BY MARK JAMISON
Last week Kathy Hochul, Representative of New York’s 24th district, where Buffalo stands to lose a mail processing plant employing 700 workers, made a modest proposal — legislation to limit the salaries of the Postmaster General and his executive officers to the level of Cabinet Secretaries. Her goal was to make a statement: “The Postal Service cannot make the argument that they need to cuts costs and let go hard-working postal workers when their own management team continues to rake in bonuses and make more than the President’s Cabinet.”
The proposal drew an interesting response from Thurgood Marshall, Jr., Chairman of the USPS Board of Governors. Mr. Marshall argued that the Postal Service needs to pay salaries higher than elsewhere in government in order to attract and retain talented individuals to operate the Service. It’s the same argument used to justify the astronomically high compensation paid to corporate executives in the private sector.
There are many arguments to be made for and against the huge salaries that have become prevalent in corporate America. When those arguments are applied to the Postal Service, however, they raise two essential questions: Is the Postal Service more a corporate entity than a government entity? And is the rationale expressed by Mr. Marshall valid?
The second question seems the easier to answer. Thirty-eight senior executives of the Postal Service make salaries in excess of those paid to Cabinet Secretaries. Now Chief Operating Officer Megan Brennan may have an important position, but is it more important than that of Secretary of Defense Leon Panetta, who makes $26,000 less than Ms. Brennan? (And that doesn’t even take into account the additional $135,000 in bonuses she received in 2011.)
Mr. Marshall says that the Postal Service must pay these salaries to attract and retain competent people. The problem with that argument is that nearly all of the senior postal executives are postal lifers, people who have spent virtually their entire careers in the Postal Service.
Former Postmaster General Jack Potter rose from carrier to the highest office in the organization. Our current PMG rose from the position of clerk. Now I’ll grant that it takes talent and perseverance to progress to the heights of an organization like the Postal Service, and many of these people worked hard to acquire advanced degrees along the way. But the simple fact is that most of the executives in the Postal Service progressed up through the ranks — and that is the limit of their experience.
When you go down to the next level of the managerial pyramid — district managers, senior plant managers, and so on — the insular nature of management becomes even more apparent. Those who earn more than $150,000 a year are almost exclusively employees who have risen through the ranks of the organization. Their experience is almost entirely self-referential, and their professional universe is actually a pretty small place.
When the Postal Service has sought to bring in outside “talent,” it has often been a disaster. One only need mention the name Robert Bernstock. He’s the fellow they brought in from Campbell Soup in 2008 with the hope that he would use his private-sector experience to re-invigorate slumping mail volumes. During his two years as the President of USPS Mailing and Shipping Services, volumes continued to slump, and Bernstock resigned — under investigation for awarding nearly $5.9 million in controversial no-bid contracts to his former business associates. When Bernstock left the Postal Service to return to the private sector, Postmaster General Potter commented, “Bob’s work will have long-lasting, positive impact on the Postal Service and its customers.”
One of the reasons General Motors got into such financial trouble is that senior managers became too insular and incestuous, too thoroughly committed to the GM corporate vision. They lost the capacity to understand the world around them, thus dooming the organization to failure.
Mr. Marshall’s argument about attracting and retaining talent is specious, but it fits into the preferred narrative of postal leaders. They portray the Postal Service as an embattled corporate giant forced to compete with one hand tied behind its back due to regulatory restrictions and Congressional interference. Postal executives are therefore not to blame for the fiscal crisis facing the Postal Service, and the only way to solve the crisis is to give them more power and to compensate them in a manner similar to their peers in the private sector.
The problem with this narrative is that despite what postal leaders, stakeholders, and some members of Congress say about how it needs to act “like a business,” the Postal Service lacks the basic characteristics of a private corporation. Simply put, a corporation is a man-made invention that allows for the dispersion of liability and the accumulation of capital, thus overcoming some of the problems that individuals face alone in the market place and allowing for a scale and a means of financing that would otherwise be difficult.
Today many folks are taking a critical look at the role of corporations in society. Most larger corporations have become global in scale, which raises questions about accountability and allegiance. In the last forty years, as the world of finance has changed in both role and scope, corporations have also shifted focus. The idea of stockholders taking an equity position in a corporation in exchange for the distribution of future profits and dividends has been stood on its head as profits are generated from financial manipulation and markets have become volatile due to rampant speculation.
Leaving modern criticisms of the corporation aside, the Postal Service still lacks the fundamentals of a corporate entity. It does not even possess the most basic element of a corporation — stockholders — and there is consequently no one to hold corporate leadership accountable.
What the Postal Service has instead are stakeholders — the members of the business mailing community. These stakeholders try to portray themselves as the “owners” of the Postal Service. It’s their money that’s sitting in the postal pension funds, and it’s their money that pays the salaries of postal workers. But the big mailers don’t own the Postal Service. They are simply its customers. Their claim is akin to me claiming to be an entitled owner of Wal-Mart because I shop there. It’s completely ludicrous.
Another characteristic of a corporation is that it possesses assets and equity, built up over time by reinvesting profits rather than distributing them to owners and shareholders. The Postal Service does possess huge assets — a large fleet of vehicles, hundreds of large processing plants, and 32,000 post offices, a fourth of them housed in buildings owned rather than leased, many of which are valuable historic properties. But the Postal Service did not build up this infrastructure on its own. It’s the American people who built the postal system, through government investment.
A private sector corporation has something else — a board of governors accountable to the shareholders. Current statutes require corporations to be chartered and to have a board of governors elected by the owners, i.e. the shareholders. Although in the real world it is somewhat tenuous, there is at least a presumption of accountability.
The Postal Service has a Board of Governors appointed by the President of the United States (appointments are governed by statute requiring even partisan distribution), but in a very real sense they are accountable to no one. They pretty much cannot be fired, and because it is Congress that sets the rules, the idea of accountability is even further diluted. The members of the BOG tend to be political insiders with no special knowledge of postal issues and in some cases only marginal experience in managing a large entity.
A corporation’s senior leadership is accountable to the shareholders and subject to consequences. When a corporation is not doing well, the shareholders expect the board of governors to replace the leaders, and if the shareholders fail to exact a toll for poor performance, the markets will do so by lowering the price of the corporation’s stock.
The Postal Service does not have shareholders in the corporate sense. The plain simple fact is that the United States Postal Service is owned by the American people. Its purpose, the reason it exists, is to bind the nation together, to provide a physical and intellectual network that facilitates the exchange of information and the conduct of commerce.
While its current mandate requires it to survive on the revenues it generates from providing mail delivery services, that does not make it corporate in nature. In its essence, it is no more “corporate” than a public park that charges fees to provide for maintenance or a local government that charges for garbage collection.
The primary and identifying characteristic of the postal network is that it is an infrastructure. Any deviation from this essential characteristic undermines the reason the Postal Service exists. The leaders of the Postal Service want to deny this fundamental reality, and they have committed themselves to dismantling the infrastructure by selling off post office buildings, preparing to close half the country’s post offices, and downsizing the mail processing network through an ill-conceived consolidation plan. In so doing, they are abdicating their responsibilities to the American people.
Corporatizing the postal services of the United States has been a tragic error, an ill-defined step towards privatizing an essential governmental function that is something much more than merely a delivery service. The current focus of senior postal leadership, abetted by some in Congress and cheered on by some in industry, fails to grasp the fundamental purpose and reason for the Postal Service.
Representative Hochul’s bill — and the response of the Postal Service to criticisms of executive salaries — bring some much needed clarity to the discussion about the purpose of the Postal Service. The idea of the Postal Service as a corporate entity that needs to act “like a business” is one that we need to dispose of, and soon, before it’s too late.
One consequence of the high salaries paid to postal executives and the contorted logic that rationalizes those salaries is that it creates an atmosphere of affirmation that justifies the insular internal culture of the Postal Service. One need only examine some of the submissions by the Postal Service in cases before the Postal Regulatory Commission. Often their arguments are circular and rely on manicured data to support a predetermined conclusion.
When challenged, the Postal Service often arrogantly asserts that no one, other than itself and its own experts, could possibly arrive at the correct answer. An example of this would be the treatment of Donny Hobbs, an Iowa mayor who testified about the meaning and value of the post office to his community. The Postal Service responded to his testimony by saying that without reams of data and a number of studies, Mr. Hobbs couldn’t possibly know his community and its needs as well as they did
And what of the Postal Service’s vaunted studies, surveys, and data? In many cases it appears that the studies are much more limited than advertised, that their conclusions are predetermined, and that the data behind them are questionable. In other cases the Postal Service simply ignores or refuses to collect data that would damage its assertions and conclusions.
For example, when the Postal Service closes a post office, it assumes all the revenue will simply migrate to neighboring post office, but has the Postal Service ever bothered to examine the revenues at the neighbor offices to see if any revenue was lost? And what of the market survey on revenue losses that might result from the combined effects of closing thousands of post offices, eliminating Saturday delivery, and reducing service standards? One moment the Postal Service says it didn’t do such a study, and the next moment it says they never completed it.
The Postal Service manages its huge workforce using a hierarchical and autocratic model. It was created on a military model, hence the title “Postmaster General,” and this limitation was, in fact, one of the things that the 1971 Postal Reorganization Act (PRA) sought to address. At that time the model suffered from a history of patronage and failed miserably at incorporating newer models of organization. By magically declaring the Postal Service more businesslike, the PRA hoped to wash away a contentious, autocratic, top-down model that served no one very well.
Whatever the intentions of the PRA, the prevalence of postal lifers in senior management positions shows that neither the model nor the thinking really changed after 1971. Like the military, the Postal Service starts people at the bottom and works them up through the system, remodeling them in the image of the organization. This is a necessary and effective technique for the military, and to some degree it has advantages, like promotion incentives. But this organizational model and culture can become stultifying and stagnant, especially when the flow of information throughout the organization is rigidly one directional.
The Postal Service makes its own managers; it doesn’t attract outside talent or fresh thinking. Instead, it takes an ambitious person and imprints and inculcates the values of the system into the individual. It is a closed system that rewards compliance, obeisance, and a willingness to overlook any evidence that contradicts the organization’s message.
The consequence of this closed system is that ideas and processes don’t get challenged. Once a policy has been determined by HQ, it is promulgated down the line. Once a target has been set, it is carved in stone, regardless of realities. I have watched a plant manager run the same mail through a machine over and over because someone above set a target and there was no correct response or answer other than to make that number.
The Postal Service loses millions of dollars in grievances every year, not because unions are petty or nitpicky, but because managers arrogantly ignore contracts or fail to properly document policies and procedures. Why? Because in such a closed system, the capacity for self-evaluation becomes non-existent. “We said so” becomes sufficient justification for any action.
If anyone ever cared to do a study, to listen to the thousands of stories of employees being bullied or berated for failing to meet unreasonable targets or goals, to find out why it becomes so hard to fire bad employees (a clue, it isn’t the unions but rather a management system that simply doesn’t manage), they would come away with a picture of a closed, stagnant system where information and consequence are unidirectional.
The salaries paid to senior executives are high not because they are required to attract and retain talent but because those salaries serve as a justification for the methods, policies, and leadership of the organization: “We must be good, look at all the money we make.”
Programs like Pay for Performance, which showered huge bonuses on those at the top, were created not as rewards or incentives but as justification. Bonuses were paid in years when the Postal Service did poorly. Quite frankly, the management organizations (like NAPS, NAPUS, and the League of Postmasters) should have been more critical of these programs, and they only began to question them when it became apparent to everyone that the numbers and process behind the awards were completely arbitrary. Nothing in the makeup of the organization, other than the pretense of being a “company,” justified the PFP program.
It is time we disposed of this ridiculous fiction that the Postal Service is a corporate entity, which, unleashed from regulation, would thrive and be productive and profitable. The Postal Service is essential infrastructure providing opportunity to every American. It is an institution that protects and preserves our fundamental values about the free, unimpeded flow of information. It is a benign and useful presence in every community, and it connects citizens in a positive way to their government. It is an institution that provides important and necessary redundancy, allowing us the capability to go to every address every day — a capability that enhances and ensures our security.
There is nothing in the charter, purpose, or mandate of the Postal Service that supports the existence of a national post that lends itself to a corporate model. To contend otherwise is a pretense and sham that serves merely to justify policies that are inconsistent with the idea of providing a basic and essential government service.
But there is also nothing in the charter, purpose, or mandate of the Postal Service that prevents the organization from being efficient, effective, and innovative. Private corporations don’t have a monopoly on efficiency and innovation. The Postal Service can be successful without turning into a private corporation. What is hampering the Postal Service is a failure of vision: It is clouded by self-referential, self-justifying, insular thinking that sees success in terms of abandoning the universal service obligation — or deploying some Orwellian redefinition of what the USO really means.
The Postal Service desperately needs reform legislation. That legislation must start with the premise that postal services and the postal network are essential national infrastructure. That legislation must recognize that the Postal Service is all about service and not about acting “like a business” or, as the new five-year business plan is entitled, implementing a “Plan to Profitability.”
The Postal Service is not a business, and it’s not supposed to be profitable in the short-sighted corporate sense of the word. The Postal Service is supposed to serve the interests of the American people — all of us. That mission, that service, when accomplished well, may be the very highest definition of profitability.[Mr. Jamison can be reached at [email protected]]
)Image credits: Pyramid cartoon; Warhol soup can; the Corporation, a great film; Westport CT post office for sale, now sold; that’s why; painting, “Approved by Postmaster General,” 1937, by LeConte Stewart)