Chapter 6: Aligning People with Progress: Building a 21st Century Postal Service Workforce

Chapter 6: Aligning People with Progress: Building a 21st Century Postal Service Workforce Source: Postal Commission Final Report on USPS

Table of Contents

• Introduction
• Background
• The Postal Service Pays More than 76% of its Revenues to Employees
• Improve, Rather than Overhaul, Tools Available to Manage Workforce
• Toward More Constructive Collective Bargaining
• A New, Time-Sensitive Approach to Arbitration
• Making the Collective Bargaining Process Work Better
• Comparability Must Cover Total Compensation
• Compensation Premium Debate Requires Independent Resolution
• Comparability Analysis Should Bind Labor Negotiations
• Addressing Significant Retiree Benefit Obligations
• Postal Service Owes the Public Complete Transparency
• Taxpayers, Not Ratepayers, Should Finance Military Pensions
• Building an Incentive-Based Culture of Excellence
• Reducing Grievances
• Pay-for-Performance Incentives
• Executive Compensation
• Rein in Workers’ Compensation Liabilities
• Management Ranks Need to be Thinned, Too
• Conclusion
• Chapter 6 Recommendations*

• Dissenting Statement of Commission Report by Commissioner Norman Seabrook

Rein in Workers’ Compensation Liabilities

The 1970 Act requires Postal Service employees—like all Federal employees—to be covered by FECA, which authorizes the Federal workers’ compensation program. Under FECA, the Postal Service has maintained a broad and effective workers’ compensation program and recent efforts have lowered injury rates considerably. Since Fiscal Year 2000, the Postal Service has linked management compensation to improved worker safety. During this period, the Postal Service has seen annual improvements in safety, as measured by the Occupational Safety and Health Administration’s Injury Illness Frequency Rates. The Postal Service has also recently initiated an Ergonomic Strategic Partnership with OSHA, the American Postal Workers Union, and the National Postal Mail Handlers Union to reduce the number of musculoskeletal disorders, which account for more than 40% of workplace injuries and illnesses. The Commission applauds these efforts at making the Postal Service a safer workplace and urges the Postal Service to continue to make worker safety a top priority.

Unfortunately, the application of FECA to the Postal Service has led to some costly and unintended consequences, most notably a $6.5 billion unfunded liability.25 Unlike most workers’ compensation plans governing the private sector, FECA imposes no waiting period before benefits begin. Employees with dependents are eligible for 75% of their pay, rather than the standard 66 2/3%. There is also no maximum dollar cap on FECA payments. As a result, particularly when employees are receiving the 75% benefit, they often do not opt to retire, staying permanently on the more generous workers’ compensation rolls. Exhibit 6-7 illustrates the difference in take-home pay for an employee receiving a CSRS-based pension benefit versus the samde employee receiving workers’ compensation benefits.

The Commission believes that the Postal Service, given its unique businesslike charter, should be provided relief from those provisions of FECA that are creating costly unintended consequences. Specifically, the Commission recommends that the Postal Service be permitted to:

• Impose a three-day waiting period before benefits begin;

• Limit benefits to two-thirds of an employee’s pay; and

• Transition workers’ compensation recipients to the appropriate retirement program when they become eligible for retirement.

Similar measures are fairly standard practice in the private sector. They are aimed at controlling costs while providing adequate coverage to employees. Given the Postal Service’s current $6.5 billion unfunded workers’ compensation liability and its businesslike, break-even mandate, taking actions similar to those that would be taken in the private sector seems appropriate. return to Table of contents

Management Ranks Need to be Thinned, Too

Today, the Postal Service management follows a "command-and-control" approach with significant policy and operational decisions made at Headquarters, under the offices of the Postmaster General and the Chief Operating Officer. These decisions are then disseminated throughout the managerial hierarchy, including Area Vice Presidents, District Managers, Managers of Post Office Operations, and Postmasters (Exhibit 6-8).

While the Postal Service’s management structure is generally sound, there is always room for substantial improvement in an organization of the Postal Service’s size and nationwide reach. It is critical, for example, that communication of strategy and goals not get lost along the way from senior managers to represented employees. The Postal Service must also continually focus on removing layers of managerial bureaucracy with an eye toward simplicity and downward delegation. Removing layers of management and resting authority in lower level managers will free senior executives to focus on higher level strategy and goal-setting.

The Commission believes that the Postal Service’s network rationalization effort,already underway, provides a unique opportunity for the Postal Service to examine and realign its management structure at the same time it is working to realign its physical infrastructure and represented workforce. The Commission encourages the Postal Service to use this opportunity to examine every management position and managerial layer to determine how it fits into the larger organization and whether it aids in the fulfillment of the Postal Service’s overall mission. As part of the effort, the Postal Service should conduct a review of the entire management structure, size, and cost to determine whether each component necessary and consistent with the best practices of the private sector and to require managers to justify their functions and the size of their respective staffs.

The Postal Service, for example, recently announced the consolidation of the administrative functions in five of its 85 districts, thereby reducing the total number of districts to 80.26 Is further consolidation possible? Does every district need to be headed by a single executive? Does the Postal Service have the appropriate number of areas and districts? These are the questions that Postal Service management must continually ask itself as it seeks to remove bureaucratic redundancies.

The Commission also believes that the Postal Service would benefit from greater consistency and standardization throughout its management ranks. To optimize efficiency, promote transparency, and improve communication across the organization, it is important that each managerial role be clearly articulated and standardized.

While flexibility is important to foster a healthy work environment, it is vital that functions and roles be identical regardless of geography. Much like represented employees moving between plants, a Manager of Post Office Operations in Boston, for instance, should be able to replace seamlessly a Manager of Post Office Operations in San Francisco.

Finally, as with its workforce in general, the Postal Service will see large numbers of its managerial employees become eligible for retirement within the next few years–fully 55% of officers and executives will be eligible in 2006 compared with 26% in 2002. While this provides an opportunity for the Postal Service to simplify its management structure and remove redundant positions and unnecessary layers, it also presents the risk that the Postal Service may lose key personnel.

The Commission believes the development of a succession plan for key management positions throughout the organization must be an ongoing priority of the Board of Directors. return to Table of contents