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Wednesday, September 29, 2004
Mr. Lawrence: Good Morning and welcome to The Business of Government Hour. I’m Paul Lawrence partner in charge to the IBM Center for the Business of Government. We created this center in 1998, to encourage discussion and research. It’s a new approach as to improving government effectiveness. You can find out more about the center by visiting us on the web at www.businessofgovernment.org.
This is a government radio hour, features a conversation about management with the government executive who is changing the way government does business. Our special guest this morning is Pat Donahoe, Chief Operating Officer of the U.S. Postal Service. Good morning, Pat.
Mr. Donahoe: Good morning Paul.
Mr. Lawrence: And joining us in our conversation, also from IBM is Bill Takis. Good morning Bill.
Mr. Takis: Good morning Paul.
Mr. Lawrence: Well, Pat, I know everybody knows about the Postal Service, perhaps you could just set the stage and give our listeners who might not be familiar with -- a couple of minutes on its mission and its activities.
Mr. Donahoe: We’ve got a pretty simple mission in the Postal Service and that is, you know, for over two hundred years, our mission has been to bind the nation together through delivery of hard copy and about a hundred years ago we added packages into that and that’s what we do today. That’s our focus. That’s what we focus on a day-to-day basis.
Mr. Lawrence: And how do you describe the size of the business; the number of pieces of mail volume or how do we go about?
Mr. Donahoe: Well, we deliver to 145 million addresses on a daily basis across the U.S. including Alaska and Hawaii. We accomplish that with about 708,000 people. We deliver 208 billion pieces of mail on a day -- on a yearly basis also. We’ve got tremendous reach across the entire United States with 38,000 post offices and we deliver mail with about 210,000 vehicles on a daily basis.
Mr. Lawrence: And then in terms of just sort of comparison to say the Fortune 500 to give people a sense how large an organization, the Postal Service is, approximately where would it be?
Mr. Donahoe: We rank right now either 9th or 10th and in terms of the World 500 we’d rank about 25th.
Mr. Lawrence: That’s an amazing scope of operations. What are some of the roles and responsibilities of your job as Chief Operating Officer of that organization?
Mr. Donahoe: As a Chief Operating Officer, I am responsible for the operations of the Postal Service, that would include all of our retail outlets, all our delivery points and vehicles, pretty much everything we do on a daily basis with the American public.
Mr. Lawrence: So all the operations, all the carriers that we see out there, all report into you, right?
Mr. Donahoe: All the carriers, all the trucks, all the buildings, I’m responsible for those operations.
Mr. Lawrence: How long have you been at this job, and then how did your career path progress to get to here?
Mr. Donahoe: I started with the Postal Service 29 years ago. I was a junior in the University of Pittsburgh and took the postal office test and got a call and they said we have evening work available, so I thought, well, I can do that and supplement the income. I didn’t realize it was going to be full time when I got there. And it was right in the middle of the UPS strike. So we were working about 70 hours a week. So I had a goal though, finish school within four years, so I finished school within four years and felt when I’m done I’ll go out and get a job, a real job in the real world. Well, 29 years later, here I am still.
Mr. Lawrence: And now as Chief Operating Officer, what types of jobs have you had up to this point to help prepare you for the job?
Mr. Donahoe: Well, I started on the work floor, you know, sorting mail like you say, in the evening and had an opportunity when I graduated from school to apply and get into what was called a management associate program and it was a great opportunity and I got a chance to relocate and move around -- move around the country and build a little management expertise there and over the years I’ve taken advantage of opportunities that were out there in the Postal Service and have been able to move up through the ranks.
Mr. Lawrence: I also understand in your career that you are also a Sloan fellow at the Massachusetts Institute of Technology. Can you tell us a little bit about that and yes the Postal Service’s involvement in that?
Mr. Donahoe: One of the -- one the nice opportunities we do this, generally one student a year, the Postal Service will sponsor somebody to go up to MIT participate in the Sloan fellows program. What that is, it’s a group of about 55 people from around the world who go in and work for one year to get a Master’s degree in science from the Sloan school, it's a -- as a matter of fact I was talking to our student up there right now and remembering a little bit of the summer term, it’s a pretty intense year but it’s a great year because what you do, you have an opportunity to work with people from all over the world, all walks of life and for us it’s important because as a member of postal service government agency, lot of times you end up with a very potentially internal focus on what you do. You go to a place like the Sloan school, it exposes you to thinking from not just the private industry but we get to see a number of other agencies in the government across the world. It really opens your view of the world from a management standpoint.
Mr. Lawrence: We take you back into your career because I was interested -- description as you took different management positions, when did the scale of the activities begin to come into play, so for example I’m imagining a more traditional career, you manage five or ten people, when do you get into the hundreds of thousands and I’m curious how that training came about?
Mr. Donahoe: It’s interesting, my -- probably my first job where I had some serious responsibility. I was responsible for customer service operations up here in Silver Spring, Maryland in the early 80s and I think at that time I had maybe about four or five hundred people and you know, that was the first exposure to daily operations where decisions you made really affected what happens on a daily basis, delivery of mail to, you know, a couple -- a thousand delivery points in that area. I was able then to move up by -- I left Silver Spring and then I was still in the management associate program and worked in various operations after that and up in Pittsburgh, Pennsylvania, Harrisburg. I was at one time the postmaster of Lancaster, Pennsylvania, with responsibility for pretty much the operations in central Pennsylvania.
After that I went to school and coming out of school, I probably had my most interesting assignment of all and that was the district manager here in Capital District. Right about -- I got here just about the time that our service was not where we wanted it to be in Washington and had the opportunity to work with a number of people to really turn around delivery service in Washington. It was probably from a management’s standpoint the best experience I ever had to work with people from all walks of life, lot of challenges and we were able to get things turn around here.
Mr. Lawrence: Let’s pick out on a couple of things in terms of the style, just in the terms of the communication as you were describing being a postmaster I could imagine that with 400 or 500 people you could see everybody occasionally but now its such a large organization, how do you communicate and get your massages out?
Mr. Donahoe: Oh, communication is in my opinion absolutely critical in our organization, you know, we do a lot of communication in with the Internet, lot of communication with radio and television and we -- I have a little internal TV show that we do on a monthly basis and it’s broadcast live across the country and we have guests in and the key that was -- and setting expectations so that people understand we strive to provide excellent service and that’s what we want to do, people understand also through the communications what the course of actions are going to be in the organization.
We made a lot of changes like every other major organization in the United States and keeping people in the loop understanding where we are going and why we are doing that, how are we going to get there is very important. And finally we are really big on recognition and making sure that we thank people, tell them they are doing a great job. We’ve got a tremendous number people who do a tremendous job on a daily basis. So that communication whether it is in writing, whether it’s through the Internet, whether it’s on the video, I think its very important so that the people understand just how important their job is and how appreciated they are doing that on a daily basis.
Mr. Lawrence: Okay, here is something interesting about your time at Sloan that it gives you an external perceptive, how do you carry that perceptive into your work with the employees? So for example, think about certain parts of -- segments of your market highly competitive and other there is less competitive. How do you get people to sort of understand that with so much difference and variation?
Mr. Donahoe: One of the big things that we work on, Paul, is making sure that everyone understands what the customer’s expectations are, absolutely critical and that goes whether you are a clerk at the window, if you are a letter carrier delivering mail, if you are a truck driver moving mail between facilities, and customers entrust their business with us. They entrust personal correspondence with us and it’s absolutely critical that we get it delivered on time to the right address and in good condition because that’s what the customers expect. And working over the past few years we have really worked hard to make sure that every -- all 708,000 people understand how important that is, because you know, when you come from a government monopoly type background sometimes people take things for granted. This is a very competitive world we are in and not just for a package standpoint, we are in the package business but we are also in advertising business and we’ve got competition whether its newspapers, its television, its radio, we’ve got competition on the Internet and people in our organization have to know how critical it is to do an excellent job in order to keep the postal service strong.
Mr. Lawrence: That’s an interesting point. Postal service introduced plans to transform itself almost two years ago. What was that plan and how are they doing? We’ll ask Pat Donohue of the U.S. Postal Service when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I’m Paul Lawrence and this morning’s conversation is with Pat Donahoe, Chief Operating Officer of the U.S. Postal Service. Joining us in our conversation is Bill Takis.
Mr. Takis: Well, Pat, we know that one of the biggest issues that is facing the Postal Service is transforming itself to meet the challenges of competition and new customer demands. Can you tell us a little bit about the transformation efforts that the Postal Service has undergone in the last few years?
Mr. Donahoe: Sure, Bill, couple of years ago we put together what’s called our transformation plan and what that is, is pretty much a plan that we’ve laid out internally and of course communicated it externally on where we want to go from a service standpoint, from a people standpoint, from a revenue generation standpoint, from a cost standpoint, but the key for the transformation plan is not exactly what it is but it's why we are doing it. In the Postal Service we realize that the model that we’re presently working on, model that was set up in the early ‘70s and was really well thought out has changed substantially and you know the world changed. And we, back in the ‘70s and ‘80s, we had a monopoly lock on -- on a lot of the correspondences because people had to put things in the mail. They can pay bills electronically now. They can transmit information electronically now. So what we are faced with is an issue that pretty much boils down to this.
Our revenues have been flattening over the last few years, well, at the same time our delivery network continues to grow and historically they’ve grown the same. We’ve been able to afford the deliveries because the revenue stream has been there. So we’ve got to set about transforming this organization changing the way we do things in order to be able to keep up with the growth -- the ever -- the continuous growth that we have in that delivery network.
Mr. Lawrence: How will this transformation plan guide future operations?
Mr. Donahoe: Although the key -- the focus like I said was service people, cost and revenue and in each one of these areas, Paul, we’ve got a number of plans in place. We are very proud of the fact that over the last four or five years we have really moved service in a positive direction and that breaks down two ways, transit time services measured -- it's measured by IBM from a standpoint of how long it takes for a mail to get from point A to point B. That’s moved in a very positive way. Right now 95% of the mail across the nation that’s considered overnight delivery gets there on time. And we are happy with that. Sure, there is room for improvement.
We will continue to move in that direction. So besides transit time from a service standpoint, we are also working on customer contact. How you are treated when you come into one of our lobbies-- Are we pleasant or do we give information? When you pick up the telephone up call us, do we have good information being provided on the other end of the line? How accessible is the Postal Service from a computer standpoint? usps.com is our Internet address, one of the most visited Internet addresses in the world and the content that’s in that internet address, you know, the ability to get information the ability to buy stamps through the internet, the ability today to actually mail a package from your home through our click-and-ship process. Those are some of the service areas that we are working to improve because that’s the way America works today.
Mr. Lawrence: Is that being picked up by the public in terms of their perceptions of the Postal Service?
Mr. Donahoe: It's very interesting. The last couple of weeks we have started an ad campaign around -- we have -- we like to make sure that before we do something and before we talk about something we’ve have done a good job internally to make sure that everything is working in the right way. So if you choose to go on the Internet and weigh and rate and pay for a package and then at the same time order a customer carrier pick up -- for our letter carrier to stop by your house the next day -- that works flawlessly. So we have been advertising it and it’s amazing that the pickup and the number of pickups that we have been having in the past couple of days increases on a daily basis of two and three thousand requests over the previous day.
Mr. Takis: I also know that in any competitive business the cost containment is very critical to keep up with your competition. How do you balance the cost containment objectives with these customer services objectives that you have been talking about?
Mr. Donahoe: In the first segment though we are talking about, Bill, the whole idea of communication -- internal communication with employees. Our employees know that the service is paramount that -- you know we have to get the mail delivered day in and day out. A good example is what’s going on in Florida right now. Monday -- this past Monday the day after hurricane Jeanne came through in the Melbourne and Vero Beach area and we’ve had practically a 100% delivery because the employees know somebody is waiting for mail whether it's check from payment or insurance information, so people are really good about providing that service. You get -- people also understand in our organization efficiency is critical. You can’t let this -- the price of the stamps get so expensive the people would look at alternatives like electronics.
So our focus over the last few years has been to control the number of people in the organization from a complaint standpoint. We have reduced the complaint in the Postal Service from a high of a 803,000 in the year 2000 down to 708, so you are looking at almost 95,000 fewer people in a four-year timeframe, when in the same time we have added about 8 million new deliveries, so its -- we keep our eye on the service. We keep our eye on the efficiencies. People understand in this organization you have to do both at the time if you are going to be successful and that’s in any business.
Mr. Lawrence: You mentioned employees a couple of times in our conversation already. What strategies have you used to, you know, improve the work force to create a high-performing workforce and at same time I guess, you know, keep good relations with the union.
Mr. Donahoe: Oh, a couple of things Paul. Communication is critical and again people responded. I think in any business, in any environment you are in, whether it's private industry or the government, if you say to people this is what we need to do and people see that, I mean when you joined the Postal Service you come from many different walks of life from many different areas across the country but once people get in, they know how important service is, so you have got that out there or persons comes into the organization, they strive for that. You know we do a lot of additional developmental work internally too. We do a lot self promotion from the ranks into our supervisor and management ranks, we’ve got a number of different development courses that we teach people whether it's inside and outside instructors to give people an opportunity to move up through the organization and that builds for a good organization. If you take a look at some of our competitors, FedEx and UPS, excellent companies, they develop people the exact same way.
Mr. Lawrence: My perception is that the union should deal with some of the toughest fare aggressive whatever, what advice would you give to others especially in government, quasi government to deal with unions.
Mr. Donahoe: Our unions are, they are not unlike any other union, I guess their responsibility to their members is to consistently work for a better pay and better working conditions. Our unions have also worked with us very well. The letter carriers, the clerks routing carriers, mail handlers those unions have stepped up they understand the importance of revenue generation in our organization, they understand the importance of excellent service and they worked with us in a number of areas. Safety, for example, we’ve got a joint working situation right now with the American Postal Workers’ Union and also to make the Postal Service the premier safety organization from an OSHA standpoint. When you get people working together like that towards a common goal, it's amazing how far you can go.
Mr. Lawrence: A few minutes ago you talked a little about technology for example the click and ship and you usps.com. How has technology changed the way you did business?
Mr. Donahoe: The change is amazing, I think to myself. When I first started 29 years ago we were installing what’s called letter sorting machines. They were gigantic machines with keyed-in ZIP codes and everybody considered that high technology. Well, in the course of you know 29 -- 20 years as a matter of fact, we have moved to the point where letter sorting machines are ancient history. Most manual cases are ancient history. The Postal Service right now is the world leader in article character technology. We read and sort about 95% of the letter mail or about 75% of these oversized letters. The flaps we call them through automated technology that nobody ever touches. We can -- computers today can read addresses and decipher addresses including handwriting at the rate of about 90%. I thought my handwriting falls in that 10% but I think the rest of the -- so what has happened is this where technology was looked at, people feared technology – if the technology will comes into place we will lose a lot of mail, it's really been a tremendous asset and benefit to us to really both reduce cost and improve service.
Mr. Lawrence: So -- your work forces embraced that over time.
Mr. Donahoe: Absolutely.
Mr. Lawrence: Postal service also does a -- a lot of work with the airline industry and recently they’ve been having some problems in terms of financial difficulties. How does it affect postal operation?
Mr. Donahoe: We work with, we -- we have to fly a substantial volume of our mail in order to meet service standards. Priority mail, and what we consider what's called 3 day first class, that’s coast to coast mail. It’s mail that’s generally over 1000 miles. For years we’ve had excellent partnerships with the airline industry, as a matter of fact, we consider ourselves in a lot of ways responsible for the airline industries and -- United and North West. We were their biggest customers for a number of years. We continue to work well with the airlines.
The airlines have had a – situations financially that have caused them to make some changes in routes and sizes of planes and that’s had some effect on us to. We also ship a substantial amount of our mail, priority mail, express mail and first class with Federal Express. They’re an excellent partner. They move mail very well, helped us to move service in the right direction. And similarly we even have some contracts with UPS.
Mr. Lawrence: It’s interesting especially dealing with the competitors. As the postal service seeks to do business differently, we often hear about the term “intelligent mail,” what is it and why does it matter? We’ll ask Pat Donahoe of the US Postal Service to explain this to us when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence and this morning’s conversation is with Pat Donahoe. Pat’s the Chief Operating Officer of the US Postal Service and joining us in our conversation is Bill Takis.
Mr. Takis: Well Pat, the transformational plans you spoke about are -- call for a growth through customer value, and I understand the Postal Service is looking to expand the way its products are provided. I've had a personal experience using the kiosk in a nearby post office, and I found it just very effective. So I'm curious about the kiosks, about how services will be provided through that.
Mr. Donahoe: One of the goals that we’ve got again is to make, doing business in the postal service very, very easy. And I mentioned before, you can actually mail a package online these days right from the comfort of your den at your house on the computer and we’ll pick it up. Then one of the other things we have been rolling out in the last -- this past year, starting in April, what we call the Automated Postal Centers and that’s been a personal issue and I love that machine. You can go and use one of these, we call them an APC, Automated Postal Center, debit-credit card, you can buy stamps, you can mail a package, you can do about 80 percent of any transactions that you would do at a vendor, on one of these machines. They’re very quick, they’re easy and they’re convenient.
We’ve started rolling them out in April and we right now have, we’ve got 2500 going out between April this year and November. We’re at about 1800 right now -- business wise, just since we started in April, we’ve done about $29 million worth of postage at these kiosks, they’re very convenient, jokingly and I've used them. I've used them in Alaska. I've used them in California. I've used them in Washington DC. An inside joke is that we time -- see how fast we can get stamps out of the machine.
So you know from standing at that machine, getting your debit card out and swiping it and keying it, my personal best is 27 seconds, so, it sure beats having to wait in line; and that’s the key thing for us. I mean, one of the other aspects of revenue generation is not just giving people options but also trying to make the visit to the post office a more pleasant experience, so they don’t have to wait in line, so they have a choice. You can use a -- if you wanted to just buy a book or 2 stamps, you use the Automated Postal Center.
Mr. Lawrence: Well just out of curiosity, something like the APC, how long does it take to develop a product like that?
Mr. Donahoe: That’s an interesting question. It took us probably a little longer to develop that than we would’ve liked to, that’s -- that process has been in the development phase for almost 4 years, but what happened was, we’re kind of glad it took that long because if you looked at technology 2 years ago, what we would have put out there would not have been very good. I mean we -- you know, when you look at vending technology and the difference between the machines capability and vending versus what you have now. A lot of those improvements have occurred just in the past couple of years, so when the technology was there and it presented itself in a way that we said this is the right thing, we pretty much condensed everything down to about 6 months with the purchase, the development and that -- the machines are rolling out right now as quickly as we can get them out.
Mr. Lawrence: How have the customers accepted them, are they as excited as you are?
Mr. Donahoe: They love them. Customers, well if you think about it, you know why I'm personal story – I’ve probably been in a bank about 10 times since 1975, when I got my first ATM card. So customers who are used to ATMs, they like pumping gas, I mean -- think about when you go to a gas station, you use a debit card and credit card, pay for gas and it’s the same with us. People really like the convenience and they’re not afraid of the machine. I mean we have people -- part of the roll out was to have a lobby director so that if a person came in, we could work them, walk them through the process. What we find is people get in there, read the instructions, pull out a debit card and 1 2 3, they’re buying stamps right there or mailing packages. It’s a simple process and it’s a convenient process.
Mr. Lawrence: And lots of them were open 24 by 7 I understand, so you can go even when a post office is closed?
Mr. Donahoe: That was a goal. We wanted -- we’ve worked that to over the past few years to expand the number of 24-hour operations, so we thought, you can put this machine, the way we set them up, we put them on what was called the box lobby, so that’s the 24-hour access and we also have got collection receptacles, so if you want to mail a package, you rate it and put the meter strip on it, and you can drop it right into a secure box and know that nobody else will touch that package, if it’s there all night long.
Mr. Takis: It sounds like a wonderful way to get your customers more convenient access to you -- what are some of the other things you mentioned -- carrier pickup from your home and then other programs?
Mr. Donahoe: The carrier pickup was something that again that we’re very happy, very proud about and that’s again simply using technology that exists out there. Say a person can go on the Internet, they can rate and weigh a package and then actually go with a click of a button, send a message to their local post office that says, I have 2 or 3 packages; I’d like you to stop by and pick them up tomorrow. We do that across the country, I mean we’ve got that system set up in over 30,000 locations across the country, where someone coming by on one of the delivery visits. I mentioned earlier in the program just stops and either picks the mail up, it’s left on your porch and if you’ve, you know, leave a note at the door, we’ll picked it up and get that package on it’s way.
Mr. Takis: Paul at the end of the last segment mentioned the term intelligent mail and lot of people in the industry have heard that term. Can you tell us a little bit about that and what's that -- what that’s doing to help change the operations of the Postal Service?
Mr. Donahoe: Well again with technology, we have the ability not just to read addresses and sort mail. We also have the ability to pull information off of mail pieces. So as barcode technology has changed, not just Postal Service been on -- you know, what you see today, whether you’re at the grocery store or you are at the airport with your baggage, you get a tag with a barcode on it. That kind of information can be picked up off of an envelope and provide some intelligence about the envelope itself. Information like the mailing date, information like a customer ID number, number that a customer might want to put on there. So they could use, they can go then into our tracking systems through a process called Confirm and actually see where that mail piece is. You know this is a -- an ongoing process intelligent mail, there’s -- we see a lot of value for the customers, besides just the physical delivery, but information and the ability for customers to use that information to change the way they do their business.
Mr. Takis: What about the impact of various other types of technology on your business? I know with the increase of the Internet, you talked a little about it before in different ways to pay bills online. How has that affected the way that you do business in the overall volumes that you see and various other aspects of your business?
Mr. Donahoe: Well, one of the concerns that we -- that we do have though as I mentioned earlier is the flattening revenue and also the change in the mail mix. We will deliver 208 billion pieces of mail this year, but this will be the first year that we have more standard mail than first class mail. It’s the first year, now the concern for that, or concern with that is the fact that with standard mail there is less contribution at the bottom line of the organization. So as mail moves from first class to standard, you know that -- that’s makes efficiencies and cost reductions all that more important. From a technology standpoint though, we look at electronic diversion as a fact of life. It’s going to change with demographics as younger people enter into the -- the general economy.
They’re going to pay bills and receive bills online, we understand that. We’re working very hard in the entire industry though, again through things like intelligent mail, through things like click and shift through, just working with small business to generate interest in the mail itself, to provide value in the mail. If you think about it, if you are a small business and you want to contact customers, want customers know about your business, you have options. We want to make mail one of those options. We want customers to start saying, hey I can send out a 1000 post cards or I could send out 500 letters and know that somebody is actually going to open the mail box, look and see that correspondence. We think there is lot of value there and we think there are opportunities to move into those areas and to make up for some of the diversion.
Mr. Takis: You’ve described, many -- several new initiatives the Postal Service are undertaking. How do you measure the success of these initiatives?
Mr. Donahoe: Well it’s the bottom line, so I -- if you know, when you take a look organizationally -- we’re organizationally -- we’re a $68 billion organization. You have to have big ideas that mean something, in order to make a difference in that $68 billion. Now fortunately there is mail, it’s in the system day in day out, just by the nature of advertising or bill payment, and bill presentment. We are -- you know you can work on the French or you can get into some other areas that maybe you’re not that comfortable in. We don’t want to do that. What we are interested in is generating value around mail, as I had mentioned earlier with small business, people who are in the mail right now. We think there is a lot of value in it and that will have a positive effect on that $68 billion enterprise. Again if you take a look just for advertising, the advertising spent on a national basis is over $200 billion a year. We probably have about 21 percent. If we’re able to pick up another 2 percentage points on that, you know you’re talking four to 500-600 million extra dollars that goes to our bottom line and that’s what we’re looking.
Mr. Lawrence: It’s an interesting point, I didn’t realize the advertising has been so large and there’s so much there for you. What changes are ahead for the Postal Service and what does the future hold? We’ll ask Pat Donahoe of Postal Service to give us his perspective when The Business of Government Hour returns.
Mr. Lawrence: Welcome back to The Business of Government Hour, I’m Paul Lawrence and this morning’s conversation with Pat Donahoe, Chief Operating Officer of the U.S Postal Service. Joining us in our conversation is Bill Takis.
Mr. Takis: Thanks Paul. You know, throughout out this whole discussion we talked a lot about the transformation of the Postal Service looking to the future. What is some of the critical success factors that you see that will measure your overall success in the future?
Mr. Donahoe: Bill, probably the most critical success factor that we see and that’s somewhat hard to measure is the on going strength of the Postal Service. We -- you know, we view the Postal Service as a critical part of the entire mailing infrastructure; and I think people don’t realize how large the actual business is. It’s estimated between 850 and 900 billion dollar industry and that goes from printers and paper companies and -- and companies that ship and companies that produce mail and companies that are in business to receive mail. We are right in the middle of that whole process.
Now, our goal with the transformation plan is to be able to continue to keep the Postal Service strong financially, which allows us to do the things that we need do day in and day out to serve these customers. If we weaken, if we are in a situation rates have to go up, that creates a very negative flow through the entire industry because, you know, in -- in many of these businesses postal rates represents 30, 40, 50% of the total cost of the operation of that business. And when you’ve got fluctuations like a double-digit change in the rates-- that can have a negative effect. Our focus through transformation plan is to do a number of things from service and cost and -- and the revenue generation to keep the Postal Service strong.
Mr. Takis: So it’s not just about the postal service which is obviously very important but it’s also about that industry as a whole.
Mr. Donahoe: The entire industry, the -- the, you know, it’s the industry, it’s a service to the American public like, you know, we feel from a postal management standpoint that it’s our responsibility to make sure we do the right things to keep the Postal Service in good stead for the entire industry.
Mr. Takis: And as you look forward into that industry over the next several years, coming decades really, what do you see the major changes in that industry? Technology, people or processes, what -- what types of changes do you see and how it’s -- how will the Postal Service fit into those changes?
Mr. Donahoe: Well, I think you’ve -- you’ve seen a big change just in the past few years. Some changes have been tried and have not worked and some changes have tried -- have been tried and have worked. From a -- from a personal correspondent standpoint, the bill payment, bill presentment, that’s an ongoing process. As we had mentioned before as demographics change, that changes will continue to increase. There’ve been some people who’ve gotten into the Internet on some content-based advertisement and periodicals, magazines that had not been really that successful. I mean they found – that yes, it might be very cheap to be able to get out there and -- hit a person’s computer, but many people either don’t agree with the ads or are afraid to open the ads and costumers have come back to the -- to the mail. One of the things that’s really interesting is that -- is that some research has been done around the catalogue business, where a few years ago people were thinking of you know, the catalogues will be online. But research shows that people really like to sit down and hold that catalogue in their hands and make notes and -- and look very carefully and that -- we know that will keep the mail like catalogues and -- and that type of advertising in hard copy and in the mail.
Mr. Takis: And that’s a very important part of that overall industry.
Mr. Donahoe: Absolutely. As I said earlier you’re seeing a shift. This is the first time we’ve had a cross over where -- where there’s going to be more mail delivered and more mail entered at a standard rate, which is the advertising rate than we have seen at first class. So keeping that viable, keeping value around -- that class of mail is very important.
Mr. Takis: Now, we all know that the world has fundamentally changed over last three years, since September 11, how has -- how has that affected the overall industry that you just described and the Postal Service in general, and how does that affect your future plans, the whole security threats?
Mr. Donahoe: Well, we’ve worked very hard internally and we’ve -- we’ve kept a -- we probably, as I mentioned earlier about the technology that -- that we’ve got for a letter reading. We’ve also worked very hard with a number of companies in here in the U.S on technology to keep the mail safe for both our employees and the general public. We had the terrorist and the Anthrax activities a couple of years ago, we’ve -- we’ve learnt a lot from that on processing and activities around. But we’ve also done a tremendous amount of work on the technology side to incorporate technology into our processes. To -- to say make the mail safe.
Mr. Takis: In terms of the future again what is your vision of the postal service say 10 years, 20 years down the road, what -- what type of postal service will it be then?
Mr. Donahoes: Well, it’s -- it’s interesting, I mean, we -- we think about this internally and we debate this using the decisions that you make now and what that -- what affect is that going to have in the future. We think it’s absolutely critical that we continue to do the right things for our costumers, now from an service standpoint, from an access standpoint, from a -- from a cost management standpoint so that -- so that going into the future, there’s trust that the Postal Service will stay on the right track, be managed well and stay strong on that industry.
You know, if you look out you pick yourself well, you know what happens if first class mail drops off precipitously or what happens if there are some changes in the way that people see advertising, read advertisements, and those things can be out there and there maybe some changes.
Our focus has been to try to positively affect those things, keep value in the mail, reach out to customers that aren’t in the mail, work to continue to move our revenue base in the right direction while keeping an eye on the bottom line cost, so that people, once they get into the mail, trust that their investment, that decision they made, is a good decision. So we think that there is a lot of value. We think that mail would be very vibrant and you look out 10-20 years from now.
We see continued growth because again from an -- the mail is the most direct way to get in front of somebody’s eyes. It’s more direct than radio, television, newspaper, magazines, Internet, anything -- the mail is the most direct way. We see value in that and that’s the way we will continue to head.
Mr. Lawrence: And that helps the overall mailing industry as you talked about before.
Mr. Donahoe: Absolutely.
Mr. Lawrence: Pat, you had a long and very interesting career, so I’m curios and have some question here, what advice would you give to person interested in a career in public service?
Mr. Donahoes: My son is in public service, he works in for the Department of Defense. He just came out of college and I’m proud of the fact that he took that direction. There is tremendous opportunity in anything that you do in public service with -- especially with the Federal Government and I tell that to people all the time.
If you -- in the postal service, you can pretty much do anything that you want to do, if you set your mind to it, whether you want be in an operating environment, we’ve got large plants and facilities that process mail. If you want to be in marketing, we’ve got tremendous marketing reach, communications, finance… There are so many different areas that a person would have an opportunity to get into and move up into the postal service and I would encourage people to keep that option open and pursue that option.
Mr. Lawrence: Well, that’ll have to be our last question Pat, we’re out of time. Bill and I want to thank you for squeezing us in your very busy schedule and joining us.
Mr. Donahoe: Oh, I appreciate it, again I appreciate the opportunity to spend some time with you and one message I guess to all of the audience out there, I would like to leave them with this, in the postal service who’re committed to doing a great job, we appreciate the trust that the people have in us and as I said we want to continue to keep the postal services strong for the industry and for the American public. Thanks again.
Mr. Lawrence: Thank you. This has been The Business of Government Hour, featuring a conversation with Pat Donahoe, chief operating officer of the US Postal Service. We’re sure you’d visit us on the web at businessofgovernment.org, there you can learn more about our programs and research in the approaches to improving government effectiveness and you can get a transcript of today’s very interesting conversation. Once again this is businessofgovernment.org.
This is Paul Lawrence, thank you for listening.