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?
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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