US Postal Service 2015 Annual Report Download - page 69

2015 Report on Form 10-K United States Postal Service 67
Our economic challenges have prevented the officer compensation system from functioning properly for an extended period,
and uncertainty persists on a yearly basis concerning whether salary increases or performance bonuses will be awarded. This
uncertainty is largely driven by our flawed business model which limits our ability to be financially successful, and which
can only be corrected by comprehensive postal legislation.
The Governors believe that this situation must be remedied in the near future, and are concerned that if this situation continues
much longer, it will further erode our ability to retain highly-qualified individuals as officers and to recruit the best qualified
individuals from the marketplace, if external hiring is deemed to be the best solution to fill critical officer vacancies.
Additionally, our financial constraints, which largely are the products of structural defects that only Congress can remedy,
have prevented us from fully complying with the statutory mandate that our officers be paid in a manner comparable with
their private sector counterparts.
We continued to use the NPA process to measure performance during fiscal year 2015. 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 impacted by general economic conditions,
such as revenue generation.
For each goal, the Postmaster General establishes indicators identifying the type of performance that will enable us 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 our overall
success.
Once the goals and indicators are established, executive officers are advised as to what is expected of them in terms of
performance during the year, how their performance will impact us, 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 us as a whole. Under this program, an individual executive officer can receive a numerical rating within a
range of 1 to 15 depending on how we perform on the national indicators and the individual’s performance, as determined by
the Postmaster General.
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 in the applicable statutory cap 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 aligned to the Postmaster General’s rating of the executive officer’s performance,
based on the degree to which the individual 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 our 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 relating to fiscal year 2015 performance, the Governors noted that
management achieved very significant accomplishments in addressing the many challenges we faced in the fiscal year. Despite
a significant continuing decline in First-Class Mail volume over the past several years, management continued to take
aggressive actions within its control to reduce costs, provide excellent service and secure revenue.
Despite the many significant accomplishments of our management team during fiscal year 2015, the Governors recognized
the fact that we continued to face significant financial challenges. While these financial challenges result in part from the
flawed business model and lack of reform, the Governors noted that comprehensive legislative change is needed to enable us
to return to financial stability. The absence of legislative change has had, and will continue to have, a significant negative
impact on our finances.