The Postal Service has made a smart business decision by continuing to negotiate with the APWU, three months after the contract with the union expired. The decision to negotiate changes in a labor contract that will reflect the new competitive reality, rather than go to arbitration reflects the fact the Postal Service needs the buy-in of its employees on the changes that will be necessary to turn the Postal Service's finances around.
The Postal Service's negotiations with the APWU will likely extend until after the Postal Service announces on March 25th the 7,500 cuts in the administrative and line management jobs mentioned at the last Board of Governors meeting by Postmaster General Pat Donahoe. At that point the Postal Service will likely announce a significant reduction in the number of districts in a move that could follow a USPS - Office of Inspector General report's recommendations to cut between 14 and 32 districts and up to three more areas. These cuts, if they are in this range, will communicate clearly to production employees the seriousness of the situation and that sacrifices will be shared by management as well.
The value of the Postal Service's approach is illustrated by a counter example, Wisconsin Governor Walker's approach to getting contracts changes with public employees in Wisconsin. By attempting to impose not only changes in benefits but also eliminating collective bargaining, he has created a volatile adversarial relationship between public employees and the state of Wisconsin that did not exist previously. While he may get what he wants, he will make the state of Wisconsin, its counties, municipalities, and school districts much less attractive employers when the financial crisis passes.
The approach that the Postal Service is using is an example of the best strategies that the private sector uses to deal with managing the process of adjusting labor agreements. Steven Pearlstein states in his column in today's Washington Post why looking toward the private sector would favor the Postal Service's approach over Governor Walker's.
Back when I was working at Inc. magazine in the mid-1980s, we loved nothing better when approaching a public-sector issue than to ask how the private sector would handle it. Faced with the situation in Wisconsin, we would have called up Tom Peters or Peter Drucker and posed the example of a new chief executive brought in by the shareholders (i.e., the voters) to rescue a company suffering from operating losses (budget deficit) and declining sales (jobs). Invariably, they would have recommended sitting down with employees, explaining the short-and long-term economic challenges and working with them to improve productivity and product quality in a way that benefits both shareholders and employees.
Now compare that with how Wisconsin's new chief executive handled the situation: Impose an across-the-board pay cut and tell employees neither they nor their representative will ever again have a say in how things will be run or get a pay raise in excess of inflation. A great way to start things off with the staff, don't you think?
Surviving the current financial crisis requires that the Postal Service follows the best management thinking around. Knowing that Pat Donahoe is following the thinking of people like Tom Peters and Peter Drucker should give Congress, customers and employees some reassurance that the Postal Service will weather the storm.
Update 12:04 pm
The March 25th date for the 7,500 job cuts was confirmed by the Postal Service
Note of thanks:
The early readers caught numerous spelling and typographical errors. I thank them for their indulgence in wading through the uncorrected post. Again, I apologize to Pat Donahoe for having as much trouble spelling his name as others have spelling Muammar Qaddafi / Moammar Gaddafi's name
Wednesday, February 23, 2011
Tuesday, February 22, 2011
Cash-Starved Postal Service May Buy Time With Obama Quick Fix
By Angela Greiling Keane
The following article provides a clear discussion as to why the provisions in President Obama's budget relating to the Postal Service matter to the business comunity and web-based comerce. It was published on Bloomberg Government and was only available to subcribers. It is published here with the gracious permission of the author.
Feb. 22 (Bloomberg) -- The U.S. Postal Service, which predicts it will run out of cash by the end of its fiscal year, may buy time to restructure under a plan laid out in President Barack Obama’s budget last week.
Obama weighed in with a fix for this year as the agency considers shuttering more facilities, cutting more employees and reducing the number of days mail is delivered across the U.S. First-class mail volume continues to decline and overall mail volume fell 20 percent from 2006 to 2010 due to widening
use of e-mail and a weak economy. The agency lost $329 million in the three months ended Dec. 31, 11 percent more than the $297 million lost a year earlier.
Jerry Cerasale, senior vice president of government affairs for the New York-based Direct Marketing Association, called the White House’s budget proposal “a great first step.”
“The president’s budget helps for 2011,” he said in an interview. “But it doesn’t do a lot beyond 2011.”
The U.S. Government Accountability Office this week said it’s keeping the Postal Service on its “high-risk” list of government programs. The Postal Service “cannot fund its current level of service and operations from its revenues and urgently needs to restructure to reflect changes in mail volume, revenue and use of the mail,” the GAO wrote in its report released Feb. 16.
Broader Fix Sought
The Postal Service would need congressional permission to cut Saturday delivery or to close post offices for financial reasons. Lawmakers have blocked those changes previously after Postal Service executives proposed them. “We hope that with the administration having this in focus and the oversight committees who deal with postal matters also having it in focus and some potential new bills coming into the Congress in the near term we’ll really bring this to a head and make some fundamental changes,” Corbett said.
The Association of Postal Commerce is working with the Direct Marketing Association, which has representatives from EBay and Google Inc. on its board, and other postal customer groups whose members send 85 percent of U.S. bulk mail. They and postal labor groups this year asked Obama to change the payment schedule for retiree health benefits, one of the things the president proposed in the budget.
EBay Reliance
EBay sellers are, collectively, the Postal Service’s single largest package customer, accounting for about a quarter of their package shipments, 13 percent of media mail and 9 percent of Priority and Express mail, EBay spokeswoman Alina Piacentino said. Postal Service revenue related to EBay commerce is about $1.7 billion as of last year, she said, or about 2.5 percent of the service’s fiscal 2010 revenue.
“EBay sellers rely on efficient, affordable shipping services to serve their customers and grow their businesses,” Brian Bieron, senior director of federal affairs for EBay, based in San Jose, California, said in an e-mail. “Federal initiatives that enable the U.S. Postal Service to focus more of its resources on providing affordable shipping services to small business retailers are a win-win for consumers and job creation.”
Jake Parrillo, a spokesman for Mountain View, California-based Google, referred comment to the Direct Marketing Association.
Pension Refunds
“As customers of the Postal Service, we recognize our delivery partner will ultimately have the obligation to pay for the benefits established by law and in collective bargaining,” the mail customer groups, which also included the Alliance of Nonprofit Mailers, Magazine Publishers of America and the
National Newspaper Association, wrote in a Feb. 7 letter to Obama. (Bloomberg LP, the parent of Bloomberg News, publishes Bloomberg Businessweek and Bloomberg Markets magazines. Bloomberg Businessweek’s president is on the board of the Magazine Publishers Association.)
Cerasale said the Direct Marketing Association will push for more federal relief. Customers would like the U.S. to refund overpayments the Postal Service made to a federal retirement fund used for employees hired before 1987, he said. In his budget, Obama proposed refunding $6.9 billion over 30 years in overpayments to the current federal retiree pension fund.
Until the Postal Service’s future is more certain, business customers may shy away from using it, exacerbating the downward spiral, Del Polito said. “Businesses do not like uncertainty and if you tell them there’s this world of uncertainty about using the Postal Service, people stop using the mail,” he said.
--Editors: Bernard Kohn, Joe Winski
To contact the editor responsible for this story:
Bernard Kohn at +1-202-654-7361 or
bkohn2@bloomberg.net
The following article provides a clear discussion as to why the provisions in President Obama's budget relating to the Postal Service matter to the business comunity and web-based comerce. It was published on Bloomberg Government and was only available to subcribers. It is published here with the gracious permission of the author.
Obama proposed deferring $4 billion of a $5.5 billion congressionally mandated payment required in 2011 to cover health-benefit costs for future postal retirees, and refunding some surplus pension payments made by the service.
It was the first time Obama mentioned the Postal Service in a budget message in his three years of presidential budgeting. Trade groups representing companies such as EBay Inc. that rely on mail and shipping services urged the administration to address the Postal Service’s uncertain future.
“It’s beginning to sink in that this is not going to be a problem that’s going to go away in advance of the election” in 2012, said Gene Del Polito, president of the Association for Postal Commerce, an Alexandria, Virginia-based group that represents postal customers. “This is a start of coming to a ealization that it’s an issue that needs to be addressed.”
The Postal Service, which has a congressional mandate to be self-supporting, has said it will reach its $3 billion annual and $15 billion total borrowing limits at the Sept. 30 end of its fiscal year and run out of cash if it has to make the $5.5 billion retiree health care payment. The agency, unlike many businesses, must fund future retirees’ projected health-benefit costs out of current revenues.
An agency executive said he was pleased by the president’s plan. “There is momentum, and we’re certainly encouraged by the whole thing,” Postal Service Chief Financial Officer Joseph Corbett said in an interview.
Widening Losses
Obama weighed in with a fix for this year as the agency considers shuttering more facilities, cutting more employees and reducing the number of days mail is delivered across the U.S. First-class mail volume continues to decline and overall mail volume fell 20 percent from 2006 to 2010 due to widening
use of e-mail and a weak economy. The agency lost $329 million in the three months ended Dec. 31, 11 percent more than the $297 million lost a year earlier.
Jerry Cerasale, senior vice president of government affairs for the New York-based Direct Marketing Association, called the White House’s budget proposal “a great first step.” “The president’s budget helps for 2011,” he said in an interview. “But it doesn’t do a lot beyond 2011.”
The U.S. Government Accountability Office this week said it’s keeping the Postal Service on its “high-risk” list of government programs. The Postal Service “cannot fund its current level of service and operations from its revenues and urgently needs to restructure to reflect changes in mail volume, revenue and use of the mail,” the GAO wrote in its report released Feb. 16.
Broader Fix Sought
The Postal Service would need congressional permission to cut Saturday delivery or to close post offices for financial reasons. Lawmakers have blocked those changes previously after Postal Service executives proposed them. “We hope that with the administration having this in focus and the oversight committees who deal with postal matters also having it in focus and some potential new bills coming into the Congress in the near term we’ll really bring this to a head and make some fundamental changes,” Corbett said.
The Association of Postal Commerce is working with the Direct Marketing Association, which has representatives from EBay and Google Inc. on its board, and other postal customer groups whose members send 85 percent of U.S. bulk mail. They and postal labor groups this year asked Obama to change the payment schedule for retiree health benefits, one of the things the president proposed in the budget.
EBay Reliance
“EBay sellers rely on efficient, affordable shipping services to serve their customers and grow their businesses,” Brian Bieron, senior director of federal affairs for EBay, based in San Jose, California, said in an e-mail. “Federal initiatives that enable the U.S. Postal Service to focus more of its resources on providing affordable shipping services to small business retailers are a win-win for consumers and job creation.”
Jake Parrillo, a spokesman for Mountain View, California-based Google, referred comment to the Direct Marketing Association.
Pension Refunds
“As customers of the Postal Service, we recognize our delivery partner will ultimately have the obligation to pay for the benefits established by law and in collective bargaining,” the mail customer groups, which also included the Alliance of Nonprofit Mailers, Magazine Publishers of America and the
National Newspaper Association, wrote in a Feb. 7 letter to Obama. (Bloomberg LP, the parent of Bloomberg News, publishes Bloomberg Businessweek and Bloomberg Markets magazines. Bloomberg Businessweek’s president is on the board of the Magazine Publishers Association.)
Cerasale said the Direct Marketing Association will push for more federal relief. Customers would like the U.S. to refund overpayments the Postal Service made to a federal retirement fund used for employees hired before 1987, he said. In his budget, Obama proposed refunding $6.9 billion over 30 years in overpayments to the current federal retiree pension fund.
Until the Postal Service’s future is more certain, business customers may shy away from using it, exacerbating the downward spiral, Del Polito said. “Businesses do not like uncertainty and if you tell them there’s this world of uncertainty about using the Postal Service, people stop using the mail,” he said.
--Editors: Bernard Kohn, Joe Winski
To contact the editor responsible for this story:
Bernard Kohn at +1-202-654-7361 or
bkohn2@bloomberg.net
Why isTunisia, Egypt, Bahrain, and Especially Libya Bad for the Postal Service?
The answer is oil. Since the fiscal year began crude oil has incresaed $16 per barrel. This is a 20% increase in price since the fiscal year began. News reports suggest that gasoline prices could hit $5 a gallon this summer if the turmoil in Libya and other Middle East ountries continues. The increase in oil prices raise the cost of fuel used to transport and deliver the mail and heat and run the processing plants and retail locations.
Private sector competitors will handle incleasing oil prices by raising fuel surcharges, while at the same time working feverishly to minimize transportation and other fuel dependent costs. The Postal Service will handle the increase by generating larger losses, even after it completes efforts to reduce excess capacity in its processing and transportation network. Figuring out which approach makes more business sense is another issue for Congress to contemplate
Monday, February 21, 2011
How Congress Makes the U.S. Less Competitive
The New York Times reports today that that the Patent Office is opening up its first satellite office. This opening is designed to help to deal with the backlog of 700,000 patents awaiting their first action by an examiner and the 500,000 patents that are in process.
Once patent applications are in the system, they sit — for years. The patent office’s pipeline is so clogged it takes two years for an inventor to get an initial ruling, and an additional year or more before a patent is finally issued.
The delays and inefficiencies are more than a nuisance for inventors. Patentable ideas are the basis for many start-up companies and small businesses. Venture capitalists often require start-ups to have a patent before offering financing. That means that patent delays cost jobs, slow the economy and threaten the ability of American companies to compete with foreign businesses.
The Patent Office like the Postal Service is self supporting. Application and maintenance fees generate "$2.1 billion in income" in 2010. This has made the Patent Office an inviting target for Congress, which "over the last 20 years has diverted a total of $800 million to other uses, rather than letting the office invest the money in its operations." [emphasis added]
While there are changes in Obama's budget to add resources to the Patent Office, previous Congressional actions suggests that Congress wants the revenue from the Patent Office more than the economic benefits generated by the patents the office issues.
"In two consecutive sessions, Congress has defeated a bill that would allow the patent office to keep all of the fees it collects."
The problems faced by the Patent Office in its dealings with Congress are quite similar to those faced by the Postal Service but on a smaller scale. The impact on the economy is also similar as Congress's actions regarding the Patent Office and the Postal Service have had the effect of retarding the economic growth by making doing business in the United States more difficult and more expensive than it need be.
Unfortionately for the Patent Office and the Postal Service fixing the problems do not have solutions that fit easily into political arguments that use words that poll favorably or fit within the 140 characters available in Twitter. The willingness of members of Congress to adjust their language to fit real solutions to the budgeting and policymaking issues of the Patent Office and the Postal Service will determine if the country reverses the anti-growth policies that now exist.
Once patent applications are in the system, they sit — for years. The patent office’s pipeline is so clogged it takes two years for an inventor to get an initial ruling, and an additional year or more before a patent is finally issued.
The delays and inefficiencies are more than a nuisance for inventors. Patentable ideas are the basis for many start-up companies and small businesses. Venture capitalists often require start-ups to have a patent before offering financing. That means that patent delays cost jobs, slow the economy and threaten the ability of American companies to compete with foreign businesses.
The Patent Office like the Postal Service is self supporting. Application and maintenance fees generate "$2.1 billion in income" in 2010. This has made the Patent Office an inviting target for Congress, which "over the last 20 years has diverted a total of $800 million to other uses, rather than letting the office invest the money in its operations." [emphasis added]
While there are changes in Obama's budget to add resources to the Patent Office, previous Congressional actions suggests that Congress wants the revenue from the Patent Office more than the economic benefits generated by the patents the office issues.
"In two consecutive sessions, Congress has defeated a bill that would allow the patent office to keep all of the fees it collects."
The problems faced by the Patent Office in its dealings with Congress are quite similar to those faced by the Postal Service but on a smaller scale. The impact on the economy is also similar as Congress's actions regarding the Patent Office and the Postal Service have had the effect of retarding the economic growth by making doing business in the United States more difficult and more expensive than it need be.
Unfortionately for the Patent Office and the Postal Service fixing the problems do not have solutions that fit easily into political arguments that use words that poll favorably or fit within the 140 characters available in Twitter. The willingness of members of Congress to adjust their language to fit real solutions to the budgeting and policymaking issues of the Patent Office and the Postal Service will determine if the country reverses the anti-growth policies that now exist.
Competing In Competitive Markets
Just like land line companies, TNT Post expects demand to decline. Its just released annual report provides the following information on volume change in 2010 and in upcoming years. As a consequence of the combined market trends [i.e., competition and electronic diversion], the addressed postal volume decline in 2010 was 9%. For 2011, Mail estimates the decline of its addressed postal volumes to be around 8% to 10%. In the years thereafter, Mail estimates its annual volume decline to be 6% on average.
TNT does have options to grow its business that the United States Postal Service does not because it is in in the private sector and does not have legal restrictions from offering "non-postal" services. The following figure illustrates TNT's strategy and a number of these options.
The argument for allowing the Postal Service offering similar services come from the economic theory of the firm that describes the limits in both efficiency and service quality of contacting out parts of a manufacturing process or service to multiple firms. The theory of the firm explains why with limited exceptions most movements of physical objects from rail cars to less-than-truckload freight to express letters are marketed and transported by a single firm and these firms have aggressively expanded into logistics and trade-finance services that customers often require in addition to the transportation. It also explains why most posts operating in the G-20 offer services similar to what TNT Post, while at the same time many now or will soon compete with firms offering upstream (i.e. collection, sortation and transporation) and end-to end mail delievery services.
The argument against allowing the Postal Service, operating as a public entitiy, offering similar services are twofold. First, allowing the Postal Servcie to offer these service would put it in direct competition with private sector and government provision of services are perceived to be required only if the private sector fails to provide the service. Second, by allowing the Postal Service to compete with private sector firms, its delivery service would give it an unfair advantage over firms currently competing in the market.
Even if the Postal Service is privatized, there is an argument against allowing it to compete with the private sector. This argument focuses on the competitive advantage of a private sector firm offering the delivery service has in the market over other competitors. In many ways these arguments are similar to those favoring net-neutrality as well as concerns of competitors to NBC that were raised prior to the merger of NBC and Comcast.
In weighing these arguments, as well as arguments on the full range of postal policy issues, Congress needs to focus on the economic impact of the policy choice.
- To the extent that mail is used to consummate transactions including the sending of bills and payments, what option allows those transactions to go smoothly at the lowest cost to the buyer and seller?
- To the extent that mail is used to advertise products and services, what option gives advertisers the most efficient advertising media possible which allows them to grow their business and create jobs?
- To the extent that the Postal Service is a critical part of a low-cost transportation network that allows e-commerce companies to grow, which option best ensures that the sender of parcels or receiver of returns will have cost-efficient delivery network that they need that will allow their businesses to grow and create jobs?
Saturday, February 19, 2011
Tweets from Congressman Dennis Ross and Possible Implications for Postal Unions
In the last few days, Representative Dennis Ross has made a number of tweets regarding the conflict between the Governor and the teachers unions in Wisconsin. While none of the tweets mention postal issues, they may provide a hint to stakeholders and policymakers regarding the tone on labor issues that the House will take when discussing changes required to return the Postal Service to solvency.
Hypocrisy & big labor are synonymous. RT @Reaganista: RT @JebBush: Must see video. Stay strong @GovWalker. http://bit.ly/dPHMH5 #wiunion
Working on that. RT @michellemalkin: Unions get waivers from Obamacare. Why can't workers get waivers from forced unionism? #wiunion
@crbones private sector unions were needed in the 20s and 30s. They are even helpful in some ways today. Public sector unions must go.
I wonder how many of the 10% unemployed in America would like a job as a teacher in Wisconsin? Time for an air traffic controller solution.
Representative Ross's tweets suggest that postal labor may find that the best they may expect from postal reform legislation could be the changes in the criteria arbitrators must use that are contained in bills proposed by Senators Tom Carper and Susan Collins.
Thursday, February 17, 2011
Tweets from Congressman Dennis Ross on the Postal Service
On February 17, 2011, Congressman Dennis Ross tweeted, "@dryMAILman we will have a website where the man or woman on the street can tell us how to improve service and cut costs."
This is the first indication of what Congressman Ross wants to do as Government Reform Committee's Subcommittee on Federal Workers, the Postal Service and Labor Policy
This is the first indication of what Congressman Ross wants to do as Government Reform Committee's Subcommittee on Federal Workers, the Postal Service and Labor Policy
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