Going Postal

Not that long ago, I attended a talk by a Manager of Strategic Business Planning at the U.S. Postal Service (USPS) who described how they used performance management concepts to dramatically improve the agency. If you are like me, I showed up at the talk fairly skeptical, as the post office does not have the best reputation for performance. In fact, the presenter addressed this common perception, using this slide to demonstrate the dramatic difference between qualitative and quantitative assessments of the agency’s performance.

Before I highlight some of the successes that the USPS achieved, it’s instructive to consider its sheer scale. In 2005 the USPS was a $70B profitable organization with nearly 700,000 employees that delivered 212B mail pieces to 145M locations.  By way of comparison, Federal Express is a $30B company with 260,000 employees that delivers less than 1B mail pieces to only 7M locations. (Source)

The presenter shared some impressive statistics about how the USPS had improved over the last few years. The most compelling: $1B in annual savings due to six successive years in productivity gains and 106,000 fewer career employees. They also eliminated $11B in debt. If one of their for-profit competitors had achieved these results, no doubt that their stock would have skyrocketed.

Most of us probably have little interest in these internal process objectives and KPIs.  Instead, as customers of the USPS, we care more about the prices of stamps and how easy it is to use their services. This diagram shows that over the last 15 years stamp prices have essentially matched the inflation rate. Given that employees probably represent the lion share of their costs, this seems like a good benchmark and reasonable performance. I would have liked to see a similar comparison with the prices of the commercial delivery services. Even without that information, however, it is telling that US stamps are significantly less expensive than other industrialized nations.

Having said this, I found the changes in customer satisfaction to be the most compelling performance improvement.  As shown in the attached logic model style diagram, the USPS started its performance management program with very low customer satisfaction scores.  To combat this, it instituted a strategic objective to improve service monitored using a key performance indicator of % of deliveries that were timely. The long-term target was 95% with annual incremental improvements. After several years, they surpassed their service target and, as expected, customer satisfaction increased dramatically.

This is a good example of deciding that you want to achieve, establishing a supporting KPI with incremental targets, and realizing the desired outcome.  Kudos to the USPS.  Frankly, I never thought I’d say that.

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2 Responses to Going Postal

  1. Robert E April 21, 2007 at 1:18 am #

    The danger for almost any organization is how do you make a difference to your customers in a way that is recognized? How do you understand your customer and service in order to provide some real differences that can be easily experienced?
    The post office hasn’t been able to do much about the surly employees behind the counter, but they have introduced a number of cool self-service work-arounds; ordering stamps on-line; having branches with a new self-serve unit to figure out the exact postage for your small packages, so you can complete sending mailing it without standing in line or even after-hours.
    In my neck of the woods, they now have a more pleasant person who talks with those waiting in line to check what you want to do and make sure you have the right forms filled out. That way you have it all done before you get to the window.
    Finally, what about how they are handling the upcoming rate increase? For the first time the generic stamp they issue will be good for first class postage forever. That is a great idea. In the past they would assign a letter to the stamp and then you would have to remember if the “D” stamp was 32 or 36 cents. (Rates go up in May, by the way).
    That is why it is so critical to understand what can be done that will make the biggest impact. I am more impressed with the new generic stamp and the improvements in services at the postal branches. Not to diminish the importance of the presentation of the USPS business manager, I didn’t have to sit through a PowerPoint to understand how service improved.

  2. Jonathan April 23, 2007 at 4:23 am #

    Robert: Great point. If a tree falls in the forest… If consumers don’t perceive better service, then it isn’t better service.

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