oversight

The Results Act: Observations on the Postal Service's Preliminary Performance Plan for Fiscal Year 2000

Published by the Government Accountability Office on 1999-04-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States

GAO   General Accounting Office
      Washington, D.C. 20548

      General Government Division


      B-282374

      April 30, 1999

      The Honorable Richard K. Armey
      Majority Leader
      House of Representatives

      The Honorable Dan Burton
      Chairman, Committee on Government Reform
      House of Representatives

      The Honorable John M. McHugh
      Chairman, Subcommittee on the Postal Service
      Committee on Government Reform
      House of Representatives

      The Honorable Fred Thompson
      Chainnan, Committee on Governmental Affairs
      United States Senate

      Subject: The Results Act: Observations on the Postal Service’s Preliminarv Performance
      Plan for Fiscal Year 2000

      This letter responds to your request to review the Postal Service’s preliminary performance
      plan for fiscal year 2000. Our assessment was generally based on our comparison of the plan
      with the requirements of the Government Performance and Results Act of 1993 (the Results
      Act); our knowledge of the Postal Service’s operations and programs; and our numerous
      reviews of the Service, including our review of the Service’s preliminary performance plan for
      fiscal year 1999.

      Results in Brief
      The Postal Service’s preliminary performance plan for fLscal year 2000 will be useful to
      decisionmakers in that it articulates well the Service’s mission and performance goals and
      provides more measures to track intended performance. , For example, the Service’s %
      preliminary performance plan for fiscal year 2000 includes a discussion of the Service’s
      mission that is consistent with the Service’s 5-year Strategic Plan; goals that respond to key
      challenges and appear balanced and challenging; and continued development of performance
      measures and targets to track intended performance. As the Service develops its final
      performance plan for fiscal year 2000, it could enhance its usefulness by improving the
      linkage between performance goals, strategies, and resources; providing more complete
      baseline data on past performance; and by identifying the top goals for the year covered by
      the plan. For example, we believe that the plan could be more useful to decisionmakers if it


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clearly indicated how the Service’s human capital will contribute to achieving performance
goals, such as those that relate to improving timely mail delivery.

Our review of the Service’s preliminary performance plan for fiscal year 2000 represents our
assessment of a work in progress. Unlike other federal agencies, the Service is not required
to submit its performance plan to the Office of Management and Budget (OMB) and is not
subject to OMB’s Circular A-11, part 2. The Service submitted its plan to Congress in
February 1999 by filing its preliminary performance plan for fiscal year 2000 as part of the
Service’s annual Comprehensive Statement on Postal Operations. The Service’s preliminary
performance plan for fiscal year 2000 is provisional until resources have been allocated and
the Board of Governors adopts the Service’s budget. The Service plans to publish its final
performance plan for fiscal year 2000 by September 30, 1999, after adoption by the Board of
Governors, which is to include final decisions on resource allocations. Figure 1 highlights
major strengths of the Postal Service’s preliminary annual performance plan for fiscal year
2000 and improvements needed as the Service develops its final performance plan for fiscal
year 2000.

Figure 1: Major Strengths of the Postal Service’s Preliminary  Performance   Plan for Fiscal Year 2000 and
Improvements    Needed as the Service Develops its Final Performance    Plan


    Major Strengths of Preliminary Plan
    l Discussion of mission that is consistent with the Service’s 5-year Strategic Plan
    l Goals that respond to key challenges and appear balanced and challenging

    *Continued development of measures to track intended performance

    Improvements Needed for Final Plan
    l Better linkages between performance goals, strategies, and resources
    l More complete baseline data on past performance

    l Identification of the top goals for the year covered by the plan
I



The Postal Service’s preliminary annuaI performance plan for fiscal year 2000 represents
moderate improvement over the Service’s preliminary performance plan for fiscal year 1999,
in that it corrects a number of the weaknesses we identified in our assessment of the
Service’s preliminary plan for fiscal year 1999. We observed that the Service’s preliminary
performance plan for fiscal year 1999 provided a partial picture of the Service’s intended
performance. We said that the Service’s preliminary performance plan for fiscal year 1999
articulated well performance goals for many areas that defined expected performance and
were quantifiable and results-oriented. However, we said that the preliminary plan did not
fully capture the Service’s mission and did not completely discuss the strategies and
resources (i.e., human, capital, information, or other resuurces) that will be needed to
achieve its goals. We made a number of recommendations directed at improving these
weaknesses, and the Service was generally responsive in addressing these recommendations
in its final performance plan for fiscal year 1999. In addition, Service officials said they would
work to improve the Service’s performance plan in future cycles. For example, Service
 officials stated that they would work toward improving linkages between performance goals,
program activities, and budgetary resources, and planned to make adjustments in the budget




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reporting process to capture detail on budgetary resources needed to meet performance
goals.

The Postal Service has continued to strengthen its performance plan. Among improvements
in the Service’s preliminary performance plan for fiscal year 2000 are (1) a more complete
discussion of the Service’s mission that is consistent with its &year Strategic Plan; (2)
restated goals that better respond to key challenges and appear balanced and challenging;
and (3) the development of additional measures and targets to track intended performance.
The Service also has used an assessment of its management system, called CustomerPerfect!,
against the criteria of the Malcolm Baldrige National Quality Award1 to identify opportunities
for improvement. This assessment led the Service to incorporate new goals into its
preliminary performance plan for fiscal year 2000 and to specify new strategies that will be
needed to achieve intended results. For example, the Service revised and expanded the
subgoals relating to the workplace and human capital. The subgoal in last year’s plan to
“Ensure a safe work environment” was revised in the preliminary performance plan for fiscal
year 2000 to “Improve employees safety, security and well-being.” The subgoal to “Enhance
workplace environment to improve relationships with employees” was revised to “Improve
workplace relations by building leadership skills and behaviors.” Further, the subgoal to
“Ensure that employees demonstrate.in the workplace the required proficiencies for their
assigned work” was revised to “Ensure that each and every employee is given the knowledge,
tools, training and encouragement to successfully meet the expectations for their positions.”
Moreover, the Service added subgoals to “Improve understanding of employee issues and
concerns” and “Ensure an inclusive and fair environment with opportunities for all
employees.“’


The Service’s performance plan could be more useful if it further improved the linkage of
major performance goals, the strategies to achieve these goals, and the related resource
commitments-human, capital, information, and other resources. Further, the plan needs to
include more complete baseline data so that readers can gauge the Service’s progress in
achieving its goals. Also, although the Results Act does not specify that performance plans
prioritize goals, the Service’s performance plan could be more useful to stakeholders if it
identified the goals that are of highest priority in the year covered by the plan. This will
enable the Service and stakeholders to engage in a dialogue about past performance and
future goals for areas such as timely mail delivery, improvements in the workplace, and
bottom-line financial performance. Service officials agreed with our observations regarding
improving the Service’s preliminary performance plan for fiscal year 2000 and said they
would respond to them in developing the Service’s final performance plan for fiscal year 2000.




’The Malcolm Baldrige National Quality Award is given annually to recognize U.S. companies for business excellence.

*The Postal Service dropped the subgoal to “Anticipate complement needs and deploy people to meet organizational
requirements.” The Service reported that this subgoal appeared to be a cause of success for other goals, rather than a subgoal
for the workplace environment.




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As we reported on the Service’s draft strategic plan for fmcal years 1998 through 2002,
providing multiple goals is a strength because achieving success on multiple dimensions is
necessary for organizational success.’ We noted concerns that improved delivery of
overnight First-Class Mail had come at the expense of 2-day and 3day First-Class Mail and
said that the Postal Service faces an even more difficult challenge in successfully
implementing the full set of goals and subgoals in its draft strategic plan. These challenges
are not new to the Service. For example, as we testified in 1991, “As the Postal Service moves
to keep costs below inflation over the next several years, the balancing act between
productivity and service could become more difficult but not impossible.“4 We testified that
in a 1988 Postal Service Planning Department paper on productivity measurement, the
Department said “It is possible to achieve simultaneous gains in both productivity and
service, but this requires careful management. Otherwise, gains in one area are likely to
come at the cost of declines in the other.” These issues appear to be relevant today as the
Service’s preliminary performance plan for fscal year 2000 includes subgoals for keeping
price increases below the rate of inflation while improving productivity and service. The
Service’s preliminary performance plan for fiscal year 2000 contains 3 overall goals, 16
subgoals, and about 50 indicators or areas in which indicators are to be developed. The
 Service officials recognized that the Service will be challenged to achieve multiple objectives
in fiscal year 2000, such as improving or maintaining the quality of service, while also
 controlling costs and achieving its targets for net revenues. In this context, the Service
 officials told us that a senior management committee is working to do strategic planning and
 define the key goals that the Service will make its top priorities for the year covered by the
 performance plan.

The Postal Service’s Preliminary Plan Provides a General
Picture of Intended Performance Across the Service
The Postal Service’s preliminary performance plan for fLscaI year 2000 provides a general
picture of intended performance across the Service. The Service’s preliminary performance
plan for fiscal year 2000 is consistent with the intent of the Results Act that annual
performance plans be aligned with a systematic management process that uses results-
oriented goals and strategies as well as performance indicators to measure progress toward
these goals.

The performance goals are results-oriented and appear balanced in addressing the Service’s
three broad corporate goals relating to (1) earning customer business by providing quality
products and services at competitive prices; (2) building an inclusive and welcoming
workplace that fosters success; and (3) achieving financial performance that ensures
viability, competitive pricin,,0 and sufficient cash flow. The Service’s preliminary
performance plan for fiscal year 2000 effectively presents its performance goals, measures,
and targets in a summary table.


‘Th e Resul ts A c t: Observations on thePostal Service ‘s .June 1997 D raft Strategic PIan (GAO/GGD-97-163R,July 31,1997).

’ Organizational Performance of the United States Postal Service (GAO/T-GGD-91-9,March 5,199l).




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In addition, more measures and targets have been developed, which continue the process of
developing a more complete basis for assessing the Service’s performance. For example, the
Service included two additional measures of timely mail delivery and two additional
measures of workplace safety. At the same time, it will be important for the Service to
continue to make tangible progress toward implementing a more complete set of
performance measures and targets. This information is also important to many postal
stakeholders. For example, mailers and postal customers have expressed concern about the
delivery service for advertising mail and periodicals and have said that measures are needed
to track the Service’s performance in these areas. The Service’s preliminary performance
plan for fiscal year 2000 reported that a performance measure for on-time delivery of
advertising mail has been implemented and reported that the Service will develop a similar
measure for periodicals by the end of fiscal year 1999. By adding performance measures in
these areas, the Service and stakeholders will be able to assess the Service’s progress and
discuss targets for future performance. The Service has committed to implement additional
measures and targets in future cycles. In working toward this objective, the Service has said
that it intends to use a phased approach to develop performance measures for all of its
products and services as soon as possible.

The Postal Service’s preliminary performance plan for fiscal year 2000 represents moderate
improvement in addressing the weaknesses that we identified in our assessment of the
Service’s preliminary performance plan for fiscal year 1999 as it relates to providing a clear
picture of intended performance across the Service. We reported in July 1998 that the
Service’s preliminary performance plan for fiscal year 1999 did not fully capture its mission5
We noted that fully articulating the Service’s mission is particularly important in light of the
Results Act’s emphasis on the relationship between the Service’s program activities and its
mission. In response, the Service revised and expanded the discussion of its mission in its
final performance plan for fiscal year 1999.

In the Service’s preliminary performance plan for fiscal year 2000, the Service has restated its
three main corporate goals to better reflect key challenges facing the Service. For example,
the corporate goal in the Service’s final performance plan for fiscal year 1999 relating to
employees was to “Improve employees’and organizational effectiveness by having the right
people in the right place with the right tools at the right time to consistently provide superior
customer value and ensure commercial viability in a dynamic market.” The Service
concluded that this original statement was perceived to reflect the voice of management
more than the voice of all postal employees. The restated goal in the Service’s preliminary
performance plan for fiscal year 2000 is to “Foster an inclusive and welcoming workplace
consistent with Postal Service values of fairness, opportunity, safety, and security: where
everyone is given the tools, training, and encouragement to be successful; and where
everyone is recognized for and takes pride in their participation in customers’ and the Postal
Service’s success.” Enclosure I lists management challenges facing the Service and the
applicable goals and measures in the Service’s preliminary performance plan for fiscal year
2000.


’The Results Act: Observations on the Postal Service’s Preliminarv Annual Performance Plan (GAO/GGD-98-144,July 10,1998).




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The Service’s preliminary performance plan for fiscal year 2000 also includes some actual
performance data that can be used as a baseline to gauge progress toward some goals-
which represents progress compared with the Service’s preliminary performance plan for
fiscal year 1999-but the baseline data are not as complete as they could be. The Service had
agreed with our 1998 recommendation to include baseline data in its performance plans and
began to include such data in its final performance plan for fiscal year 1999. However, in
some areas, such as financial goals and associated measures, the Service’s preliminary
performance plan for fiscal year 2000 still did not include baseline data. Service officials told
us that the Service’s preliminary performance plan for fiscal year 2000 will be revised so that
the Service’s final performance plan for fiscal year 2000 will include baseline data when such
data are available.

The Preliminary Plan Provides a General Discussion of
Strategies and Resources to Achieve Goals
The Postal Service’s preliminary performance plan for fiscal year 2000 provides a general
discussion of strategies and resources that will be used to achieve its performance goals.
Although the Postal Service’s preliminary performance plan for fiscal year 2000 represents
progress compared with the Service’s preliminary performance plan for fiscal year 1999, the
Service could further improve the linkage of its major performance goals, the strategies to
achieve these goals, and the related resource commitments-budgetary, capital, information,
and human resources. The Results Act states that the Service shall prepare an annual
performance plan covering each program activity set forth in the Service’s budget. The
Results Act recognizes that for the Postal Service, a program activity is defined as Uaspecific
activity related to the mission of the Postal Service.”

Although we recognize that developing meaningful linkages between performance goals,
program activities, and budgetary resources is a difficult task, these linkages are incomplete
in the Postal Service’s preliminary performance plan for fiscal year 2000. Service officials
have stated in response to our 1998 report that in the long term they plan to make
adjustments to the Service’s financial systems that would enable them to capture detail on
budgetary resources needed to meet performance goals.” However, Service officials have
said that the Service does not currently have the specific information that would be needed to
estimate budgetary and other resources associated with achievement of each of its goals. The
Postal Service’s budget submission to Congress for fiscal year 2000 included the Service’s
planned obligations in nine general categories that are based on its accounting system-which
in turn has been structured to provide data required to set postal rates. For example, the
largest category of obligations in the Service’s budget submission for fiscal year 2000 was
postal field operations ($44.5 billion), which accounted for most of the Service’s
 compensation costs7 Although these field obligations could generally be related to most of

’ GAOIGGD-98-144.
’The Postal Setice does not depend on federal appropriations for its basic operations. The Service reported $60 billion in
operating revenues in iiscai year 1998, of which $67 million was for some congressionally mandated services, such as free and
reduced rate mail.




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B-282374


the Service’s performance goals, such as providing timely delivery and achieving gains in
labor productivity, information is not readily available on how much of the $44.5 billion is
linked to any specific goal.

In addition, Service officials agreed in response to our 1998 report to include more detail in
the Service’s performance plans to clarify the linkages that connect the Service’s
performance goals with strategies and budgetary resources that will be needed to achieve
targeted improvements.* The Service’s preliminary performance plan for fiscal year 2000
included 10 major programs with planned spending of $1.7 billion in fiscal year 2000, as well
as 10 cost reduction programs with planned spending reductions of $449 million. For
example, the Service’s preliminary performance plan for fiscal year 2000 included a number
of specific programs that are primarily oriented to initiatives involving the Service’s
infrastructure, such as expenses and cost savings related to mail processing equipment, new
retail terminals for window clerks, and infrastructure enhancements for postal facilities.
These types of linkages help decisionmakers to understand how the Service intends to meet
its performance goals, and we encourage the Service to continue developing more specific
linkages between its goals, strategies and programs, and associated budgetary and other
resources.

In addition to better linkages with budgetary resources, we believe that the Postal Service’s
performance plan could be more useful to decisionmakers if it clearly indicated how the
Service’s human capital will be used to achieve performance goals. The Service has nearly
900,000 employees and employee-related costs accounted for 79 percent of its expenses in
fiscal year 1998. The Service’s preliminary performance plan for fiscal year 2000 states that
“If the customer goals require it, the Postal Service is committed to developing appropriate
additional human resources and investing additional financial resources to improve value.” A
more specific discussion could be helpful in this area. For example, the Service could discuss
how the Service’s human capital will contribute to achieving the subgoal of providing timely
delivery. The Service has set a target of on-time performance of 2-day and 3-day First-Class
Mail at the go-percent level, which would represent a’record level of performance.g The
Service has also set on-time performance goals for certain types of advertising mail and
ground packages. In this context, improved linkages between goals, strategies, and resources
in the Service’s performance plan would be consistent with the intent of the Results Act to
provide a better understanding of how budgetary and other resources are used to achieve
performance goals.

 In addition, the Postal Service’s performance plan for fiscal year 2000 could be more useful if
the Service improved the linkage between each of its specific goals that the Service
designates are to be of highest priority in the year covered by the performance plan, the
associated strategies and programs, and the budgetary and other resources that will be
required to achieve these goals. An example of such linkage in the Service’s preliminary


a GAO/GGD-98-144.

’The national performance for 2-day and 3-day First-Class Mail for the first quarter of fiscal year 1999 was 86.6 percent,
according to the Postal Service’s preliminary performance plan for fiscal year 2000.




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performance plan for fLscal year 2000 related to the goals of providing timely delivery
performance and achieving targeted net income; the strategy was to implement delivery
confirmation by providing delivery confirmation information to improve service for all
Priority Mail and Standard B mail (which is primarily parcels and Bound Printed Matter). The
resources specified were $108 million in spending planned for fiscal year 2000. It would be
useful to see this kind of linkage of strategies and resources to each of the goals that the
Service designates as its highest priority for fiscal year 2000. Service officials have told us
that they plan to identify their highest priority goals later this year and include a discussion in
the final plan of the budgetary and other resources that are to be used to help achieve these
goals. The Service’s budgetary resources for fiscal year 2000 are to be finalized by
September, and the Service plans to publish its final performance plan for fiscal year 2000 by
September 30,1999.

The Preliminary Plan Discusses Steps to Ensure the Credibility
of Performance Information
As required by the Results Act, the Postal Service’s preliminary performance plan for fiscal
year 2000 discusses the means to be used to verify and validate measured values. We reported
in 1998 that the Postal Service’s preliminary performance plan for fiscal year 1999 was not
complete in its discussion of how data would be verified and validated.” The Service’s
preliminary performance plan for fiscal year 2000 made progress in addressing this weakness
by adding an overview of systems and processes used or planned for verification and
validation of various performance data. For example, the Service specified, for its residential
and business customer satisfaction surveys, that the contractor who collects the data is
responsible for data verification and data quality checks. In addition, the plan points out that
some of the performance data, such as net income, are included in Postal Service financial
statements that are audited each year by an independent public accounting firm.

In addition to discussing verification and validation in its performance plan, it will be
important for the Postal Service to ensure that performance data are reliable. In January
1998, the Service’s Inspector General designated “data integrity” as one of the 10 most serious
management concerns facing the Service. For example, the Service has acknowledged that
some of its employees attempted to undermine the integrity of the Service’s performance data
on one of its key performance measures-the timeliness of overnight First-Class Mail. In
response, the Service reported that it made changes to prevent manipulation of the data.

The Postal Service’s Inspector General has said that it plans to follow-up on data integrity
issues by providing independent analysis and validation of key data elements and reviewing
the Service’s information management and data processing systems. Consistent with our
practice of avoiding duplication of audit work with the Service’s Inspector General, we have
not assessed the quality of the Service’s current performance data, internal controls that
relate to that data, financial management systems, and information systems. In connection


 "GAO/GGD-98-144.




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with fulfilling our requirement to audit the financial statements of the U.S. government,
including its internal control report on financial reporting, our work has been limited to
reviewing fiscal years 1997 and 1998 financial statement audits performed by the Service’s
independent public accounting firm. Therefore, except for data that come directly from the
Service’s audited financial statements, we have no basis to assess whether the Postal Service
has the information sources and the capacity through its information systems that are needed
to generate reliable data to support its performance plan and to produce credible
performance reports.

Agency Comments
In a letter dated April 26, 1999, signed by the Chief Financial Officer/Senior Vice President,
and Vice President, Strategic Planning, the Postal Service provided comments on a draft of
this letter. These comments are included in enclosure II. In general, the Postal Service stated
that the letter was balanced and helpful in providing the Service with guidance to improve its
final performance plan for fiscal year 2000, which is to be published by September 30,1999,
following review and approval by the Board of Governors. The Service also agreed with our
suggestions for improvements to the preliminary performance plan for fiscal year 2000 and
indicated how it plans to respond to each suggestion in developing the Service’s final
performance plan for fiscal year 2000. The Service agreed to provide additional information
on linkages between performance goals, strategies, and resources, including more
information on how its human capital is to contribute to achieving its performance goals;
more complete baseline data; and identification of the goals that are of highest priority for the
year covered by the performance plan.

The Service has been responsive to our past recommendations about performance plans and
continues to work constructively with us. Typically, there is a long learning process in
understanding what constitutes a good plan, and it may take some time to develop
improvements in the plan. Therefore, it is reasonable to expect additional improvement in
future cycles.



We are sending copies of this letter to Representative Richard A. Gephardt, House Minority
Leader; Representative Henry A. Waxman, Ranking Minority Member, House Committee on
Government Reform; Representative Chaka Fattah, Ranking Minority Member, Subcommittee
on the Postal Service, House Committee on Government Reform; Senator Joseph Lieberman,
Ranking Minority Member, Senate Committee on Governmental Affairs; Senator Thad
Co&ran, Chairman, and Senator Daniel Akaka, Ranking ?VI.inorityMember, Subcommittee on
International Security, Proliferation and Federal Services, Senate Committee on
Governmental Affairs; William J. Henderson, Postmaster General; and other interested
parties. Copies will also be made available to others upon request.




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Major contributors to this letter are listed in enclosure III. If you have any questions, please
call me on (202) 512-8387.




Bernard L. Ungar
Director, Government Business
 Operations Issues

Enclosures - 3




 Page 10                           GAOIGGD-99-72R   Postal Service Preliminary   Performance   Plan for FY 2000
Enclosure I

Postal Service Management Challenges,
Goals, and Measures in its Preliminary Annual
Performance Plan for FY 2000

GAO Management Challenge           Applicable Goals and Measures          in the Postal Service’s   Preliminary   Annual   Performance    Plan
and/or Postal Inspector General    for Fiscal Year 2000
Management Concern”
GAO: Long-Standing Challenges      Goal: “Foster an inclusive and welcoming workplace consistent with Postal Service values of fairness,
in Labor-Management    Relations   opportunity, safety, and security: where everyone is given the tools, training and encouragement to be
                                   successful; and where everyone is recognized for and takes pride in their participation in customers’
IG: Labor-Management   Relations   and the Postal Service’s success.”

                                   Subgoal: “Improve workplace       relations by building leadership skills and behaviors.”

                                   Performance measures: For fiscal year 2000, the Postal Service is to:
                                   l Make the REDRESS process (an alternative to the traditional Equal Employment Opportunity
                                   process) available to all employees in the 85 geographically based units called Performance Clusters.
                                   l After completion of the labor negotiations, set a contract compliance target based on the percentage
                                   of grievances denied by an arbitrator.
                                   l Respond to all employee    suggestions within 6 months.

                                   Subgoal: “Improve understanding       of employee issues and concerns.”

                                   Performance     measures:     For fiscal year 2000, the Postal Service is to:
                                   l Conduct  an   employee     survey.
                                   l Monitor the   percentage     of required labor/management meetings held.
                                   l Develop  an   index and    performance baseline for the workplace environment     and set targets.




                                              Page 11              GAOIGGD-99-72R    Postal Service Preliminary   Performance   Plan for FY 2000
                                                      Enclosure I
                                                      Postal Service Management Challenges,    Goals, and Measures       in its Preliminary    Annual
                                                      Performance Plan for FY 2000




GAO Management      Challenge       Applicable Goals and Measures              in the Postal Service’s   Preliminary      Annual     Performance        Plan
and/or Postal Inspector General     for Fiscal Year 2000
Management    Concern”
GAO: The Continuing Challenge of    Goal: “Generate financial performance that assures commercial viability as a service provider in a
Containing Postal Costs and         changing competitive marketplace and generate cash flow to finance high-yield investments for the
Protecting Revenues                 future while providing competitively priced products and services.”

Postal Service Inspector General:   Subgoal: “Control costs by-achieving          productivity gains.”
Financial Management
                                    Performance measures: For fiscal year 2000, the Postal Service is to:
                                    l Achieve a Total Factor Productivity (a measure of total resource usage efficiency, including capital)
                                    gain of 0.5%.
                                    l Achieve  a labor productivity (a measure of labor resource usage efficiency) gain of 1 .O%.

                                    Subgoal: “Improve overall business performance.”

                                        Performance measures: For fiscal year 2000, the Postal Service is to:
                                    l     Generate positive indexed economic value added.
                                        l Achieve a capital commitment budget of $4 billion.
                                        l Achieve an overall net income of $150 million.

                                        Subgoal: “Keep price increases below the rate of inflation.”

                                        Performance measure: For fiscal year 2000, the Postal Service is to:
                                        lMaintain current rates.

                                        Subgoal: “Restore original equity.”

                                        Performance measure: For fiscal year 2000, the Postal Service is to:
                                        = Ensure compliance with the equity restoration policy of Board of Governors’ Resolution 95-9 by
                                        achieving net income of at least $377 million per year averaged over the current rate cycle.

                                        The Postal Service’s preliminary performance plan for fiscal year 2000 also identifies $449 million in
                                        projected cost savings from 10 major fiscal year 2000 cost reduction programs. These programs are
                                        linked to a number of the Service’s subgoals that relate to generating financial performance and
                                        earning customers’ business.
GAO: The Need to Implement              The Postal Service’s preliminary performance plan for fiscal year 2000 sets a number of specific
Reliable Indicators of Postal           objectives for implementing additional indicators of postal performance. For example, in the section
Performance                             that describes the goal of earning customers’ business and the subgoal of providing timely delivery,
                                        the Service’s preliminary plan for fiscal year 2000 states that the Service is to “Develop on-time
Postal Service Inspector General:       performance indicators for Periodicals and International Mail by the end of FY 1999, and develop
Data Integrity                          performance baselines by the end of FY 2000.”

                                            The Service’s preliminary performance plan for fiscal year 2000 also discusses “The specific Postal
                                            Service systems and processes planned for the verification and validation” of various performance
                                            measures. However, in March 1999, the Service’s Inspector General reported that providing
                                            additional information in the plan to address these issues would be helpful in assessing the reliability
                                            of the data being used to gauge progress toward the Service’s performance goals. In response, the
                                            Service said that its final plan is to include additional information about the general strategies,
                                            procedures, data sources, data standards, and challenges for improving the data verification and
                                            validation process for its performance targets.




                                                        Page 12           GAOIGGD-99-72R    Postal Service Preliminary      Performance       Plan for FY 2000
                                                Enclosure I
                                                Postal Service Management Challenges,     Goals, and Measures    in its Preliminary   Annual
                                                Performance Plan for FY 2000




GAO Management Challenge            Applicable Goals and Measures        in the Postal Service’s   Preliminary    Annual     Performance       Plan
and/or Postal Inspector General     for Fiscal Year 2000
Management Concern”
GAO: Postal Service at Risk of      None. The Postal Service’s preliminary performance plan for fiscal year 2000 discusses the Service’s
Year 2000 Problems                  Year 2000 program and ties it to the subgoal to “Provide timely delivery.” The Service’s preliminary
                                    performance plan for fiscal year 2000 projects that the Year 2000 program cost is to be $150 million
Postal Service Inspector General:   in fiscal year 2000. The Service’s preliminary performance plan for fiscal year 2000 does not contain
Year 2000                           measures to track the progress of the Year 2000 program.

                                    However, in a recent response to the Postal Service’s Inspector General, the Service agreed that
                                    progress in addressing its Year 2000 challenge could be better assessed by including specific goals,
                                    indicators, and targets in its performance plan. The Service reported that it intends to include these
                                    Year 2000-specific items in its final performance plan for fiscal year 2000 as well as more details on
                                    resources and project plans that relate to its Year 2000 initiative.
Postal Service Inspector General:   Goal: “Foster an inclusive and welcoming workplace consistent with Postal Service values of fairness,
Violence in the Workplace           opportunity, safety, and security: where everyone is given the tools, training and encouragement to be
                                    successful; and where everyone is recognized for and takes pride in their participation in customers’
                                    and the Postal Service’s success.”

                                    Subgoal: “Improve employees safety, security and well-being.”

                                    Performance measures: For fiscal year 2000, the Postal Service is to:
                                    l Develop  indicator and performance baseline for security of postal facilities.
                                    l Develop  process for identification and resolution of hostile environment.

Postal Service Inspector General:   Goal: “Foster an inclusive and welcoming workplace consistent with Postal Service values of fairness,
Workers’ Compensation               opportunity, safety, and security: where everyone is given the tools, training and encouragement to be
                                    successful; and where everyone is recognized for and takes pride in their participation in customers’
                                    and the Postal Service’s success.”

                                    Subgoal: “Improve employees safety, security and well-being.”

                                     Performance measures: For fiscal year 2000, the Postal Service is to:
                                    l Keep lost workdays due to injury per 200,000 work hours below 1.96.
                                    l Keep total accidents  per 200,000 work hours below 11.36.
                                    l Keep motor vehicle accidents    per million miles driven below 10.90.
                                    l Develop/update   safety indicators to match Occupational Safety and Health Administration
                                    requirements and set targets.




                                               Page 13           GAO/GGD-99-72R     Postal Service Preliminary   Performance      Plan for FY 2000
                                                     Enclosure I
                                                     Postal Service Management Challenges,   Goals, and Measures in its Preliminary      Annual
                                                     Performance Plan for FY 2000




GAO Management Challenge            Applicable Goals and Measures            in the Postal Service’s   Preliminary    Annual   Performance        Plan
and/or Postal Inspector General     for Fiscal Year 2000
Management Concern”
Postal Service Inspector General:   Goal: “Earn customers’ business in a marketplace         where they have choices by providing them with
Service Delivery                    world-class quality at competitive prices.”

                                    Subgoal: “Provide timely delivery.”

                                    Performance measures: For fiscal year 2000, the Postal Service is to:
                                    l Achieve overnight First-Class Mail on-time performance of at least 93%.
                                    l Increase 2-day and 3-day First-Class    Mail on-time performance to 90%.
                                    l Complete   development of a First-Class remittance mail on-time performance indicator; establish a
                                    performance baseline; and set an FY 2000 target when data are available.
                                    l Achieve  targeted Priority Mail on-time performance, as measured by the Delivery Confirmation
                                    system. (The target is not released because it is proprietary information.)
                                    l Achieve  97 percent on-time performance for Ad Mail delivered within a requested sales window,
                                    using the ADVANCE measurement system.
                                    l Achieve  targeted on-time performance for destination-entered ground packages, using the Delivery
                                    Confirmation system.
                                    l Develop   on-time performance indicators for Periodicals and International Mail by the end of FY
                                     1999, and develop performance baselines by the end of FY 2000.

                                        Subgoal: “Provide consistent service.”

                                        Performance measure: For fiscal year 2000, the Postal Service is to:
                                        lValidate recently developed Customer Service Measurement indicators           of delivery within 30
                                        minutes of the scheduled time for business and residential customers.

                                        Subgoal: “Provide accurate service.”

                                        Performance measure: For fiscal year 2000, the Postal Service is to:
                                        lValidate recently developed Customer Service Measurement indicators           of complaints    or claims for
                                        misdelivery, damage, or loss.

                                        Subgoal: “Ensure that the service is easy to use.”

                                        Performance measures: For fiscal year 2000, the Postal Service is to:
                                        “Improve performance against Ease-of-Use Indices, which use customer satisfaction surveys to
                                        measure how easy it is for customers to do business with the Postal Service. Both composite and
                                        customer segment Ease-of-Use Index goals are shown below (based on a maximum value of 1000):”
                                        l Increase the Composite    Ease-of-Use Index to 710.
                                        l Increase the Residential   Ease-of-Use Index to 760.
                                        l Increase the Premier Accounts     Ease-of-Use Index to 700.
                                        l Increase the Business    Ease-of-Use Index to 740.
                                        l Increase the National Accounts    Ease-of-Use Index to 685.

                                            Subgoal: “Explore customer needs segmentation    as an alternative to product segmentation.”

                                            Performance measure: For fiscal year 2000, the Postal Service is to:
                                            lDevelop indicators and targets based on customer needs segmentation.

                                            Subgoal: “Develop ‘best value’ criteria based on Customer Value Analysis.”

                                            Performance measures: For fiscal year 2000, the Postal Service is to:
                                            lDevelop indicators and targets using the Customer Value Analysis technique.




                                                       Page 14          GAO/GGD-99-72R   Postal Service Preliminary    Performance     Plan for l?Y 2000
                                                 Enclosure I
                                                 Postal Service Management Challenges,        Goals, and Measures in its Preliminary     Annual
                                                 Performance   Plan for FY 2000




GAO Management Challenge            Applicable  Goals and Measures          in the Postal Service’s     Preliminary     Annual   Performance      Plan
and/or Postal Inspector General     for Fiscal Year 2000
Management Concern”
Postal Service Inspector General:   Subgoal: “Explore concept of customer loyalty for competitive          products.”
Service Delivery (continued)
                                    Performance measures: For fiscal year 2000, the Postal Service is to:
                                    l Develop  customer loyalty indicators and targets.

Postal Service lnsuector General:   None. However, the Postal Service’s ureliminarv performance plan for fiscal vear 2000 describes
Systems Automation                  investments in automation and mechanization eqbipment and iinks them to performance goals and
                                    resources. For example, in fiscal year 2000, a total of $1.9 billion is to be used for automation and
                                    mechanization investments to enhance previously deployed technologies and expand the technology
                                    base available to support postal operations. The plan states that while most of these investments are
                                    directly targeted at the subgoal of controlling costs by achieving productivity gains, many investments
                                    also are to contribute to improvements in the subgoals regarding service quality (i.e., provide timely
                                    delivery, consistent service, and accurate service) and ease of use (i.e, ensure that the service is
                                    easy to use).

                                    The Postal Service’s preliminary performance plan for fiscal year 2000 also describes a number of
                                    specific automation programs. For example, the Robotics program is designed to acquire over 300
                                    robots to automatically unload letter mail trays and flat tubs from mail containers. These robots are to
                                    replace current labor-intensive operations in the opening unit and container breakdown operations of
                                    Processing and Distribution Centers, Bulk Mail Centers and Air Mail Centers with automated
                                    equipment. In addition, the Tray Management System program is an automated material handling
                                    technology program designed to reduce allied labor expense and improve operational efficiency while
                                    providing real-time work-in-process information.
Postal Service Inspector General:   Goal: “Generate financial performance that assures commercial viability as a service provider in a
Ratemaking                          changing competitive marketplace and generate cash flow to finance high-yield investments for the
                                    future while providing competitively priced products and services.”

                                    Subgoal: “Keep price increases below the rate of inflation.”

                                    Performance measure: For fiscal vear 2000. the Postal Service is to:
                                    l Maintain durrent rates.
Postal Service Inspector General:   None. However, the Postal Service’s preliminatv oerformance elan for fiscal vear 2000 describes
Electronic Comm&ce                  programs designed to facilitate various methods 6f making electronic paymekts to the Postal Service.
                                    For example, the Postal Electronic Payment Platform is to create a platform that combines all
                                    electronic automated clearinghouse and wire payments into a single, Postal Service financial
                                    institution, and is to provide business customers with a cohesive method of paying the Postal Service
                                    electronically as well as on-line reporting that supplies all necessary payment information to them.
                                                  ’ The four challenges attributed to GAO are based on Maior Manaaement Challenaes and Proaram
                                                  Risks: U.S. Postal Service (GAO/OCG-99-21, Jan. 1999). The 10 management concerns attributed to
                                                  the Postal Service’s Office of Inspector General are the most recent available list and are based on
                                                  the Inspector General’s January 20, 1998, letter to Majority Leader Dick Armey. This letter responded
                                                  to Rep. Armey’s December 15, 1997, request to identify the 10 most serious management problems
                                                  in the Postal Service.




                                                Page 15             GAO/GGD-99-72R      Postal Service Preliminary      Performance   Plan for FY 2000
Enclosure II

Comments From the U.S. Postal Service




               April    26.     1999




               Mr. Bernard      L. Ungar
               Director,    Government     Business
                Operations       Issues
               United    States    General  Accounting             Office
               Washington,        DC 20546-0001

               Dear     Mr.     Ungar:

               Thank   you for providing       us an opportunity     to review    the dreft report to the Congress    entitled:    3
               Postal  Service’s    PreliminarV     Annual   Performance       Plan for FY 2000.     This plan was issued       as
               Chapter    IV in our 1998 Comorehensive            Statement     on Postal ODerations,     as required  by the Results
               Act.

               In general,        we believe   that the report is balanced     and helpful  in providing the Postal   Service    with
               guidance         to improve   our final N 2000 Annual       Pefformance     Plan. which will be published      by
               September           30. 1999. following   review  and approval     by our Board of Governors.

               As you have noted in your earlier              reports,   the Results     Act provides      the Postal Senrice       an opportunity    to
               document      and publish       the results    of the stages      of our internal    management        system    that we call
               CustomerPerfect!.           The Preliminary       Performance        Plan provides     a concluding      statement     to our fill
               cycle of establishing         performance       goals and preliminary        performance       measures.       The final Performance
               Plan will reflect       the conclusion     of our spring     deployment      process     in which   resources      are allocated    to
               program     activities.

               While    noting     that the major strengths       of the Preliminary      Plan were the consistency     of the mission
               statement       with the earher Strategic       Plan, balanced       and challenging    goals that responded    to key
               challenges.       and continued     development        of measures      to track performance,    you also suggested a
               number      of improvements,       and we want to respond            to each of them.

               Better         Linkages    between       Pelformance           Goals,      Strategies       and    Resources

               You suggested           that we further          improve     the linkage        of major performance            goals with strategies           and
               the human.       capital,      information,        and other resources            that will be needed          to achieve     targeted
               improvements.            As we dxscussed             in our meeting        with you last month. we will provide                 additional
               information      on these         Ilnkages     in the final Performance              Plan.    Specifically,      we will include       information
               on program        strategies         and resources        for the major performance                targets    in the summary          table of
               goals,    subgoals,       indicators,       and targets       (page     97 of the 1998 Comprehensive                   Statement).         We will
               also provide        more information            on how our human             capital     will wntibute       to achieving      the various
               performance         goals.       As we have discussed               previously,       linkage    information       will require    refinement
               over time. and we look forward                    to working     with GAO to achieve              continuous       improvement          in future
                Performance         Plans.




                                                                                                           .




                         Page 16
   Enclosure II
   Comments From the U.S. Postal Service




                                                     2




More Complete Baseline Data on Current Performance

You suggested that we provide more complete baseline data SOthat readers can gauge progress in
achieving the goals, especially in the Voice of the Business area. We believe that this information will
be a helpful addition to the final Performance Plan. To the extent possible based on the availability of
historical data, we will provide baseline data on each performance measure for each of the three
preceding fiscaf years.

Identification of the Top Goals forthe Year Covered by the Plan

You mentioned that our Performance Plan could be more useful to stakeholders if it identified the
goals that are of highest priority in the year covered by the plan. This would allow a constructive
dialogue between the Postal Service and our stakeholders on past performance and future goals in
all three CustomerPerfect! Voice areas. We agree with your assessment. In fact, following the
development of the Preliminary Performance Plan, we identified the top priority targets and the other
targets as the tirst step in our internal deployment of resources. In the final Performance Plan for FY
2000, we will identify the high-priority goals and associated measures of performance.

We appreciate the time you and your staff took to meet with us on these issues and we look forward
to additional discussions in the future.




M. Richard Porras                                                  Robert A. F. Reisner
Chief Financial Officer &                                          Vice President
Senior Vice President                                              Strategic Planning




    Page 17
Enclosure III

Major Contributors to This Report


                        Teresa Anderson, Assistant Director
General Government      Kenneth E. John, Senior Social Science Analyst
Division, Washington,
D.C.

                        Laura Castro, Senior Evaluator
Accounting and          Paula M. Rascona, Senior Auditor
Information             Carl M. Urie, Assistant Director
Management Division

                        Alan N. Belkin, Assistant General Counsel
Office of the General   Jill P. Sayre, Senior Attorney
Counsel




                                                                  .




                        Page 18       GAO/GGD-99-72R   Postal Service Preliminary   Performance   Plan for J?Y 2000
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