Wednesday, April 11, 2012

When Congress has to sign off on self-evaluation

It's easy to see from lecture this week and the readings for the last two, that going through the process of self-evaluation for a company or organization could become a long, involved process. Implementing a change in strategy can take even longer, as evidenced by Professor Zak's analogy to turning a large ship. So imagine having to go through that process and being required to get the approval of a majority of 435 Congressman and 100 Senators. This is the problem facing the United States Postal Service (USPS).

You could argue that throughout its history the Postal Service has represented the epitome of the "network effect" strategy, though this is really the case for anything bordering on a public good. In any event, the effectiveness of the popular belief is that because of the change in how people communicate (i.e. letters are few and far between) the USPS is in dire straits. Because of this the Postmaster General has set forth a plan to create $20 billion in savings by 2015 that would close nearly 3,000 post offices, end overnight delivery for first class mail, stop Saturday service, and lay off over 200,000 workers. However, the changes must be put into legislation and passed by both houses of Congress.

It is worth noting that despite the shifts to emails and other correspondence technology, the USPS would actually be in good financial condition if not for a requirement Congress enacted several years ago. In 2006 the legislature passed a bill requiring the Postal Service to fully PRE-fund the health benefits and retirements for any current or future employee that will retire in the next 75 years. And they must do so by 2016. Supporters of the Postal Service have noted that if not for this provision, the USPS has actually generated an operating profit the last four years. The Postmaster General has even pointed out to Congress that the fund presently has $44 billion and is earning an annual return of four percent, which should be "enough to subsist without additional payments while [they] examine strategies to increase profitability."

The end of the article for the link above includes several ideas for expanding the services offered by the USPS in order to increase their revenue. I would imagine that doing so would also help to make the organization more diversified, and in some sense agile for the future. Some of the changes suggested include expanding service to seven days, having a banking facility for small accounts, offering more services (e.g. notaries, cell phone sales, delivery of wine), and offering high-speed broadband internet. One change the USPS hopes to adopt is a premium service, of sorts, whereby companies could actually integrate their logos into their own postage for a small fee.

It's hard to believe that the best solution is for the USPS to cut services and lower their quality. I can't see how that would work in the open market. When you consider the amount of substitutes for traditional mail and other shipping companies in operation, it's clear that the USPS is operating in a much more open market than they have had to before. So which approach or approaches do you think are most appropriate? Should they try to diversify their services or return to their traditional role but in a more limited way?

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.