US Postal Service 2013 Annual Report Download - page 66

2013 Report on Form 10-K United States Postal Service 64
include areas that an officer may directly influence, such as service, efficiency, employee satisfaction, and productivity, as
well as those that are more susceptible to being affected by general economic conditions, such as revenue generation.
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
The officer compensation system has not functioned as designed for the past six years, due to the Postal Service’s
economic challenges. The system is supposed to operate as follows: An individual executive officer’s performance rating
would make the officer eligible for an increase to base salary, as well as for a performance-based lump sum payment.
Due to statutory cap limitations, increases to the maximum of the salary range for executive officers would 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 would be tied to the Postmaster General’s rating of the executive officer’s performance 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. In making compensation decisions for fiscal year 2013, the Governors noted that management
achieved very significant accomplishments in addressing the many challenges the Postal Service faced in the fiscal year.
Despite a significant continuing decline in First-Class Mail volumes over the past several years, management continued to
take aggressive actions within its control to reduce costs, provide excellent service and secure revenue. Despite declining
First-Class Mail volume, package volume increased during fiscal year 2013. Management improved total factor
productivity by reducing the workforce, 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 beginning implementation of
consolidations and other steps 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.
Despite the many significant accomplishments of postal management during fiscal year 2013, the Governors based their
decisions on compensation on the fact that the Postal Service continues to face significant financial challenges. While
these financial challenges result in part from the decline in First-Class mail and the economy, the Governors noted that
comprehensive legislative change is needed to enable the Postal Service to return to financial stability. The absence of
legislative change has had, and will continue to have, a significant negative impact on Postal Service finances. Given the