Postal Service ends controversial bonus program for managers

Postmaster General John Potter Friday announced the end of an often-criticized bonus program for managers and supervisors, but Postal Service officials are committed to finding other ways to motivate employees and improve performance and productivity.

The so-called EVA program-economic value added-covered more than 80,000 postmasters, supervisors and management employees. Created in 1996, the plan replaced cost-of-living increases, overtime and locality pay. It was designed to reward managers for increasing "economic value" and achieving strategic goals. Economic value is calculated by subtracting certain capital expenditures from revenue.

During its infancy, the program was largely hailed as a way to focus postal employees on performance. But as the agency's bottom line turned from black to red over the last three years, observers became disenchanted with the pay-for-performance program. Agency leaders found it increasingly difficult to explain why and how managers were getting performance payments while the agency was hemorrhaging money and raising rates. The program's complex formula for setting bonuses was never understood on Capitol Hill.

"The program was so misunderstood and hard to explain," said agency spokesman Gerry Kreienkamp. "The fact is the system worked. Service levels are the best they have ever been and productivity has been increasing." He added that the agency saved nearly $2 billion over the life of the program by making performance payments instead of across-the-board cost-of-living increases.

Nonetheless, the Postal Service's inspector general said last December that the program was flawed. The IG accused the Postal Service of inflating revenues in order to boost incentives.

Postal Service officials, along with management groups, want to have a new system in place by 2004. As first reported in The Washington Post on Monday, about $300 million remains in the EVA bank account and will be paid to eligible employees later this year.

Joseph Cinadr, president of the National League of Postmasters, is eager to begin working on a new incentive program. About 62 percent of postmasters were excluded from the initial program because they were nonexempt employees. The Postal Service added them to the program in 1998, but at a lower rate than supervisors.

"We want to see something that is fair," Cinadr said. "Performance measures are great so long as there is a line of sight-so I know that my actions will make things better or, if I neglect my duties, will impact the organization in a negative way." That wasn't always clear under EVA, he added.

The new system will have a greater emphasis on individual performance, said Kreienkamp. The old system was more focused on clusters and regions. Managers got a bonus based on the percentage of goals their cluster met.

"When postal managers improve productivity, it helps to keep costs down. There should be a reward for that," said Robert McLean, executive director of the Mailers Council, the mailing industry's largest trade association. "Setting objectives for managers should be part of their management system. Raises should not be automatic."