US Postal Service 2014 Annual Report Download - page 75

2014 Report on Form 10-K United States Postal Service 71
When the Governors appointed the current Postmaster General, they set his salary at the legislative salary cap. Given the Postal
Service’s significant financial challenges when he assumed office, the current Postmaster General asked the Governors not to
award him any additional compensation, beyond salary and the general types of benefits provided to Postal Service executives.
The Governors agreed.
Over the years, the Governors have authorized the Postmaster General to establish salaries for the other executive officers,
within the confines of the salary ranges established by the Governors. For Calendar Year 2014, after reviewing
recommendations from the Postmaster General and the Compensation Committee and in light of the Postal Service’s financial
constraints, the Governors raised the salary ranges for some officers and increased officer salaries by 1%.
In 2014, the Postal Service continued to employ a national performance assessment program (“NPA”) to set annual performance
goals and metrics that vary among executive officers and are weighted to reflect appropriately the degree to which an executive
is able to influence the overall performance of the Postal Service. Annual NPA metrics and targets generally take into
consideration the Postal Service’s performance during the prior year and particular challenges the Postal Service expects to face
during the upcoming year. The NPA places emphasis on objective, measurable performance indicators. The Governors also set
individual metrics and targets for the Postmaster General and Deputy Postmaster General and authorize the Postmaster General
to establish individual metrics and targets for other officers.
As described above, the officer compensation system has not functioned as designed for the past seven years.
The officer compensation system is intended to operate as follows: The Board establishes annual Pay-for-Performance (“PFP”)
incentives to provide opportunities for the Postmaster General and the Deputy Postmaster General to earn enhanced
compensation, directly tied to the level of their performance. The Postmaster General establishes annual PFP incentives for
other officers, to provide them opportunities to earn increased compensation, based upon their performance. Incentive payouts
are not to be made for a particular goal if the Postal Service or the individual fails to meet minimum acceptable performance
standards. The payment of PFP incentives may sometimes be deferred for future payment where required due to the
compensation caps.
The Postal Service’s economic challenges have prevented the officer compensation system from functioning properly for an
extended period. The Governors believe that this situation must be remedied. The Governors are concerned that if this situation
persists much longer, it will erode the Postal Service’s ability to retain highly-qualified individuals as officers and to recruit the
best qualified individuals from outside the Postal Service, if external hiring is deemed to be the best solution to fill critical
officer vacancies. Additionally, the Postal Service’s financial constraints, which largely are the products of structural defects
that only Congress can remedy, have prevented the Postal Service from fully complying with the statutory mandate that its
officers be paid in a manner comparable with their private sector counterparts.
The Postal Service has continued to use the NPA process to measure performance during Fiscal Year 2014. NPA performance
goals and rewards fall into several categories. These 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 their
individual performance and the performance of the Postal Service. 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.