Monday, November 30, 2009

Potential Business Models

The range of potential business models include nearly a continuum of options that run the gamut from a government department to a corporation owned by private shareholders. How close a particular model is to one end of the continuum or the other depends on choices regarding to corporate governance, employment and labor law, financial management, operations management and marketing management. This paper divides potential models into two groups, governmental and corporate models, depending upon whether the characteristics of the model are more similar to the characteristics of the models on either extreme of the continuum. In total five models were looked at:

Governmental Models
  • Government Department – This is how the federal government currently provides air traffic control, weather, agricultural marketing, national parks, museums and other services to businesses and consumers. In all of these examples, the service is provided under standard federal government law, civil service and all or a significant portion of revenue is generated from the users of the government service or private donations.
  • Government Enterprise as defined by current Postal law – This is the existing model under which the Postal Service operates
  • Government Enterprise with relaxed human capital, financial, and operating constraints – This model maintains the governmental characteristics of the enterprise but modifies specific characteristics in a manner similar to other government enterprises.
Corporate Models
  • Government Owned Corporation – The Postal Service operates under standard private-sector law and is owned by the federal government.This is most similar to the structure of municipal owned utilities and publicly owned commuter railroads. Many foreign postal operators fall under this business model. A government-owned private-law corporation can be loss making or profit making.
  • Private Sector Corporation with or without government shareholders – A private sector corporation would include private sector owners and operate under a charter granted by the federal government. Services provided on behalf of the federal, state or local governments would be provided under contract and could include services that fall within the charter that are not sufficiently remunerative to justify their provisions .
The three governmental models reflect the general approach that the federal government has taken with business-oriented services. The corporate models reflect what foreign posts have chosen. The corporate models also reflect the models of all of the Postal Service’s competitors including those offering physical and electronic delivery, and those that compete by providing sortation or transportation of mail. The table below (can be seen on pages iv through vi of the full document as I am not sure how to put it in the blog) summarizes how well each of the models handles the challenges facing the Postal Service and policymakers. Examination of how well each of these models would handle the challenges facing the Postal Service finds all of the governmental models wanting. While relaxing the some of the constraints of the current model would be a reasonably safe choice, it would not be sufficient to serve the Postal Service’s retail and wholesale customers, and ensure that the Postal Service’s obligations to the Treasury are paid. Instead, the best solutions would involve preparing the Postal Service to operate as a government corporation, working under private sector law.

Making this transition will not be easy.The Federal Government has done this only twice with the US Enrichment Corporation and ICAAN. Neither organization was as large as the Postal Service. In particular, neither had the challenge of transferring more than a few hundred employees from civil service to private sector employment, nor did the have significant financial needs to cover modernization, debt and unfunded. However, the experiences of foreign posts, many which employ tens of thousands of employees and had similar financial woes illustrates how this can be done, and how it can be done with minimal disruption of the careers of postal employees.

Executive Summary Part 1: Choosing a Mail Industry Policy
Executive Summary Part 2: Challenges facing all Business Models
Executive Summary Part 3: Potential Business Models (this post)

Full Paper: Examination of Potential Business Models

1 comment:

Anonymous said...

Yep!privitize and the 1st thing the privite company ask the federal goverment for is a loan