First Class Feud

espite job cuts and deficit-driven restrictions on agency budgets, relations between management and organized labor in the executive branch have been relatively cordial in recent years. The situation at the U.S. Postal Service, however, is exactly the reverse.

Employment is growing-with 820,000 workers, an increase of 60,000 over the last five years, USPS is the country's largest employer outside the armed forces. Profits are high-a $1.3 billion profit in fiscal 1997 followed gains of $1.8 billion in 1995 and $1.6 billion in 1996, allowing USPS to cut in half the debt accumulated over the last two decades of postal independence. New markets are opening-the Postal Service is positioning itself to move into business lines ranging from electronic delivery to new international services. Revenue and mail volume achieved new records in 1997 of $58 billion and 190 billion pieces.

Yet relations between USPS management and its employees "are the worst I have seen in the past 40 years and are getting worse," says American Postal Workers Union President Moe Biller.

The General Accounting Office agreed with that assessment in a recent report, saying USPS suffers from persistent labor-management problems characterized by "autocratic management styles . . . sometimes adversarial attitudes of employees, unions and management [and] . . . a sometimes contentious work environment." GAO added that "little progress" had been made since 1994, when it issued a report finding virtually the same problems.

Labor relations at USPS briefly catch the public's attention after incidents of violence at postal facilities in which job frustrations play a role, such as the December shootings in Milwaukee in which a worker wounded a supervisor who had reprimanded him, wounded one co-worker and killed another and then killed himself. But while violent acts are sporadic, bad blood is ongoing-stirred by management's pressure to meet production goals, according to unions, and by bare-knuckled rhetoric and an entitlement mentality by union officials, according to management.

Grievances are one indicator of the state of relations. The annual number of grievances lodged by unions that weren't resolved at the local level and were taken to higher-level offices rose from 65,062 in 1994 to 89,931 in 1996, while the backlog of cases awaiting formal arbitration grew from 36,669 to 69,555, GAO said. Not surprisingly, labor and management officials "tended to blame each other for the high volume of grievances being filed and the large number of backlogged grievances awaiting arbitration," GAO found.

Postal officials say they do not have detailed statistics on types of grievances, but common themes include treatment of employees who commit minor infractions; disputes over leave, overtime and work processes; lack of employee participation in decisions affecting their work; and perceptions of disparate treatment, particularly in disciplinary cases. "The relationship between managers and employees remains adversarial instead of instructive and educational," says Hugh Bates, president of the National Association of Postmasters of the United States. "When mistakes are made, threats follow. There is rarely an attempt in the field to correct a problem and move on."

The partnership program created by presidential order in 1993 to foster cooperation between labor and management has helped smooth relations in the executive branch, but the program didn't cover the semi-governmental, semi-corporate Postal Service. In executive agencies, "we've had some successes in terms of changing the culture of the adversarial relationships that existed traditionally. On the postal side . . . things have deteriorated or are still as bad as they've ever been," says John Leyden, secretary-treasurer of the AFL-CIO's Public Employee Department. Leyden is a member of the National Partnership Council, which includes major executive branch employee unions, management groups and representatives from the Office of Management and Budget, Office of Personnel Management and other agencies.

"There's no diminution of the hard rhetoric between the various organizations and the Postal Service," Leyden adds. "The increase in the number of grievances that have been filed is a clear indication of the adversarial relationship and the non-progress in resolving differences between the Postal Service and the employee rep- resentative groups."

To George Gould, assistant to the president for legislative and political affairs at the National Association of Letter Carriers, the state of postal labor relations is revealed in what employees tell Congress. "I'm having more and more members of Congress in the last two or three years telling me about letter carriers going into their offices, and the first thing they lead off with is the negative way they perceive their jobs and the way they're being treated by management," he says. "They call me and tell me, 'I've just had a group of clerks or letter carriers in my office, and I wanted to talk about legislation and they wanted to talk about how they're being treated on the job.' When they start talking about that instead of losing benefits from congressional action, I know that there's a serious problem."

Postmaster General Marvin Runyon agrees there are problems in labor-management relations. "I'd be the first to acknowledge that we're not where we want to be. We have a lot of offices where employees work together to serve the customer, and where teamwork and cooperation are a way of life. But more need to be that way," he says.

But Runyon sees the relationship in a more positive light. The number of grievances raised to the national level is only one indicator of the state of labor-management relations, he says, noting that the level of authority at local levels partly determines whether complaints are resolved at the work site or higher up.

"I think if you went around to a lot of different locations around the country, you would find a lot of locations where they're getting along very well, they don't have problems," Runyon says. "Unhappy people don't perform the way our workers are performing now. They may be filing grievances, but I would contend that their morale is not so low as people would think." He notes that overnight delivery scores for first-class mail stand at 92 percent nationwide, the highest ever and 13 points better than 1994, and that measured satisfaction among businesses and customers also is at record highs.

People vs. Profits

But unions say the high scores and profits have come at a price. They especially criticize the incentive pay system for managers, which rewards them for meeting financial and performance goals. "The system is devised to reward the managers who push from the top down on the workers," Leyden says. "It's driven to create that type of a gap and an adversarial relationship, because the reward to individual managers and supervisors is if they come down hard. The supervisors make numbers and make money at the expense of maintaining good employee relations. It's supposed to be performance-based incentives, but it actually rewards ill-treatment of workers by supervisors."

Says William Young, NALC vice president, "Managers are paid by their ability to achieve the bottom line. They are not measured on the way they treat employees; they are not compensated by the way they treat employees. They became so bottom-line driven over the last year or year-and-a-half that they've lost the broader view."

Biller says the labor-management problems are "the result of a management system designed to make compliance with employee contractual rights subservient to operational goals, and to defer resolution of problems somewhere out into the distant future."

The two sides recently took several steps that, while falling well short of the partnership arrangements in the executive branch, provide an opening for a more cooperative relationship. First, Runyon visited APWU headquarters for what the union described in State Department-like terms as a "frank, open and candid dialogue." Then, leaders of the major postal unions and postmaster and supervisor organizations met with top management at a "summit" under the auspices of the Federal Mediation and Conciliation Service. The parties agreed to work on developing a joint understanding on the roles of labor and management and the Postal Service's business goals. Follow-up meetings are planned.

The Postal Service and APWU also have agreed on a memorandum of understanding to reduce the backlog of grievances and to review barriers that might be impeding voluntary settlements. USPS has signed agreements with NALC to improve the way workplace disputes are resolved and to conduct joint tests to create a better work environment. Runyon, meanwhile, has promised greater union involvement in setting USPS strategic plans and has gone out of his way to praise his employees before Congress and in other forums.

Good Intentions Gone Awry

Postal labor and management, though, have a history of good intentions gone awry. GAO's report identified 32 initiatives designed to address labor-management problems. Of the 10 it examined closely, disagreements between the parties on approaches prevented full implementation of five and caused the cancellation of two others, while GAO found it difficult to gauge the results, "if any," of the other three.

For example, a partnership-like program called "employee involvement" that was intended to alleviate adversarial relationships on the work floor started in 1981 with NALC. (APWU refused to participate, saying the program would undercut union representation rights and give employees a false feeling of authority over decisions in the workplace.) USPS abandoned the venture in 1996, saying the program was "unable to address the root causes of conflict in the workplace or to foster empowerment of letter carriers." NALC continues to criticize the decision to end the program, calling it a step in the right direction.

Another now-discontinued initiative was an annual employee survey started in 1992 to gather opinions on the Postal Service's strengths and shortcomings as an employer. But APWU and NALC later urged their members to boycott the surveys, saying the results had been used improperly in the 1994 bargaining. USPS ended the program in 1996, saying that without responses from clerks and city carriers, the results would be almost useless.

"Mr. Runyon is the 18th postmaster general under whom I have served. Every one of them came in saying, 'We know there's an autocratic culture and we're going to change it,'" says Biller. "And somehow they get co-opted by the bureaucracy. The players change, but the culture remains the same."

Pressures to Reform

USPS and the unions have been getting the message to reform the culture not only from GAO but also from Capitol Hill. Participants say the summit might never have been held except for the interest of Rep. John M. McHugh, R-N.Y., chairman of the House Government Reform and Oversight Subcommittee on the Postal Service. And at a recent hearing of the panel, members said that employee relations should get higher priority.

"You've been quite successful in a number of areas-financially, and in terms of service delivery," Rep. Chaka Fattah, D-Pa., told Runyon. "And there's one glaring deficiency [labor relations]. That either means that the same skills and effort and priorities that allow the service to address these other areas of concern have not been applied to this area, or that there is something peculiar about the difficulties between labor and management at the Postal Service that requires some extraordinary effort that is absent from your management team's ability to get to the bottom line."

McHugh told the postmaster general there is a wide perception that the Postal Service has a "dual system of accountability," in which infractions by craft workers are strictly penalized but those by managers are not. He cited the removal of an 18-year letter carrier who took 13 minutes longer than scheduled to complete her route because of her short stride , while a postmaster was only transferred with no loss in pay after having an accident after hours in a postal vehicle and allegedly lying about it to postal inspectors.

Simply in financial terms, USPS may no longer be able to afford poor relations. "The existence of labor-management relations problems at the Postal Service does not come without a cost, and that cost is to the service, the unions and to the public at large," says Bernard Ungar, GAO's director of government business operations issues. GAO estimates that USPS spends more than $200 million annually just in processing grievances, and said there are added costs in lower employee morale, delays in efficiency improvements and employee reluctance to suggest and carry out better ways of doing business.

After three strong years, the Postal Service expects to lose more than $200 million in its current fiscal year as it awaits revenue from a requested rate increase that will take effect later this year. But even that rate increase will not overcome the financial challenges USPS faces from increased competition in areas ranging from parcel services to overnight delivery. And the two categories of mail that make up four-fifths of postal revenues, first class and third class, "face the highest risk of diversion from both competitors and electronic alternatives such as e-mail and faxes," by the Postal Service's own assessment.

Also, McHugh has proposed legislation requiring USPS to compete on the same ground as private-sector companies. For example, it could not subsidize competitive operations with revenues from services that have no direct competition, such as first-class mail. The outlook has led USPS to not only explore new openings for revenues-for example, it believes it can nearly double its revenue from international products to $2.9 billion by the year 2000-but also to look for ways to hold down spending.

From the management side, the numbers tell a plain story: USPS is an exceptionally labor-intensive business. Most of the potential for savings in postal operations lies in personnel costs. Compensation and benefits together make up about 80 percent of expenses. The next largest single cost, transportation, represents only 7 percent.

The proportion of labor costs has declined slightly in recent years, partly because of relatively low inflation that has held down cost-of-living pay raises, but also because of increased automation. USPS also is looking to hold down personnel costs through privatization-for example, by contracting with Emery Worldwide for priority mail processing centers in 10 Eastern cities. A recent report by a blue-ribbon committee, comprising major postal customers such as AT&T, L.L. Bean and CTC Distribution Direct, recommended that USPS "continue to look for opportunities to improve service and/or reduce costs through the appropriate use of outsourcing."

From the labor side, the story is equally plain: Reducing labor costs means less hiring, less potential for advancement and the threat of job cuts. Despite the job growth of recent years, employment security is a major concern for postal workers, says NALC's Gould, who adds, "If you don't have the job, the rest of it is rather irrelevant."

Contracting is taking jobs out of the hands of postal employees and giving them to the private sector, unions say. Several Emery centers where priority mail is processed have been picketed by APWU with the theme "return our work."

Employees also see their jobs threatened by machines. The Postal Service estimates that without its investments in automation since 1987, it would have 100,000 more employees than it has today, and the automation push is continuing. A new five-year capital investment plan targets $6.7 billion for equipment and robotics to sort and handle mail. USPS has set a goal of automating the processing of all letter mail by the end of 1998.

While executive branch unions increasingly have turned to partnership in the face of similar threats, postal unions are more inclined to take a hard line, and they are better positioned to do it. While they cannot strike, they have the authority to bargain over pocketbook issues such as pay and benefits, and they have much larger bargaining units-the four largest unions represent about 660,000 workers. About 90 percent of unit workers are dues-paying members, compared with about 20 percent of those represented by executive branch unions.

Says APWU's Biller of the recent dialogue with postal management: "I want to be optimistic. I want to work with this. I've never objected to labor-management cooperation, either publicly or privately. But we're not going to be co-opted. We get paid to represent the employees."

Says NALC's Young, "I think there's reason for optimism, but I guess I'd term it guarded optimism, and maybe that's because of the baggage that I carry from the failed previous efforts that we've made."

Even while taking steps toward conciliation, Runyon has signaled that he felt that outside help might be needed to achieve better relations by endorsing McHugh's proposal to create a special commission on labor-management issues. Unions remain opposed, saying that the parties should resolve their differences among themselves.

However, the recent record at the national level shows as much division as the relations on the work floor. Only the National Rural Letter Carriers Association reached a negotiated contract with USPS during the last round of bargaining. The other three major unions-APWU, NALC and the Mail Handlers Union-went to arbitration, as they had in every contract since 1984. Those three contracts expire in November (the rural carriers contract runs an extra year) and negotiations begin in August.

For now, there is a feeling of cautious optimism for improvement in the relationship. But there may be little time for that to take root. Traditionally, the months before negotiations have been a time of increasingly heated rhetoric as both sides stake out their bargaining positions.

"Time is critical," says Anne Barkas Hoffman of the Federal Mediation and Conciliation Service. "The occurrence of the bargaining and the actual agreement has slowed progress in the past. We're hoping that it doesn't do it in the future. I think there is a window, and I'm hoping that it is important enough that we can use it."

Eric Yoder is a Washington-area journalist who has covered the federal government for 17 years.