Monday, August 31, 2009

Management Approaches to Restructuring

The Postal Service is in the midst of a major restructuring of the smallest of its operating networks, the one that handles sortation and transportation of bulk mail. The implementation of the new National Distribution Center network in the northeast both reduced costs and improved service quality. The positive results has caused the Postal Service to accelerate the program's completion.

The Postal Service could implement the restructuring with minimal if any loss of jobs by transferring employees to the larger network handling single-piece mail and mail drop shipped at processing plants. Clearly a similar restructuring of the entire processing network would give the Postal Service few if any opportunities to transfer employees. Without the ability to transfer employees, the Postal Service faces significant civil-service related procedural challenges, labor negotiation challenges, and substantial costs to reduce workforce levels before the savings can be acheived.

To see what would happen if the Postal Service had both the resources to handle the transition costs of creating a more efficient network and did not have to deal with civil service protection, one need only look to Canada Post which is in the midst of a $1.7 billion transformation plan that will introduce delivery point sequencing to all mail and consolidate letter carrier and parcel delivery routes. While delivery point sequencing is not new to the United States, how Canada Post is handling its implementation is different.

One of the first cities seeing the change is Winnipeg, Manitoba. Canada Post is building a new plant to house the new equipment that started construction last year.

As required by its contract with the Canadian Union of Postal Workers (CUPW), Canada Post informed the union that it plans cut 15% of Winnipeg employees including clerks, mailhandlers and letter carriers. As the Union's memo to employee implies, Canada Post under its labor agreements has the authority to lay off employees when demand for labor decreases. Furthermore, the letter implies that even more layoffs could occur in the more remote areas of Manitoba that the the plant serves.

Canada Post employees have not had civil service protection since at least the 1970's. The CUPW is at least as tough a negotiator as any union in the United States and has not been afraid to use a labor strike as a negotiating tactic. However, even while dealing with a tough-minded union, Canada Post has been able to negotiate an ability to rightsize its workforce as new technology is introduced, as long as proper notification is given to employees.

The approaches that Canada Post used to implement its introduction of delivery point sequencing reflects a labor complement management philosophy significantly different from the Postal Service employees. Canada Post determines its labor needs and then implements a plan to reduce its workforce quickly to the new level required. The Postal Service determines its workforce needs and then must find a way to reduce its workforce without layoffs through attrition and employee transfers. Both the Postal Service's approach of reducing the workforce through attrition and transfers and Canada Post's approach of outright layoffs of employees may eventually get the workforce down to the same optimal level. The Postal Service's approach is much slower to reap the gains from introducing new technology or a network restructuring.

The Canada Post reflects an active management style that a corporate structure, operating under standard Canadian corporate and employment law and union agreements that make sense for the business of Canada Post allow. Canada Post's management approach also reflects an understanding of all political parties that for Canada Post to survive and to serve the national interests of nationwide system of mail delivery it must operate in a manner like all other Canadian businesses without interference from local or national politicians.

The Postal Service approach reflects a more passive management style that has developed due to numerous influences. The first influence is the corporate structure, operating under a quasi-governmental business law and civil service employment law The second are the union agreements that only make sense for a business not experiencing technological or competitive changes. The third is a regulatory process that reviews any change in network infrastructure, introducing administrative costs through a public hearing process and increasing operating costs of restructuring by slowing down the process. The final influence on management style is Congress, who have on regular occasions legislated restrictions on the Postal Service's ability to restructure its business.

As this cursory examination of how Canada Post and the United States Postal Service dealt with a transformation issue illustrates, the business model and regulatory framework employed do make a difference. More detailed examination is warranted to fully explore how each of the differences in corporate law, employment law, labor agreements, regulatory oversight, and political interference between a postal operator and the businesses in the same country affect how well the operator deals with the stress of technological and market induced changes while still meeting universal service obligations. Without such a study, identifying the benefits of changing the business model and regulatory framework in the United States would be difficult.


jim said...

Get your facts right!

It’s unfortunate that you don’t know what you are talking about, when it comes to Canada Post and the Canadian Union of Postal Workers. Article 53 of their collective agreement prohibits the lay-off of any permanent employees, and goes even further, guarantees permanent employees job security within a 25 mile radius of their current job.

Perhaps you should actual investigate, before basing your entire post on an assumption made in error.

Max said...

Jim your "facts" are not entirely correct either!

From Article 53 of the CUPW collective agreement with Canada Post: "There shall be no lay-off of any regular
employee who was employed in the bargaining unit as of
September 1, 2007, provided the employee agrees to be
displaced to another position
in accordance with the
procedure set forth hereinafter. The same shall apply to
any other employee who becomes a regular employee
after September 1, 2007, and who has five (5) years or
more of continuous employment."

Those who were hired after September 1, 2007 are not covered by this provision and do not have job security!

Anonymous said...

You say "The Postal Service's approach is much slower to reap the gains from introducing new technology or a network restructuring."

From your point of view, immediate mass-layoffs are a positive aspect to restructuring. However, the equipment and network distribution upgrades the Postal Service has/is implementing did not happen overnight. It is a time-demanding process. It takes years to implement a national delivery sequencing system - for example. The Postal Service has been keeping pace with upgrading its sorting equipment and updating its network quite efficiently.

The job protection clauses have been negotiated with the labor unions in exchange for the right to strike. The unions demanded this because people's livelihood are also worth ... something.

How to pass the current storm:
YES on HR22
NO on S1507