July 26, 2016

USPS is a unique agency

Lack of oversight could be hurting the quality of USPS strategy. The USPS is a government agency that has been granted a legal monopoly over the carriage of mail. It also is a rare government agency that collects its own user fees for the services it provides. It does not depend on appropriations from Congress. The Postal Service has been told to operate like a business.

Given its unique status, an important question is whose interests is the leadership of the USPS supposed to advance. Postal leadership doesn’t represent or work for the type of owners or shareholders that characterize private sector businesses. It doesn’t have a share price or enterprise value to maximize.

As it has been granted monopoly power, USPS does not operate under the famous dictum of Sam Walton: “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

Who are the customers?

And who are the “customers” anyway? Are they the over 3 million businesses and 1.5 million nonprofit organizations that pay about 90 percent of the user fees, or postage, that the USPS depends on? Are they the 125 million U.S households that typically spend minimal amounts of postage and but care very much about the free delivery of the mail they receive six days a week?

The USPS Board of Governors is supposed to help sort out and prioritize the diverse interests is , described by the Postal Service:

“The Board of Governors of the U.S. Postal Service is comparable to a board of directors of a private corporation. The Board includes nine governors who are appointed by the president with the advice and consent of the Senate…The Board directs the exercise of the powers of the Postal Service, directs and controls its expenditures, reviews its practices, conducts long-range planning and sets policies on all postal matters. The Board takes up matters such as service standards and capital investments. It also approves officer compensation.”

Leadership is lacking

But for a couple of years now, the US Senate has forced the USPS Board of Governors to dwindle to only three members, one independent Presidential appointee, James H. Bilbray, and the Postmaster General, Megan J. Brennan, and the Deputy Postmaster General, Ronald A. Stroman.

The PMG and DPMG are selected as follows:

“The nine governors select the postmaster general, who becomes a member of the Board, and those 10 select the deputy postmaster general, who also serves on the Board. The postmaster general serves at the pleasure of the governors for an indefinite term. The deputy postmaster general serves at the pleasure of the governors and the postmaster general.”

Given the complicated set of interests the USPS must reflect and represent, and the fact that it is a $70 billion operation that all of America relies upon, and the fact that it has a government monopoly, the current degree of oversight and leadership is surely not enough. One Governor oversees the PMG , and one Governor and the PMG manage the DPMG. Governor Bilbray is the chairman of the Board of Governors and PMG Brennan is the vice chairman. How can the USPS operate without the equivalent of a board of directors of a private corporation?

How does lack of oversight affect strategy? Have USPS management interests been aligned with those of its paying customers in recent years? How long can a misalignment between management and customers persist? Does the USPS’ reform wish list match its customers’? If they could, would USPS customers follow Sam Walton’s advice?