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REMAKING ITS IMAGE

The mail carrier is facing tough times with public dependence on e-mail and rising personnel costs

The Washington Post

WASHINGTON ' There are, in many ways, two U.S. Postal Services.

There is the one that people love to hate, especially after a hike in rates such as last week's two-penny jump. This is the Postal Service that made Mark Tornga, 24, hold his head in disbelief as he walked out of a downtown post office at 4:30 one afternoon last week. Fifty-two minutes I spent in line ' 52 minutes! he fulminated after sending a certified letter for his employer, a public relations firm.

Then there is the Postal Service that has made huge strides in on-time delivery, runs one of the most impressively automated operations in the world and, for now, is bringing in a huge profit. This is the Postal Service that customers such as Tornga don't see, and take for granted ' the one that moves 580 million pieces of mail a day with remarkable speed and accuracy to every address in the nation, six days a week.

The first Postal Service is the one that executives are trying to fix, the one with the bad rap, the one that delivers mail late, the one that drives people crazy with its long lines and sold-out 2-cent stamps.

The other Postal Service is the one they are trying to save.

— Am I optimistic or pessimistic? I'd have to say I'm anxious, said John Nolan, who retired last year as deputy postmaster general and now works as a consultant.

The structural problems facing the Postal Service are monumental. Despite a tiny uptick last year, first-class mail volume is slowly but steadily eroding as people pay more bills online, send Evites instead of printed invitations and type e-mails rather than write letters.

The agency also is facing massive and escalating personnel costs, especially for health care, even as it has embraced automation and reduced staffing needs.

Without making some hard decisions ' and revisions ' in the near term, Nolan and others say, the Postal Service is on a crash course with cataclysmic change.

What kind of change and when is unclear. Privatization? Shuttered post offices? Dramatically more expensive mail? Less frequent delivery? It could be any of those things ' or none of them. It just depends on how things go.

And this is when people start thinking about the third Postal Service ' the one that delivers possibility six days a week ' a letter from an old friend, a tax refund or an acceptance from the admissions office. This is the post office that brings us the letter carriers we admire, who avoid dogs and leave footprints in pristine snow. It gives the tiniest towns their own proud postmarks. It's the post office that found you even when the address under your name was so incredibly incorrect it was laughable.

This is the Postal Service that no one wants to lose.

At its most basic level, the Postal Service needs to keep as many customers as it can, and a good place to start is by tackling its legendary customer-service problems. Although users of many rural and suburban post offices rarely see the kinds of hassles that are routine in urban locations, city dwellers are familiar with the maddening pace of two clerks plodding through a 20-person line.

At these especially busy locations, the agency is trying to keep wait times down by rescheduling staff lunch breaks, once routinely taken during the midday rush, and splitting some shifts in two. Individual postmasters are tracked based on such performance criteria, too, with independently measured wait times at individual offices factored into pay and promotions at the end of every year.

Unfortunately, we know, looking at the numbers, we do have pockets of problems, said Tom Day, senior vice president of government relations for the Postal Service. But the good news is we're aware of it; we do hold people accountable. That's where we really force the issue of restaffing and rescheduling.

With 38,000 retail offices nationwide, this effort is notoriously slow going.

Day said that in rush periods, the branch manager should be out in the lobby, sorting customers' needs in line and helping where possible. On the other hand, union rules prohibit managers from opening an empty clerk station and serving customers.

William Burrus, president of the American Postal Workers Union, said the Postal Service has institutionalized long wait times by cutting staff sizes, following the model of the private-sector retail industry.

They could provide a two-minute wait max, if they wanted to, Burrus said. But they don't want to because they know the American public will accept a delay. They've become accustomed to it.

One area where Day and Burrus agree is in the way Americans view postal employees. Surveys show that most of them hold postal workers in high regard.

In the meantime, postal officials keep coming up with ways to keep people ' happily ' out of the post office.

There are the post office's retail partners, grocers in particular, that sell books of stamps, which has become one of the most common ways people buy stamps.

There's the almost-four-year-old Click-N-Ship service: Go online and find out the rates, print the postage at home, then schedule a free pickup. The problem has been getting out the word that Click-N-Ship even exists, in a world where many small-volume mailers now reflexively call United Parcel Service or FedEx.

There is, in the younger generation, a sense that the Postal Service is out of date, slow and all the rest, he said. So reaching them and letting them know that we do provide online services that are useful, customer friendly and timely is a challenge.

Computer-generation technology has also reached 2,000 postal offices nationwide in the form of new Automated Postal Centers, which can do many of the things people stand in line for: dispense stamp sheets, sell postage in any denomination, look up rates and Zip codes, provide certified mail receipts, and so on.

I'm sure my mother would struggle with it, but people who are comfortable with computer technology, after just a few basic tips, they understand how to use it, Day said.

And for the lower-tech among its customers, post offices now give out nifty cardboard scales that measure how much postage you need for a letter.

To encourage people to use the mail more, the post office has been aggressively advertising some of its newer services on television. It is even getting downright touchy-feely. In another effort borrowed from Madison Avenue, it's giving people what they love: babies and animals.

The Postal Service is in the midst of a second test of PhotoStamps, which let consumers put their own cute pictures on commemorative-size stamps they can order online. It was the brainchild of Stamps.com, which has long had a contract with the Post Office to sell postage online.

To their credit, they went along with it, said company president and chief executive Ken McBride, who deems the test a success. From May to September, customers bought 3.5 million PhotoStamps, he said, featuring adorable kids, bouncy puppies and romantic moments.

We believe a lot of this is new revenue, McBride said. Customers are using PhotoStamps and coming back from electronic means of communication. They're excited about it, so they're sending real invitations rather than electronic invitations, personal letters instead of e-mail.

Behind the scenes at the Postal Service lie both its best and worst stories.

Since 2000, the agency has gone through an astonishing makeover of automation and efficiency; reducing staffing by 100,000 to just over 700,000, all through attrition; while delivering more mail to more delivery points. Last year, the post office took roughly 212 billion pieces of mail to 144 million addresses, 2 million more delivery points than in 2004.

What postal officials find most gratifying is that on-time delivery has improved, too: Today, 96 percent of mail is delivered on time to the Zip codes that should only take only one day for delivery. Eight years ago, that figure was 92 percent, Day said.

Businesses and other big-volume mailers are bar-coding mail so it can be processed faster and automatically. New optical readers can decipher all but the worst handwriting on envelopes.

And last year was a particularly good year, with mail volume up, and even first-class mail rising one-tenth of a percent. But these results belie an underlying erosion in the most important type of the Postal Service's business.

About two years ago, first-class mail fell below the 50 percent threshold of mail volume for the first time. It now accounts for about 46 percent of all mail, while direct-mail marketing items represent 49 percent. The rest is packages. The package-delivery business is so dominated by UPS and FedEx that the Postal Service now partners with these private carriers along parts of the delivery chain. The theory is that it's cost-effective for both if only one delivery person has to walk up to a house. There are even FedEx boxes in some post offices.

The decline in first-class mail is partly because people are writing fewer letters, but it's also closely tied to the banking industry. The more people pay bills online, the more money banks save, so they're making it easier to do. Financial remittances represent about &

36;17 billion of the Postal Service's &

36;70 billion operating revenue, so it's a big chunk to lose.

My concern would be ... there comes a tipping point in the financial services industry where the balance goes so heavily towards electronic means of communication for bills and bill payment that they may get more aggressive in providing incentives to customers to get them out of the mail, Day said.

To deal with the expected decline in revenue, the Postal Service needs to raise money in other ways and cut costs, and that means several looming battles, Day said. Rates will likely rise again for first-class stamps and for direct mail, perhaps as early as next year, he said.

Later this year, the agency will also begin renegotiating contracts with four major unions in hope of winning concessions on some high-cost benefits such as health care. Union leaders are ready for a fierce fight.

The employees that I represent, they should be rewarded for a job well done, Burrus said. All of the savings (the Postal Service has) achieved came on the backs of the employees I represent.

For all the dire predictions mail-industry experts make about the Postal Service, though, there remains an underlying feeling that somehow it will get worked out. It's like this: You just can't let the post office ' the one we feel so connected to ' go away.

Because there's such power in mail,' Nolan said, I have to believe that people looking at it intelligently will find the right answer before it's too late.