US Postal Service 2011 Annual Report Download - page 53

2011 Report on Form 10-K United States Postal Service - 51 -
more susceptible to being affected by general economic
conditions, such as revenue generation.
The Board believes that this mix of goals has helped the
Postal Service to continue to deliver high-quality service
even in the face of an unsettled economy. Particularly in
a troubled economy, in order to remain viable, the Postal
Service must serve its customers with the highest levels
of efficiency and productivity. Measuring results and
sharing information with executive officers on their
performance is one way that the Postal Service sustains
this performance.
For each goal, the Postmaster General establishes
indicators identifying the type of performance that will
enable the Postal Service to achieve or surpass the
goal. These performance indicators are aligned at the
corporate, functional, and individual levels and are
weighted. The higher an individual’s position is in the
organization, the more his or her PFP goals will be tied
to overall corporate performance. The executive officers’
goals are aligned with national performance goals and
linked to the overall success of the Postal Service.
Once the goals and indicators are established, executive
officers are advised as to what the Postal Service
expects of them in terms of performance during the year,
how their performance will impact the entire Postal
Service, and in years when performance incentives are
authorized, the potential level of performance-based
incentives they can expect depending on the Postal
Service’s and their individual performance. Under this
program, an individual executive officer can receive a
rating of Non-Contributor, Contributor, High Contributor
or Exceptional Contributor, with a numerical rating within
each category, depending on how the Postal Service
performs on the national indicators and the individual’s
performance, as determined by the Postmaster General.
As shown in the chart below, a rating of Non-Contributor
would result from an overall numerical rating of 1 to 3. A
rating of Contributor would result from a numerical score
of 4 to 9. A rating of High Contributor would result from a
score of 10 to 12 and a rating of Exceptional Contributor
would result from a score of 13 to 15.
Overall Performance Rating
Adjective Rating Number rating
Exceptional Contributor (EC) 13, 14, 15
High Contributor (HC) 10, 11, 12
Contributor (C) 4 to 9
Non Contributor (NC) 1, 2, 3
In years when a salary freeze is not in effect and when
performance incentives are authorized, the individual
executive officer’s performance rating would make the
officer eligible for an increase to base salary as well as a
performance-based lump sum payment. Due to statutory
cap limitations, increases to the maximum of the salary
range for executive officers generally follow the
percentage increase to the Executive Schedule for any
given year. Any salary increases for executive officers
are limited by these maximums and are solely
performance based as determined by the Postmaster
General. Lump sum incentive payments are based on
the executive officer’s performance rating given by the
Postmaster General and multiplied by a range of 1.33%
to 2.50% based on the degree to which the individual
has achieved previously set individual goals and metrics.
The Postmaster General’s discretion on PFP incentives
for executive officers in a given year is limited by the
Postal Service’s overall performance on NPA goals and
metrics. Generally, officer performance scores must
average to the Postal Service’s overall NPA
performance score for the fiscal year.
Salary increases, if any, are determined after the end of
the fiscal year, and any new salaries become effective
for the following calendar year. Although management
achieved very significant accomplishments in addressing
the many challenges the Postal Service faced in fiscal
year 2011, the Governors determined that salaries
should remain frozen in calendar year 2012 in light of the
Postal Service’s current financial situation. For the same
reason, the Governors did not award the Postmaster
General a performance incentive for fiscal year 2011.
Likewise, the Postmaster General, with the approval of
the Governors, determined that performance incentives
should not be paid for fiscal year 2011 for the other
named executive officers. Although the Postal Service’s
financial situation caused the Governors to freeze
salaries and not to allow incentive awards, the
Governors noted that, despite the significant continuing
decline in mail volumes over the past several years,
management has continued to take aggressive actions
within its control to reduce costs, maintain excellent
service and secure revenue. Despite declining volume,
management improved total factor productivity by
reducing the workforce, overtime, and supplier
expenses, as well as through a number of other process
improvement efforts. In addition to maintaining high
levels of service, management also maintained
employee satisfaction, introduced a number of new
products and services, increased customer access and
offered mailers pricing incentives to help stem the
volume decline. Management continued to streamline
operations, closing a number of facilities and
establishing a process to optimize network and retail
operations. The Governors also noted that the Postal
Service received an unqualified opinion from its external
auditors as to the effectiveness of internal controls.
Finally, management also took significant actions to
pursue legislative reform in areas key to the Postal
Service’s ability to provide universal service in the future.