Time for a Change

he U.S. Postal Service is by far the largest government corporation in the United States. Marvin Runyon, who took over as postmaster general in 1992 and is scheduled to leave this month, arguably was the first postal chief to think of the Postal Service as more of a corporation than a government agency.

Formerly a senior executive with Ford Motor Co. and president and CEO of Nissan America, Runyon came to USPS fresh from a stint at the Tennessee Valley Authority, where he earned the nickname "Carvin' Marvin" for his plan to reduce management layers and cut costs. He immediately applied the same philosophy at the Postal Service, triggering a reorganization that reduced staff by 40 percent, cut layers of oversight, and eliminated overhead and headquarters positions. In his use of employee buyouts and other incentives to achieve his goals, Runyon anticipated strategies that would be used across the federal government.

Runyon later introduced the CustomerPerfect program, based on criteria from the Malcolm Baldrige National Quality Award, that once again was ahead of executive branch efforts under the 1993 Government Performance and Results Act. He reached a goal, thought by some to be unachievable, of delivering 90 percent of local first class mail overnight.

After the initial period of cutting, USPS grew under Runyon's tenure, both in employees-it is now the largest employer in the country apart from the uniformed military services-and in capital-with a $50 billion budget that would rank it No. 8 in the Fortune 500.

He also expanded the agency's reach into international and electronic markets, while processing 43 percent of the world's mail volume, some 183 billion pieces of mail a year. Runyon broke the cycle of postage rate increases every three years, and after three years of surpluses exceeding $1 billion each, USPS expects to finish with a small surplus in the current fiscal year even though a requested rate increase won't take effect until later in the year.

However, Runyon's tenure at USPS was not without controversy. Employee unions complained that his emphasis on automation and privatization cost jobs. They also criticized his management incentive program, which they believe overemphasizes numeric goals, and his advocacy of higher salaries for top executives. Nor did Runyon eradicate the problem of sporadic violence in the postal workplace.

Runyon announced earlier this year that after a decade of service in government he wanted to return to the private sector. He spoke with Government Executive as he was readying his departure.

INTERVIEW with Marvin Runyon

Q: Many other agencies are trying to do the same thing you did here-operate in a more businesslike manner. What's your No. 1 piece of advice to them?

A: Recognize that they have customers and set their operations up so that they satisfy their customers. That's what people in government are supposed to do. In the Postal Service, we're a service business, and our job is to satisfy our customers. For example, when I came in here, post offices were closed at 5 o'clock. People really wanted them open later, but we had rules that sort of said you work from 8 to 5. A lot of people have to be at work at 8 o'clock, and they want to drop their mail off on the way. A lot of people are at work at 6 o'clock, and they'd like the post office to be open at 7.

You have to allow your people to tell you what your customers want. When you talk to your employees, in addition to talking to your customers . . . you'll find employees know more about the business than anybody. Employees understand it.

Q: Do you ever feel like the first government reinventor?

A: When I went to TVA in 1988, one of the reasons I went was to prove to myself that you could run a government agency as effectively as a private business. We made TVA very efficient. They haven't had a rate increase at TVA for 10 years as a result of some of the things we put in. When I went there, they'd had rate increases for 22 straight years that averaged 10.4 percent a year. There were companies that were leaving the Tennessee Valley because the cost of power was going up so much. So we did make that operate as efficiently as a private business. At the Postal Service we've done the same thing.

Q: Do you think there's similar slack built into pretty much every agency?

A: I do. When you go into an agency and look at it from a business standpoint, you'll find there are many, many things you can improve. It's just that way. First you need to find out what your customers want and need. Stop doing the things they don't want or need. The government doesn't exist just to exist, it exists for the people. And if you're satisfying a need, that's good. If you're not, you ought to pack up and leave.

Q: One of the first things you did when you came in was a reorganization that involved paring the management ranks in the middle. Again, the executive branch is trying to do the same thing, without much to show for it. Do they need a new approach over there?

A: I just know what we did. We looked at the way we were organized. We had too many levels. I think we eliminated about five levels of management. And we operate much better.

Q: The Postal Service historically has had an image problem. There are several other agencies right now in the same boat-the IRS for example. What would you tell an agency that has that problem?

A: I have to go back to customer service-do what the customers tell you to do. You get a bad [image] because you're not doing what you ought to be doing. If people are saying my mail is late, you've got to figure out a way to get them the mail on time. If people are saying it's costing too much, you have to figure out why. You've just got to go to work on it. In our particular case, we have surveys. We measure our performance. In the Pew Center report on government agencies, nine out of 10 Americans are very pleased with the Postal Service. The second best was the Park Service at 85 percent and nobody else was 80 percent. Well, that's a reality check.

Q: The reorganization, for at least the initial period, really threw things into an uproar. If you had to do that over, would you do it any differently?

A: The way we did it was to allow people to opt out, and we gave them six months' pay if they opted to retire. So we didn't have anybody laid off. The people who left chose to leave. We didn't tell them to go. Then we reorganized on what we had left. I don't think I'd do that any differently. Just going in and saying, "OK, all of you are out of here," that's not a good way to do it. We had, I think, 46,000 people leave, and 30,000 is what we were looking for. We let too many people leave with experience, and if I had it to do over again, I'd try to figure out what I could do to have the number leave that I wanted to leave. That's difficult to do, though.

Q:The era of cutting back on jobs certainly is over at USPS and seems to be pretty much over in corporate America generally. The executive branch is continuing down that road. Are they going in the wrong direction?

A: I haven't studied what the executive branch is doing. We are continuing to try to improve our operations, improve our productivity, to look at our processes. We're putting in automation that over time will make us do our operation more productively, more effectively, more efficiently. I think that people really need to look at . . . the process of what we do, so that changing the processes actually [requires] fewer people.

To say, "We've got 10 percent too many people," and figure out where you're going to take out 10 percent of the people, that's the wrong way to do it. I know that's the way people used to do it, and there are maybe some people still doing it that way today. A better way of doing that is to look at the processes, improve the quality of the product, improve the value-added that you make and figure out how to do that more efficiently.

Anything you do, you've got to be sure you've got accountability involved. You've got to be credible. And in our case, and I think in all government agencies, you have to be sure you're competitive. That's not a government word, "competitive," but in the Postal Service we've got more competitors than I ever had in the automotive industry. Everybody has competitors. I don't care what branch of government you are in. If your competitors can do it better than you, then you shouldn't be doing that. If you can do it better than your competitors, then you ought to be improving your methods so that you can do it even better.

Q: Your CustomerPerfect program emphasizes timeliness, setting targets and measuring progress. The Government Performance and Results Act emphasizes the same sort of thing. Having been down that road, what advice would you give agencies?

A: Four years ago, we decided we needed a better way of running the Postal Service. So we installed the Baldrige concepts. We called it CustomerPerfect, because that's what we're really aimed at-the customer. There are management principles behind that. Part of the concept there is that you set goals. You have to first get indicators. It's difficult to get indicators. Overnight on time is an indicator. So we started on that. We are now measuring two- and three-day performance and priority mail.

Q: What if you're running an agency that doesn't have those kinds of indicators?

A: You might be surprised if you start to analyze what number of calls they have been getting, how many people are satisfied in those calls, and so forth. You have to assign people to find those indicators. But there are indicators in everything you do, whether it's filling out income tax reports or government contracts. How many times are they on time? How many times are they not on time? How many times do you have to make a change order? All of those things lend themselves to being indicators. You just have to find them.

Also, we've tied that to pay for executives, our supervisors. I think pay for performance is very important, and I think that's something government agencies need to figure out.

Q: To what extent has the executive compensation program made you able to meet goals?

A: Every employee should be paid on [a performance basis]. When you go for pay for performance, you have to be very sure you know what you're doing when you set the indicators. Make sure those indicators are what you want to receive, because I guarantee that's what you're going to get. If you want the quality of delivery to improve, then set that as an indicator. If you want employee satisfaction to improve, set that as an indicator. If you want safety to improve, set safety as an indicator. Because what gets measured gets managed.

Q:You've been criticized for creating too much of a bottom line-driven organization.

A:It's not necessarily the bottom line we're driving at. That is one factor. Employee satisfaction is one factor. Customer satisfaction is another factor. We have three voices-voice of the business, voice of the employee, voice of the customer. We have indicators, and we measure all of those factors.

I frankly would like to see all of the unions accept performance pay. They could all increase their pay by improving performance. And not on the sweat of their labor. You don't get things done working harder, you get things done working smarter, and that's what we're all about.

We're looking at how our processes are managed. We have members of our unions who are members of those process management teams, and they like it. A lot of our people would like to see performance pay. Take letter carriers. I think letter carriers would be very pleased to be in a performance pay proposition, where they know what the standards are, and they figure out a better way. Not a harder way. Not running from door to door. That's not the answer; that's never the answer. The answer is smarter. Figure out how to improve their productivity and they receive more pay for it.

Q: Relations between labor and management at the Postal Service historically have been tense. Do you ever look across the street at the executive branch and say, "If I only had the cooperation they're getting over there."

A: Relations between any union and management that want to be adversarial are tense. You don't have those kinds of relationships in the automotive industry. The unions in the automotive industry have decided that they have competitors. They have now figured out that they need to work with management. I don't mean roll over and play dead, anything like that. I'm talking about teams work better than individuals. They have decided they need to do that.

One of the problems we have in the Postal Service is that we continue to be successful, we continue to get new business, we're running a surplus, and people say that's because we're working so hard. So therefore that's really bad. It's not bad. We need to continue to grow our business in every way we can, but we need to work together.

I think in a lot of ways we are working together better. One of the problems with postal pundits is they look at grievances. Grievances are not a measure of relations. I could take you to many locations in this country where labor-management relations are really good, where management and unions are really working together. We have other places that need help, and we're making those changes as fast as we can from a management standpoint.

Q: USPS has thrived as it has grown. What about an agency where you know you're going to be more or less where you are, if not smaller, for as far out into the future as you can see?

A: I'd have to look at what I was being asked to do by Congress, and I'd be looking at my customers and asking them, "What is it that you don't want done?" If I were going to have to cut back, I'd find out what my customers didn't want and I'd stop it. That's a tough situation. When people just mandate dollars, that's not the way to do it.

Q: To what extent does being governmental, with government retirement, health and life insurance, help or hinder managing the Postal Service?

A: The Postal Service has some different personnel practices than the regular government. Some people have civil service retirement, then 12 years ago they came in with FERS. I'm finding with civil service, they stay until they can retire. A lot of people with civil service are now reaching 50 to 55 years of age, and at 55, I think they're out of here. In five years, a lot of people with FERS will have 17 years [of service]. They can be out of here too.

It's going to make it harder to run an operation like the Postal Service, where we have a lot of people at the upper levels who are grossly underpaid in relation to the outside market. The delivery companies pay much more than we do. We're able to pay our top executives $151,000. But you take somebody who's a chief financial officer or a chief operating officer at one of those companies, and it's $600,000, $700,000. So how are we going to continue to fill those jobs, to keep people here who are quite competent to go out and get some of those jobs?

Q: What advice do you have for the next postmaster general?

A: They should have a really tough skin. They need to understand that there's going to be 280 million owners, there's going to be 435-plus-100 overseers [in Congress]. You've got more customers than anybody in the United States that you've got to satisfy, and some big customers-$600 million a year, $400 million a year, $100 million a year. You really have to be dedicated . . . and to work maybe 16, 18 hours a day-and listen to people who are unhappy because they didn't get their letter.