CEO Watch
US Postal Service CEO Looks to Forge a new Direction Amidst Dire Budgetary Realities
September 30th 2011
Although the United States Postal Service is a quasi-governmental organization designed to carry out the Constitutional mail delivery mandates, its economics are subject to private sector realities.
Since the 1970 Postal Reorganization Act, the USPS receives no tax dollars. It is designed to be what the government called a semi-independent agency and is required to be “revenue neutral”. Basically the USPS is told: Don’t make a profit, don’t lose money.
This mission is striking in the current technological and monetary environment because it makes a tightrope walk over an open canyon seem safe and dull by comparison. Patrick Donahoe is both Postmaster General and CEO of the USPS. He is facing the stark reality of making the USPS a solvent business entity. Recently the USPS reported more quarterly losses in the Billions (with a B). Mr. Donahoe took over the position in October 2010 in the middle of a time of serious financial losses and under his brief watch things have gotten worse. He came to the job as a 35-year postal service veteran having recently held the dual roles of Deputy Postmaster General and Chief Operating Officer.
In his September 6, 2011 statement to Congress, Mr. Donahoe noted that not only does the USPS serve the underserved in remote areas all around the country at no additional cost to those consumers, but nearly 8 million people are employed in jobs related to the process and delivery of the mail. The economic devastation of a total collapse of the Postal Service as an operating entity would be felt not just by employees. Commerce would be at the mercy of purely private carriers and their fully market-driven carrier fees.
The internet is the obvious culprit in the drop in demand for USPS’s bread and butter product: First Class Mail. In Mr. Donahoe’s own words: “The growth in electronic communications continues to drive the diversion of First-Class Mail.
Instead of buying stamps, many consumers pay bills online, send “e-vites” to friends and family, and simply press “Send” when they want to communicate.”
In the face of the competition from expanding free digital technology, the task ahead seems insurmountable. To aid the USPS in returning to break-even from $3 Billion quarterly losses and close the estimated future cost gaps of over $20 Billion, Mr. Donahoe recommended: reductions of over 220,000 career positions by 2015, direct management by the Postal Service over employee health care plans, relief from the Government mandated Multi-billion dollar annual pre-funding of employee pensions and legacy benefits, 5-day rather than 6-day delivery, and allowing the Service to price based on market supply and demand rather than abide by government caps. These were a few of the highlights among many ideas.
Predictably, the political leanings of the decision makers in the Federal Government are influencing the talking points on how to best proceed. The trend among many Republicans in government is to support a streamline towards total privatization of services that were once government run. Conversely, Democrats looking to lend support to President Obama’s recent job’s proposal are emphasizing the importance of the government protecting jobs. (Especially the protection of jobs produced by an organization with no current tax dollar support.) What is very possible in the near future is temporary relief from the required employee retirement pre-funding payment. This payment represents a huge cash flow debit for the USPS before one stamp is sold, or one package delivered.
If you have stories or observations that further the discussion towards common sense reforms, please share them on http://www.ceo-watch.com
This mission is striking in the current technological and monetary environment because it makes a tightrope walk over an open canyon seem safe and dull by comparison. Patrick Donahoe is both Postmaster General and CEO of the USPS. He is facing the stark reality of making the USPS a solvent business entity. Recently the USPS reported more quarterly losses in the Billions (with a B). Mr. Donahoe took over the position in October 2010 in the middle of a time of serious financial losses and under his brief watch things have gotten worse. He came to the job as a 35-year postal service veteran having recently held the dual roles of Deputy Postmaster General and Chief Operating Officer.
In his September 6, 2011 statement to Congress, Mr. Donahoe noted that not only does the USPS serve the underserved in remote areas all around the country at no additional cost to those consumers, but nearly 8 million people are employed in jobs related to the process and delivery of the mail. The economic devastation of a total collapse of the Postal Service as an operating entity would be felt not just by employees. Commerce would be at the mercy of purely private carriers and their fully market-driven carrier fees.
The internet is the obvious culprit in the drop in demand for USPS’s bread and butter product: First Class Mail. In Mr. Donahoe’s own words: “The growth in electronic communications continues to drive the diversion of First-Class Mail.
Instead of buying stamps, many consumers pay bills online, send “e-vites” to friends and family, and simply press “Send” when they want to communicate.”
In the face of the competition from expanding free digital technology, the task ahead seems insurmountable. To aid the USPS in returning to break-even from $3 Billion quarterly losses and close the estimated future cost gaps of over $20 Billion, Mr. Donahoe recommended: reductions of over 220,000 career positions by 2015, direct management by the Postal Service over employee health care plans, relief from the Government mandated Multi-billion dollar annual pre-funding of employee pensions and legacy benefits, 5-day rather than 6-day delivery, and allowing the Service to price based on market supply and demand rather than abide by government caps. These were a few of the highlights among many ideas.
Predictably, the political leanings of the decision makers in the Federal Government are influencing the talking points on how to best proceed. The trend among many Republicans in government is to support a streamline towards total privatization of services that were once government run. Conversely, Democrats looking to lend support to President Obama’s recent job’s proposal are emphasizing the importance of the government protecting jobs. (Especially the protection of jobs produced by an organization with no current tax dollar support.) What is very possible in the near future is temporary relief from the required employee retirement pre-funding payment. This payment represents a huge cash flow debit for the USPS before one stamp is sold, or one package delivered.
If you have stories or observations that further the discussion towards common sense reforms, please share them on http://www.ceo-watch.com