory.  While the USPS is now working to get aggressive in this area, mindless pricing and political intervention demanding unaffordable services are clearly rampant.

# 3. Leaderless

Today there are so many government parties that believe, or actually do, have some responsibility for the USPS that the result is nobody does.  There is no single person that has the authority and responsibility to drive the organization to success.  While the USPS Postmaster General is the so-called USPS CEO, as noted above, to drive any change he has to deal with Congress and possibly the President.  The result of all this bureaucracy is that leadership is virtually impossible and there is no business plan designed to put the USPS on sound footing.

The leadership lessons are very clear:

  • Focused Authority and Responsibility: You need one person who has the authority to make decisions, and who knows he or she is responsible.  The person knows that if things don’t go well, there will be implications.  Regarding the USPS mess described above, the only way to have such authority/responsibility is to privatize.  That is exactly what several European countries did.  For example in Germany, the postal service was privatized in 1995 and it has since combined with DHL to become the world’s largest logistics company.   
  • Face Reality and Develop a Plan: For the USPS, the components of a plan for success are dead obvious.  For starters, price the services to reflect the costs and then for each service, see if the public is interested or not.  If not, either modify it to be of interest or kill the service.  Also, overhaul the health/pension program which is clearly not affordable.
  • Staff for Success: For any organization to be successful, you need a performance appraisal system that rewards excellent performance and puts poor performers on a path to significantly improve or be terminated.  The USPS is hamstrung by a seniority-oriented union.

One more obvious lesson for aspiring leaders: Beware of taking a job with the government!

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Images:  ”Red mail box with heap of letters. / Shutterstock.com



The Author:

Bob is an author, public speaker and retired executive vice president and chief operating officer (COO) of Microsoft Corporation. Before joining Microsoft, he spent twenty six years at Procter & Gamble, the last five of those years as senior vice president of advertising and information services. Since retirement, Bob has divided his time between working as a consultant for his own Herbold Group LLC and as writer and public speaker focusing on leadership. Bob has written three books. His latest, "What's Holding You Back? 10 Bold Steps That Define Gutsy Leaders" was released February 2011 by Wiley/Jossey-Bass. http://www.bobherbold.com

Add Your Comment

  • http://tweakyourbiz.com/ Niall Devitt

    Hi Bob, another great post, and so much for many organisations to learn here. What’s frustrating is while the mess may not have been complex, no one was entrusted to figure it out and the result was all too predictable. Ultimately, that needs to be one person and not a committee but these mistakes are continuing to be repeated, and all over the world.

  • http://about.me/Lindeskog lyceum1776

    Bob: Thanks for speaking out. It is scary that if you try to compete with the stated owned postal office, they could “go postal” and put you behind bars…

  • http://www.bizsugar.com/ Heather Stone

    Hi Bob,
    Thanks for the great post. Ultimately, organizations facing competition like this need great leadership above all else, so lack of leadership simply makes this issue worse. Thanks to Sian for sharing this post with the BizSugar community.

  • Smallbiztrends

    Bob, interesting observations.

    As a rule I hate government spending — it’s a huge waste. But in the case of the U.S. Postal Service, I feel it is one of the few places where average citizens and businesses alike get daily value.

    I think the problems have been two-fold. First, the USPS was forced to set aside a huge pension fund unlike other parts of the government. Second, they keep getting hit over the head with rate increase issues that make no sense to me. To send a letter doesn’t cost that much. We can all afford to spend a few cents more and citizens ought to quit crying about it. Congresspeople (and USPS critics) are hurting us more than helping by focusing on small cost increases and not allowing the USPS to try to be competitive on the one hand, but beating on it for losses on the other hand.

    If anyone thinks it will be cheaper with private delivery services for individual letters once we drive the USPS into the ground and kill the goose that laid the golden egg, they’re nuts. It will way more expensive. And we’ll lose Saturday delivery on top of it.

    - Anita

  • Val Nostdahl

    The United States Post Office was formed in 1775 by continental congress members Sam Adams and Benjamin Franklin for the purpose of communication during the revolutionary war, it predates the forming of the Nation and the Constitution. A good book to read on the USPO, can be found on amazon.com, or free google books, called The Post Office, its past record, its present condition an its potential relation to the new world era, by Daniel Calhoun Roper, First Assistant Post Master 1913-1917. In this era collective bargaining was formed due to congress not addressing the needs and concerns of postal worker in the work force. In 1970 was the great postal strike, due to postal workers not being able to get decent wages by congress control, most were working 3 jobs or on welfare while working for the USPO. The strike was successful and re enforced collective bargaining rights, with the USPO being changed to the USPS and oversight from the Presidents cabinet removed, and a board of governors instead placed over it, and under them the Post Master General, and other executives, then the labor department for management of Post Masters, who are over the offices. In 2000, 2001, after taking years of cuts in wages, and benefits worth around 200 billion, Postal workers were forced to pay in 15 percent extra to their federal retirement accounts, known as FERS and CSRS, under the 1997 budget reconciliation act for budget reasons only, The Postal Workers were thanked for their sacrifice, and the increase was removed in 2002 from the President’s budget. In 2003, the Post office reported back to congress that the retirement accounts were overfunded or overpaid. By billions of dollars, FERS by 15 billion and CSRS by 140 billion. ( see postal comments to the federal trade commission , august 6, 2007) Then in 2003 new postal legislation began, and later changed in to the Postal Accountability and Enhancement ACT passed by voice vote by congress, to make a 3rd retirement account mainly because the USPS had made a huge profit in 2006, the PAEA gave pay per performance bonuses to the top 13 executives, including PMG Potter who got a 72 thousand a year raise, making his pay cap exceed that of the Presidents of the United States even though his cap is to be under what the Vice President’s makes, The PMG retired in 2010 with 5.5 million in pay and benefits. But not before cutting staffing on the lower levels of delivering the mail, so non replacement of attrition or mail letter carriers began due to having too much money in retirement accounts. For further research here are links : AWPU 3800 first area tri-county local, PA library, stress in the workplace articles : How the ongoing violation of the USPS guiding principles are creating a toxic work environment, 2008, grand forks herald article The mail must go through , Ryan Bakken Column archives 2009, Minot Daily News, Postal Politics, 2010, Postal Frustrations 2011 and How to fix the USPS, March 3, 2013, search for ALEC/Koch Cabal The Privatization of USPS for Ups and FedEx, April 2012, Bob Sloan , Vltp. net, Tim McCown , Examiner.com, behind all the schemes and lies of the privatization of USPS, Michigan American Postal Workers Union, The truth about the Postal Crisis, The battle for democracy and the USPS, scribd( net) , http://www.savethepostoffice.com, postal employees network, USPS widows on face book.