United States Postal Service Pay-For-Performance Program

1. United States Postal Service Pay-For-Performance Program

2. “ … service in all measured categories reached record levels … a record fifth straight year of positive total factor productivity … eliminated $1.5 billion in costs … significant increases in safety and employee satisfaction …” -- 2004 Annual Report

3. “ A few agencies have pioneered results-oriented performance management. … The real leader is the U.S. Postal Service. … The results of the Postal Service’s variable pay plan have been dramatic.” -- Government Executive Magazine

4. What have we achieved? USPS business model Design foundation Performance evaluation Pay actions FY 2004 results & ratings

15. Business Mission 1970 Postal Reorganization Act (Title 39) Universal service Uniform pricing Break-even over time

16. Mandated Compensation Levels Pay comparability to the private sector Salary cap to cabinet level Federal retirement, unemployment, and injury compensation systems Fund pension obligation for military service

17. Mandated Compensation Process Collective bargaining Moderation in growth of pay Mixed success in pay-for-performance Pay consultations White collar pay-for-performance since 1995 Merit and variable pay programs

20. Postal Reorganization Act of 1970 Sea of red ink in through early 1990s Early 1990s - operational metrics 1992 PMG Runyon – change & focus 1995 market study / pay talks 3 PMGs since 1995 maintained commitment to pay-for-performance 2001 Transformation Plan

21. Starting point is extensive balanced scorecard of metrics Metrics must be objective, measurable & independently verifiable Program must drive continuous improvement year-to-year Success is linked from corporate to unit to individual objectives

26. 15-Point Evaluation System

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35. Target Functional Averages

37. 15-Point Evaluation System

38. Non-Executive Pay Actions

42. 26 grades with minimums & maximums Length of range is about 50% No steps No locality pay premiums One annual salary increase based on performance (Pay-For-Performance Program)

43. One of the most reliable measures of what’s happening in the private sector with pay is the Bureau of Labor Statistics Employment Cost Index. It shows that private sector wages are now increasing at less than 3% per year. One of the most reliable measures of what’s happening in the private sector with pay is the Bureau of Labor Statistics Employment Cost Index. It shows that private sector wages are now increasing at less than 3% per year.

51. 280 engineers and executives Part of HQ process for performance evaluations FY 2004 Engineering ratings average higher than national average Important role of function in productivity of USPS (automation) Important role of function in safety and health of USPS customers and employees (anthrax)

52. Engineering response to PFP positive: Greater focus on productivity Encouraged cooperation between functions Higher number of higher ratings & pay Engineering concerns: Goal setting process needs to be earlier Comparison of ratings not always healthy Need for greater objectivity in goals Focus on short-term results over long-term