DOCKET SECTION
BEFORE THE
POSTAL RATE COMMlsSl~N~
WASHINGTON, D.C. 20268-0001
POSTAL RATE AND FEE CHANGES, 1997
i
Docket No. R97-1
REBUTI-AL TESTIMONY OF
JON M. STEELE
ON BEHALF OF
UNITED STATES POSTAL SERVICE
TABLE OF CONTENTS
I. AUTOBIGRAPHICAL
II. PURPOSE
SKETCH .. ..._.................................................................
OF TESTIMONY
Ill. AUTOMATION
_______._.........,........................................................
IMPLEMENTATION
A. ‘Automation
Refugee”
is not a Familiar Concept in Postal Operations.4
Implementation
Staff Reductions
due to Automation..4
Avoided Creating Excess Career
Employees _____._.._........_.........................................................................
IV INCENTIVES
3
DID NOT CREATE REFUGEES............4
B. Postal Planning Accommodated
C. Automation
1
AND ACCOUNTABILITY
ENCOURAGE
5
STAFFING
ECONOMY .. . . .. . .. .. .. . .. . .. . . .. . .. . .. . . .. . .. . .. .. .. .. . .. . . .. . . .. .. . .. . .. . .. .. . .. .. . . . . .. . . . .. . . .. . . .. . . .. . .. . .. . . .. . 5
A. Incentives Encourage
B. Accountability
Staffing Economy. . . .. .. .
Encourages
C. The Incentives
D. Line Supervisors
.. . . . . . .. . .. . . .
.. .. . . -5
Staffing Economy . . .. .. . . . . . . .. . . .. . .. . . . .. . .. . .. . . .. . .6
Extend onto the Plant Floor .. .. .. . .._................................
Get the Mail Out, but do it Economically
9
. .. . . .. . . .. . .. . . .10
1. AUTOBIGRAPHICAL
SKETCH
My name is Jon M. Steele, Vice President,
Area Operations
Northeast Area of the United States Postal Service.
management
of nine performance
operating
11
manage through
12
and area oftice executives.
13
career and non-career.
They range
clusters in New England.
In
Bulk Mail Center, the major Airport Mail Center
in Boston, fifteen major processing
10
My duties include the direct
clusters located in the Northeast.
from Buffalo and Albany, NY to seven performance
total this includes the Springfield
for the
plants and 2,632 Post Offices.
Our annual
budget is $4.08 Billion, and our annual revenues are $4.5 Billion.
an executive staff of district managers,
I
lead plarlt managers,
They in turn oversee some 75,456 employees,
both
14
15
Immediately
prior to my assignment
to the Northeast Area in August,
16
1996, I served as Vice President, Area Operations,
17
area includes several major metropolitan
1x
over thirty Processing
19
Mail facilities covering Ohio, Pennsylvania,
20
and West Virginia.
for the Allegheny
Area.
This
areas with numerous Post Offices and
and Distribution facilities, Bulk Mail Centers, and Airport
Delaware,
and parts o,f New Jersey
21
22
I joined the Postal Service in 1962 as a craft employee while supporting
23
myself in college.
I interrupted
my career for service in the United States Navy,
24
and joined the Post Office Department,
Boston Regional Office in 1970.
I have
1
spent my entire postal career in field operations,
2
years of that time as a Postmaster,
having served approximately
17
MSC Manager and Division Manager.
3
4
For twelve years I served in Springfield,
s ; manager of the Management
Sectional Center.
MA as the Division Manager
and
My duties included all operations
6
for western Massachusetts
and Vermont with over 400 associate offices, plants
7
in both states and the Bulk Mail Center at Springfield.
8
combined
I directly
managed
the
Bulk Mail Center and plant in Springfield.
9
10
I served as the General Manager in the New Jersey Bulk and international
11
Mail Facility for nearly a year in the 1980’s.
I’ve held a variety of positions
12
District and Area Offices, and have worked extensively
13
locations across the nation.
14
Massachusetts.
15
Program and have done graduate work in Business Administration.
on detail in a variety of
I hold a bachelors degree from the Uliiversity
In addition, I graduated
from the Harvard Advance
2
in
of
Management
1
2
II. PURPOSE
OF TESTIMONY
3
4
My testimony
5 i concerning
responds to testimony of witness Stralberg
“automation
and others
refugees”. Specifically, witness Stralberg ialleges “the
6
existence of considerable
additional ‘not-handling’
7
refugees,’
no longer needed in manual letter sorting but still in the
8
system, having been reassigned to the manual operations,
9
units, where productivity
IO’
i.e. employees
time in the fomr of ‘automation
particu~larly opening
is least monitored in postal facilities.”
In part Ill, I describe how this concept is entirely foreign to postal operations.
11
Automation
implementation
12
recognized
from the beginning that automation
13
requirements
14,
ensured that we would avoid having excess career employees.
15
did not create refugees.
in manual distribution operations
Postal Management
would reduce staffing
and our automation
In part IV, I describe the incentive structure in operations
16
particular,
I describe
17
operations
management,
18
supervisor,
has every incentive to avoid excess staffing.
19
accountability
20
Tr. 26/l 3841.
planning
management.
how I manage operations in the Northeast
A,rea so that
from the plant manager to the most junior line
The system of
and incentives is such that there is nowhere to hide hours.
In
1
2
III. AUTOMATION
IMPLEMENTATION
DID NOT CREATE REFUGEES
3
d
A. “Automation
Refugee”
is not a Familiar Concept in Postal Operations
5
6
My managers
and I are well aware of the mailing community’s
concern
7
with postal costs, and the special concern of periodical mailers that their
8
costs appear to be increasing more rapidly than they should be. Until asked
9
to testify in this proceeding,
refugee”.
however,
I had never heard the expression
10
“automation
Indeed, when my managers and I are listening to our
11
customers
12
strikes me as absurd to suggest that there is a pool of excess employees
13
are not needed to process the mail. Certainly, veteran managers
14
stories of the early days of automation
15
exactly how to manage this new technology
16
engendered,
17
of “automation
18
operations
and struggling
so hard to maintain service while reducing costs,
it
that
can tell
in the 1980s when we weren’t sure
and the complex mail flows it
but I am not aware of anything resembling a systemic problem
refugees” even then.
management
In any case, by 1990 at the latest,
had a clear picture of what needed to be done.
19
20
B. Postal Planning Accommodated
Staff Reductions
due to Automation
21
22
23
In the early 1990s the Postal Service negotiated
with the Postal Unions governing Transitional
a series of agreements
Employees.
As Article 7 of the
1
agreement
2
88):
3
with the American
“Transitional
employees
4
are due to be eliminated
5 i
employees
6
becomes operationally
7
Postal Workers
Union states (sele USPS LR-H-
may be used to cover duty assi,gnments
by automation........The
will be phased out as the deployed
which
use of transitional
automation
equipment
proficient.”
That was our plan.
8
9
C. Automation
Implementation
Avoided Creating Excess Career Employees
10
11
The history of the Transitional
Employee program demonstrates
12
fact accomplished
our plan. I am told that the use of Transitional
13
for clerk and maintenance
14
1993 and June, 1995, with approximately
15
national total is about 500 in the plants.’
work in the plants peaked between
that we in
Employees
IDecember,
22,000 on the rolls. The current
16
17
IV INCENTIVES
AND ACCOUNTABILITY
ENCOURAGE
ECONOMY
18
19
A. Incentives Encourage
Staffing Economy
20
21
As shown in Exhibit USPS-RTdA,
employees
“FY 98 EVA Variable
Pay Program
22
Recommendations”,
exempt from the wage and hour laws receive
23
incentive payments based in equal parts on service performance,
personnel
1
incentive payments
2
metrics, and financial performance.
3
performance
4
based in equal parts on service performance,
determines
In addition, national financial
the size of the overall incentive payment pool.
The Postal Service is divided into geographic
areas called F’erformance
5
Clusters so that the performance
6
plants within each area can be measured collectively.
I
Cluster employees,
of the Post Offices and mail processing
8
50% on national performance,
9
the achievement
the financial performance
For Performance
portion of their score is based
25% on their Area performance,
of their Performance
facilities
personnel
Cluster.
10
Distribution
11
among the 85 Performance
12
facility perceives
13
facility and their personal financial interests.
and 25% on
The 257 Processing
where most mail processing
and
occurs are distributed
Clusters so that a manager or supervisor at a
a direct relation between the financial performance
of their
14
15
B. Accountability
Encourages
Staffing Economy
16
17
The idea that one of my plant mangers might be hiding a pool of
18
“automation
refugees”
is not realistic.
Let me explain the pressure they are
19
under to maintain good service and still operate economically.
20
review any delayed mail from the previous night and pay special attention to
21
any delayed periodicals.
Daily, we
If a plant manager had excess employees,
’ These numbers exclude Remote Encoding Centers.
6
she
1
Every Monday afternoon,
I have a telephone
2
and plant managers
3
week.
4
is a full scale Business Review.
5 i
is management
6
complement,
7
and maintaining
8
9
conference
to review the raw performance
Each Accounting
with my District
data from the previous
Period we meet physically and once a Quarter there
of resources
maximizing
The common element in all of these reviews
with emphasis on reducing the career
effective use of the least costly labor categories,
service.
It may be useful to describe these meetings in greater detail.
Monday afternoon
the staff, the performance
conference
Each
clusters and myself hold a
10
telephone
to discuss the past week’s performance.
11
concerns
12
benefits, employee
13
other voices, that is the voice of the customer - service, and the voice of
14
employee
15
these telephone
16
we need to do to improve in the coming weeks, and what the olutlook is for
17
the rest of the year.
center on total operating
mix, overtime,
expenses,
conferences
especially salaries and
and revenue.
- training, safety, complement
Key
Additionally
management
we discuss the
etc. The focus of
is on how we did in the past seven days, what
18
19
Each accounting
period, that is every four weeks, the lead F’lant
20
Managers,
District Managers,
the Area Staff and myself meet for two days,
21
typically here at the Area Office in Windsor.
22
did, but now over the past 4 weeks and year to date, emphasizilng
23
in performance
We again focus on how well we
and areas where there is room for improvement.
any gaps
We have
hard data available for these meetings and focus on our net income, salaries
and benefits, total operating
have an opportunity
expense, total facility productivity,
etc. We also
to look at economic value added (EVA) with an eye to as
how best to improve performance
in all categories.
Additionally
significant time on the voice of the customer, particularly
6
voice of the employee,
7
management.
we spend
service, and the
especially safety, training and complement
8
9
At our quarterly Business Review meetings we meet with the Lead Plant
10
Managers,
the District Managers
and their direct reports in each Performance
11
Cluster.
12
of a day and we discuss all the above in detail , especially total facility
13
productivities,
14
to be successful for the rest of the year and how best to service our
15
customers.
These are intense and detailed discussions
16
adjustments
to plans and assumptions.
17
apparent
18
discussions.
19
between
The meetings with each Performance
complement
Cluster typically last about half
trends, what we need to do to position ourselves
Complement
gearecl to mid-course
trends are most
in quarterly data, so complement is always a major eljement of these
My managers
are all sensitive to the significant cost differences
career and non-career
employees.
20
21
22
23
At the conclusion
of the year, we wrap up the fifty-two weeks with a focus
on how well we did, and what we need to improve on for the coming year.
1
The point of this narrative is the common thread of discussion
2
week, to accounting
period, to quarter, to end-of-year
3
utilization of resources
4
outstanding
5
Service has been focus, attention to detail and planning.
service.
- from
- focusing on skillful
and the ability to make our budget while providing
The key to our success in the United States Postal
6
I
C. The Incentives
Extend onto the Plant Floor
8
9
In addition to the competitive aspects, incentive awards can be financially
10
significant to the recipients.
I am told that in FY 1997 every Pe:rfomrance
11
Cluster made their financial goals and that last December the average
12
supervisor
13
account, and 6.67% paid out in cash. Their supervisor,
14
has a larger incentive payment opportunity
15
substantial
had 9.89% of annual salary credited to her incentive payment
encouragement
the Plant Manager,
and, as I explained
to help his supervisors
above,
manage economically.
16
17
D. Line Supervisors
get the Mail Out, but do it Economically
18
19
The Plant Manager and her supervisors
as possible.
Productivity
work to fulfill the Operating
20
productively
in distribution
21
monitored,
22
Opening Units, where there are no effective workload
23
wipe out hard-won
operations
but everyone is aware that excess workhours
gains in distribution
9
productivity.
Plan as
is carefully
in allied operations
productivity
measures,
such as
would
Witness Stralberg describes
I
Opening Units as the “least monitored”.
This is the opposite of the truth.
2
Units are usually in a very visible location where they are easily monitored.
3
Plant Manager and supervisors
4
manager can evaluate the workload based on visual inspection and recognize
5
whether it is operating
6
wouldn’t choose Opening Units as the place to do it.
pass by Opening Units frequently.
efficiently.
If employees
Opening
The
Any experienced
wanted to “hang-out”,
they certainly
I
No Plant Manager knows in advance exactly how much mail his facility must
8
process on a given night, exactly when it will arrive, or precisely how many of his
9
employees
10
will show up for work.
But, supervisors
mail out and still operate economically.
For example, they can:
11
*send employees
12
*call employees
13
*call for voluntary or mandatory
14
*offer annual leave to regular employees
15
*shift employees
16
17
have a number of tools to get the
to lunch early
in early or send part-time employees
and labor agreements
home.
overtime
between operations
as workload
requires and as skills
permit.
All of these decisions must be made quickly on-the-spot
18
information,
but this is what we expect of our supervisors.
19
levels and a strong financial performance
20
the good job they are doing.
IO
with fragmentary
Rec:ord service
over the last three years testify to
EXHIBIT USPS-RT-8A
FY 98 EVA VARIABLE PAY PROGRAM
RECOMMENDATIONS
1.
Compensable
Indicators.
Measures, Taraats and Welohts
(see footnotes be/oow)