Wednesday, March 10, 2010

USPS: Known Knowns, Known Unknowns Unknown Unknowns

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know. 
Donald Rumsfeld

After nearly a year of study, the Postal Service has presented its proposal for modifying its business model and regulatory framework.   The Postal Service's proposal reflects the gravity of the business challenges it faces now and will face in the remainder of the decade. The tone of the Postal Service's presentation also reflected the gravity of the challenge as it lacked both the sentimental imagery and boosterism that had the Postal Service and others previously used to justify minimizing changes from the status quo.

Anyone who has read the comments on the proposal written by editorial writers, or spoken by members of Congress, representatives of the labor unions and management associations and representatives of mailer trade associations will immediately see that there is no consensus yet on how to proceed on the Postal Service's proposal.

This creates a significant challenge if a solution is to be found for the Postal Service's current difficulties.   Donald Rumsfeld's silly sounding framework of known knowns, known unknowns and unknown unknowns may provide a way to develop a common knowledge base and language for parties to discuss possible solutions that will actually ensure the viability of the postal industry and create as secure a future as possible for current and future Postal Service employees.

Known Knowns
  1. Total Postal Service mail volumes in 2020 will not be greater than volumes handled today.
  2. The mix of mail handled in 2020 will include a higher proportion of advertising mail than is handled today.
  3. The mix of mail handled in 2020 will include a lower proportion of single piece mail than is handled today. 
  4. The revenue associated with projected volumes cannot support the Postal Service's payments on legislated long-term obligations and debt or the current operating model. 
  5. Expanding revenue through diversification is not an option now for covering the revenue shortfall of  declining volumes.  
  6. Privatization is off the table for now.  
  7.  The Federal budget deficit and tight state and local budgets remove taxpayer subsidies as a solution.     
  8. The Postal Service's proposal to change its business model and regulatory framework has diffuse benefits and specific costs.
    Known Unknowns
    1. The amount that actual volume and revenue will differ from the forecast.
    2. The amount that economic activity and inflation will differ from statistics used in revenue and cost forecasts and how much they will differ from tend on a year-to-year and quarter-to-quarter basis from the long-run average.
    3. The difference in the rate of penetration of high-speed digital and mobile technology from the current forecast.
    4. When new communication technology just entering or not yet on the market will find wide acceptance as an alternative to existing print, digital, and mobile alternatives.
    5. The time it will take for the Postal Regulatory Commission to review the 5-day delivery proposal.
    6. How the Postal Regulatory Commission will rule on an exigent rate case that does not produce break-even results in a test year or changes precedent regarding rate relationships and relative mark-ups on classes and sub classes.
    7. The outcome of negotiations between the Postal Service and its labor unions.
    8. The time frame for any action required by Congress and whether there is time in this Congress to move legislation forward.
    Unknown Unknowns

    As these are unknown, none are listed.  

    The lists of known knowns and known and unknowns are not exhaustive.   Comments are requested on others that should be added.    A latter post will detail some of the implications of these known knowns and known unknowns.


    Anonymous said...

    Who knew? You know?

    Nolan said...

    Has ANYONE validated the USPS operations as far as their being efficient? Are they making the right decisions? Do they have qualified managers at all levels of the organization? Is travel, credit card usage, overtime under control?
    I believe there operational decisions should be validated by an outside non-bias business.

    Anonymous said...

    A "known known", imho: USPS already has the workforce flexibility it needs. Union-represented employees with no-layoff protection make up only a small percentage (exactly what percentage is a "known unknown", but intuitively I know it to be "small" in relation to the overall workforce). No one ever considers the vast amounts of casuals employed by the USPS, often for years and years (yet they remain casuals). Also, imho, it's a "known known" that USPS has too many chiefs in relation to its number of indians. Potter's call for workforce flexibility is just another contract-time ploy.