The USPS’ Radical Plan
Postmaster General William Henderson once bragged to Harry Quadracci, the founder of Quad/Graphics, that the U.S. Postal Service had increased its productivity by 6 percent in the previous decade.
That's nothing, Quadracci responded, Quad achieved a 6 percent productivity improvement every year.
I don't think Harry Q was exaggerating. While the U.S. Postal Service whines about its annual rate increases being too small, publication printers like Quad have been enduring price reductions of roughly 3 percent or more per year for more than a decade, not to mention declining demand and inflationary pressures. They've had to improve productivity constantly just to survive.
Now it's the postal service's turn to try real productivity improvement. Facing multi-billion-dollar losses and declining demand, postal officials in August released a radical plan to downsize the workforce by about 30 percent in four years. After factoring in a switch to five-day delivery and adjusting for declining volumes, the USPS would need to achieve productivity improvements of—guess what?—about 6 percent annually during those four years if it is to get by with such a drastic reduction in the number of employees.
The reaction from publishers and other mail-dependent industries can generally be summarized as, "It's about time!"
"The postal service, like all industries, will have to continue to find ways to do more with less," Ellen Levine of Hearst Magazines recently told a Congressional hearing. "Magazine production has been revolutionized over the past years and decades, from the days of glue and line-by-line layout to the high-tech digital world in which we now operate. If our magazines were being produced today the way they were when they were launched, we'd probably be out of business."
The Problems With "The Plan"
Quite true. But be careful what you wish for. If the postal service tries to carry out its plan, publishers are likely to be unhappy with the chaos that results.
Yes, the postal service is ripe for restructuring and cost reductions. In theory, the plan would keep the postal service solvent. But in reality, the proposal is overly optimistic regarding what the agency can achieve in a relatively short time.
Consider this cautionary statement from none other than Quad/Graphics in its latest quarterly earnings report, which refers to "decreased labor productivity associated with integration and restructuring activities related to hiring and training additional employees to prepare certain plants to receive transferred volumes from manufacturing facilities that were closed as part of the World Color Press integration."
Radical restructuring can reduce costs, but it's a messy process that causes temporary setbacks and reduced productivity—even for a company like Quad that had an extensive integration plan and is used to ratcheting up productivity. The lesson is doubly true for a generally dysfunctional organization like the postal service, which only in recent years has become religious about being more efficient.
Quad and the other surviving publication printers didn't improve productivity by slashing head counts. They did it through investment—in larger presses, computer-to-plate technology, automated workflows, employee training, and a host of new methods and processes. Head-count reductions didn't cause productivity gains, but instead were made possible by such gains.
Likewise, our industry's paper suppliers have spent money to save money—by upgrading machines (and closing those that were no longer efficient), reducing energy consumption, using less-expensive materials, reducing waste and improving productivity. Otherwise, they would not have been able to survive, considering that the prices they charge are nearly identical to what they were a decade ago, even though input costs continue rising.
Implementing digital technologies and workflows required magazine publishers to make some investments up front, tolerate transition pain, and change organizational structures before the investments paid off.
But investment in the postal service has been almost non-existent the past few years because of its cash crisis. Its plan is unrealistic regarding how quickly changes can be implemented and, so far, has not addressed the investments necessary to fix the underlying causes of the agency's inefficiency.
The plan, for example, would reduce the number of processing and distribution centers from more than 500 to fewer than 200 in the next 12 months. Successfully pulling off such a massive overhaul in one year is a pipe dream even in the unlikely event that Congress doesn't interfere. And it seems likely that some of the remaining facilities would need—heaven forbid—some capital investment to take on the work moved from closed centers.
The postal service has too many inefficient delivery vehicles and too many mechanics—but only because it hasn't had the cash to update its fleet, despite the clearly favorable return on investment.
Almost anyone who works for the USPS will tell you it has too many supervisors and management layers. But it has been unable to invest in the kinds of organizational changes that would enable it to thrive with a simplified structure.
Opportunities do exist for further automation and the use of information technology to streamline operations. But those would take time and money to implement. The postal service's inability to provide accurate estimates of pension benefits to prospective employees is just one example of how difficult it can be to automate USPS processes. Anyone who has dealt with PostalOne! or other balky USPS websites has seen how the agency has struggled to make its IT investments pay off.
And anyone who has stood in line trying to mail a package in mid-December can tell you that the postal service needs a comprehensive overhaul of work methods and employee scheduling, the scale of which would intimidate even the most high-powered consulting firms.
I don't fault postal executives for putting forth such a risky plan. They have been warning for years that Congress' meddling and accounting games were putting the agency on the road to insolvency. On one front, the proposal has succeeded where previous efforts by the agency and mailers' groups had largely failed: The postal service's financial problems and Congress' role in causing them are now front-page news. And the prospect of having to vote on voiding no-layoff clauses in union contracts and allowing an estimated 120,000 postal workers to be sacked has attracted legislators' attention as well.
Given the constraints placed on it, the postal service had been making a lot of the right moves recently to get its house in order. But inaction by Congress and the White House put USPS on the verge of running out of cash. The postal service responded with its only option—what in football is known as a "Hail Mary" play, when a player launches the ball as far as possible in an effort to score final points, usually with very little time left in the half. As any football fan can tell you, such desperate plays rarely work. PE
D. Eadward Tree is the pseudonymous Chief Arborist for Dead Tree Edition (http://deadtreeedition.blogspot.com), recently named by industry commentator Patrick Henry as one of the top 10 blogs for printers and publishers. Mr. Tree is an old print dinosaur who doesn't know his RSS from a hole in the ground, but pay him a few bucks for an article and all of a sudden he thinks he's some kind of new-media pundit.