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Postal Service defends bonuses for executives
The Postal Service on Monday defended a compensation program that rewards senior managers for meeting annual productivity goals, even though the agency is experiencing a financial downturn.
Earlier this month, Postmaster General Jack Potter sent a memo to senior managers telling them they may be eligible for cash bonuses because productivity has improved over the past year. The suggestion that the agency would be offering bonuses at a time of huge projected losses raised eyebrows in the media and among some Postal Service observers.
With growing debt, declining revenues and increasing costs, the Postal Service could lose as much as $3 billion this fiscal year. In April, the agency's financial status prompted the General Accounting Office to add the Postal Service to its "high risk" list, which identifies agencies and programs vulnerable to fraud, waste, abuse and mismanagement. The agency has already raised its rates twice this year.
Greg Frey, a Postal Service spokesman, said the agency has used a pay-for-performance system for a number of years to motivate and reward managers who meet productivity goals.
"It [the memo] was written in the vein of an annual letter, telling executives that as they near the end of the fiscal year, if they are achieving their goals, they can max out at a certain percentage," said Frey. The memo was sent to Postal Career Executive Schedule managers, Frey said. These executives are comparable in rank to those in the Senior Executive Service.
Frey said that since the Postal Service is not a for-profit organization, employee compensation should not be based on profits or losses. He said Congress did not create the Postal Service to be a profit-making organization.
"When it comes to productivity goals, we look at delivery standards, the rate process, employee safety standards," Frey said. "Profit-making is not a goal."
Since 1996, the Postal Service has used a pay-for-performance system based on an industry financial model to reward senior managers with cash bonuses if they meet the agency's productivity goals for the year. The pay-for-performance program is based on the economic value added (EVA) formula, developed by Stern Stewart & Co., a financial consulting firm.
Economic value added is a financial performance measure that takes into account the cost of capital in estimating an organization's profits or losses during a certain time frame, providing what is thought to be a more accurate picture of how well the company is performing financially. Paying bonuses to managers as an incentive when they meet the organization's productivity goals is a key part of the EVA model.
According to Robert McLean, executive of the Mailers Council, an Arlington, Va.-based trade association, the EVA model does not allow the Postal Service to hand out bonuses arbitrarily.
"There are explicit rules for determining how much managers at every level receive. There are national, area and district objectives that must be met before anyone receives an EVA check," he said. The Postal Service has 11 areas and 85 districts.
McLean said the Postal Service's overall productivity is improving, so it "makes perfect sense" for managers to receive bonuses based on the economic value added model. The Mailers Council released its "Productivity goals are set at the beginning of each fiscal year, and managers are given aggressive objectives," McLean said. "Why shouldn't they be rewarded for meeting those objectives?"
But Michael Riley, a former Postal Service executive who now owns a financial consulting firm, questioned the wisdom of handing out bonuses during a year when the agency could lose nearly $3 billion.
"It is not possible to run a place that only breaks even; that is just not a sustainable position," he said.
Instead of handing out bonuses now, the agency should "save the money for a year, calculate the amount owed, and put it in the bank to give to managers when the Postal Service turns profitable," he said.
Riley criticized the Postal Service's pay-for-performance system, saying it rewards even mediocre managers. "The pay-for-performance system really needs a tune-up. It is not fair to those employees who are doing a wonderful job," he said.
COMMENTS
- Because of current economic conditions, I will stay with the postal service. After 20 years with the military through good and bad times, I feel as if I'm TDY on a bad assignment with todays' postal service. Good thing the mail volumn is down otherwise that mail that backs up daily would really be out-of-control. The elimination of jobs,tours/shifts, and personnel has greatly enhanced the current working atmosphere. The contract trucking company drivers are giving up their second jobs with all their late fees, I don't have to work overtime as much because of all the grievance monies, and i get to spend more time on my real life. I do feel guilty when I see all the delayed mail backing up, but since the postal service doesn't have the manpower to handle the reduced volumn, and managers that consistently tell untruthes,my guilt is minimum. Recent retirees couldn't even get plaques for thier service, but postal managers got bonuses. wayne smith Posted March 16, 2009 9:27 AM
- I have been working for the Postal Service as a City Letter Carrier for 13 years. I have also served as a 204B Supervisor for the past 4 years but I gave that position up because I realized how bad management treats their employees to achieve falsified goals to obtain their bonuses. Management is the greatest threat to the Postal Service with their mismanagement, bonuses and their stupidity. They cut back the workforce and expect us to take up the extra workload in less time. We get harassed for calling in sick especially when documentation is provided. We get harassed for missing our MSP scan points (even though there is a glitch in the computer system) and the MSP points has nothing to do with the delivery of mail. Managers falsify mail counts to show that they are meeting their goals. Management has so many supervisors/postmasters out of their offices on detail/oic due to vacancies to which they are paid mileage, per diem and hotel stay. I was paid $655/week in addition to my regular salary for a detail assignment. The Postmaster General stated that we are losing mail volume every year but they always seem to pad their pockets with their bonuses. I had almost forgotten that I worked for the Postal Service and not EXXON Mobile. patrick fuller Posted January 28, 2009 1:09 PM
- I have worked for the United States Postal Service for 10 years. I have seen logic thrown by the wayside, along with customer service. The two number one complaint on the street is: Why do we get our mail so late? and Why are there only two clerks at the window? Management continues on pushing our reporting time back, which moves the delivery time back, and upper management continues to abolish clerk positions. Possibilities for accidents improve greatly after 4pm. Routes are out of control with carriers criss crossing each route, double delivering to same cluster boxes, and wasting gas. Routes need to be squared off. Management needs to get intouch with reality, Spring has doubled in size...and still growing. This means more deliveries, and more confusion on the street. I thought that we were the "backbone" of the company. Try listening to us. We have the ear to the customers...you know, the people who keep us employed. Tonya Rackley Posted August 22, 2008 8:07 AM
