December 7, 2020

In a speech to mailer associations, Postmaster General Louis DeJoy seemed to mirror the approach of his three predecessors: Jack Potter, Pat Donahoe, and Megan Brennan.  Perhaps after his calamitous start this summer, Mr. DeJoy is following the advice of the public relations firm that is advising him, likely the long-time USPS contractor Weber Shandwick.

The PMG seems to be on a normalization campaign.  DeJoy praised postal employees.  He bragged about how well USPS has been dealing with the pandemic and how well they handled delivering ballots.  He rattled off data on how quickly the average ballot was delivered.  And he pledged to work on fixing the broken USPS business model.  In doing so, DeJoy promised to retain universal service with six-day mail delivery (mandated by Congress) and to make the USPS “self-sustaining.”  All very politically correct.

When he turned to discussion of his upcoming strategic plan, DeJoy gave some general hints and followed the blueprint set down by Potter in his March 2010 strategic plan, which Donahoe and Brennan also adhered to.  In the case of universal service, however, DeJoy was more conservative than Potter, who said in 2010: “Adjust delivery days to better reflect current mail volumes and customer usage.  Survey data show that the public favors 5-day delivery over using taxpayer funds and other alternatives.”

The 2010 playbook starts as all recent management discussions of the need for postal change begin, with a statement that the USPS “busines model” is broken:

For over 200 years, the Postal Service has fulfilled its mission to deliver trusted, affordable service to the nation. Its business model worked well because mail volume increased steadily as the nation grew. In recent years, however, as customer preferences have rapidly evolved and new technology has changed how Americans communicate and transact business, the model has faltered. Mail volume, instead of increasing, is declining dramatically, even as the cost of delivering mail to an expanding number of addresses continues to grow. As a result, the Postal Service’s ongoing ability to finance universal service is at great risk.

Instead of proposing a new “business model,” PMG DeJoy hinted that he is going to follow the “laundry list” approach to closing a financial gap.  Since 2010, USPS strategy has consisted of defining a financial gap and listing individual actions that management believes will add up to enough to close the gap.  The list is usually in two parts: those within control of management and those requiring Congressional or regulatory changes.

The fact that every USPS laundry list has these two parts is a symptom of the real issue: USPS is not a business in need of a business model.  The Postal Service is a federal agency acting as a hybrid of businesslike operations and government-mandated public services that are mostly free of charge to the beneficiaries.

PMG DeJoy hinted at the gap when he said that USPS performs $80 billion worth of services, but only charges $70 billion for them.  He teased some of the likely items on the list to close the gap, such as returning to his efficiency initiatives of this summer and adding promising new revenue streams.

DeJoy also repeated his distain for the Postal Regulatory Commission taking four years to do the ten-year review, and reiterated his need to charge captive customers more than inflation.  Of course, DeJoy was rewarded by the PRC shortly after his remarks.  In this case, DeJoy was again following the Potter playbook from 2010: “Ensure that prices of Market Dominant products can be based on the demand for each individual product and its costs, rather than capping prices for every class at the rate of inflation.”  How a monopoly government agency with rapidly falling demand for mail will price to demand remains a mystery.

PMG DeJoy hinted at rolling out a 5-to-10-year strategic plan within 30 to 60 days.  He clearly has been advised that there will be opposition to many of the items on the list, and so is being careful about when and how it is revealed.  Based on the very high-level preview, we are expecting that when we see the new plan it will be the same as the old plan, perhaps with a few more audacious attempts at the same categories.  For example, removing collection boxes and sorting equipment at a faster pace than before.

Nonprofit mailers should be reminded that a Washington Post article purporting to be privy to the developing strategic plan said that DeJoy is considering “curbing discounts for nonprofits,” which would require Congress to change the longstanding law.