Thinking out of the P.O. box

USPS needs to be “corporatized” By Gene Del Polito People and businesses expect infrastructure services to work, and they’re right to expect this. When you hit the light switch, you shouldn’t have to wonder if the lights will come on. And when a marketer or publisher gives mail to the Postal Service for delivery in three days, it shouldn’t have to wonder if delivery will be made on time or at all. The trouble is the U.S. Postal Service is functioning in less than the utility-like manner that modern businesses need in today’s Internet age. So what’s the problem here? The answer is very simple. The Postal Service,
while charged to provide an essential business service, was never structured, or ever intended by Congress, to be a “business.” It is, and always has been, an agency of the federal government, operated by a government bureaucracy under a law (the Postal Reorganization Act) that was intended to insulate the Postal Service from competition. The world in which the Postal Service exists, however, has changed dramatically since the time of its creation (out of the old Post Office Department) more than three decades ago. Like it or not, law or no law, the U.S. Postal Service must function within a truly competitive market.
Competitors such as United Parcel Service, FedEx, foreign posts and a
dizzying array of electronic communication technologies now provide
customers with options that Congress did not foresee. Competitive businesses are driven by the need to maximize their gains and minimize their costs. These motivating forces are totally absent in the Postal Service. The present postal law prohibits it from operating as a profit-making business, so there are no incentives to maximize gains. The law directs the Postal Service to raise its prices when its costs go up, so there is no incentive to minimize its costs. In short, the incentives that underlie today’s Postal Service are exactly the opposite of what’s needed to survive in a competitive market. The Postal Service is in desperate need of significant legislative reform.
At the very least, any reform measure must redirect the incentives that
drive the behaviors of those who are charged with providing our mail
services. There are many ways by which this can be accomplished. The most logical is by transforming the Postal Service into a true stock corporation-whose stock not only could be held (or redeemed) by the U.S. government but also
by employees of the corporation and the general public. Such an entity no
longer would be operated on a break-even basis, but would be expected to
be a profit-making (and cost-minimizing) enterprise. It would be required
to operate under the same rules governing all other corporations. It would
be subject to antitrust rules, and its services would be sufficiently
“de-monopolized” to encourage competitive entry while still preserving
the nation’s need for universal mail service. Corporatization, however, is only one such incentive-redirecting alternative. There are others. If Congress behaves as Congress usually does, the alternative that ultimately gets selected probably will be the one that better reflects the expedience that goes into most of our lawmaking. The important thing to keep in mind is that mail is now and will remain for some time to come an indispensable part of the American economic infrastructure and the marketing communications system. Think of the
weeping and gnashing of teeth that accompanied United Parcel Service’s
10-day strike of a few years ago. Then think of what business life would be like without a Postal Service. I realize there are some within the marketing world who disdain the very thought of being called “mailers.” Rather, they would prefer to fashion themselves as “advertising executives,” “direct marketers” or “direct merchants.” But if any part of a business depends on the existence of a reliable, cost-efficient and universal mail system, guess what? You’re in the mail busin