If ever a postal rate increase could be considered strategically good for mailers, it would be R-97. For years, mailers have asked for a more customer-focused, market-responsive postal service and smaller, more predictable rate increases.
The postal service finally listened.
R-97's moderate increase results from changing management practices and attitudes at the USPS, and it represents a unique opportunity to change the rate-making paradigm for the better. So how does the mailing community respond? We question and grumble.
We grumble about the postal service's higher-than-anticipated 1998 revenues and the use of 1996 data to predict the 1998 Test Year revenue needs. We allege unfair treatment of our various mail classes. We conclude that the USPS doesn't need a rate increase and we question why one is even being litigated now.
But this short-sighted perspective only considers postal developments since R-97 was filed and it ignores the bigger picture — a precedent-setting opportunity. Our criticisms hinge on the premise that, because the postal service used a near-term test year, we now have real data with which to judge and question its request for more money. However, it took this approach to avoid inflated cost estimates typically associated with long-term test years in traditional rate cases. The irony is that the postal service was trying to give mailers a smaller increase, consistent with our long-standing pleas.
If R-97 is delayed, we will likely revert to the status quo, defined by double-digit increases that often are as unpredictable as they are big. Surely, we haven't forgotten those large increases from R-87, R-90 and R-94 that hurt us all and put some of our businesses in jeopardy. These increases were reactions to increased long-term costs, rather than proactive estimates of near-future needs.
Some of us may well ask, “How can I sell this to my CEO?” “The Age of Paradox,” by change management guru Charles Handy, is a relevant guide to ensure long-term growth and vitality. He asserts that an organization must begin new initiatives before its current business path peters out.
Handy depicts an organization's growth as progressing up a slowly inclining curve. If it continues on that path, it eventually will lose momentum and its business will fall sharply. To sustain long-term growth, it must shift gears before the old curve peters out, so that it can create a new and more energized curve. The key is knowing at what point to take that short-term “hit,” including the frustration that inevitably comes with change. Paradoxically, that is the exact time the organization is operating smoothly. Such decisions are critical to an organization's successful future, yet are among the toughest a manager can make.
R-97 marks the beginning of that critical new growth curve for the postal service. At this point we have the time, resources and energy to get the new curve through its transition before its old path hits bottom.
Costs are declining in large part because of reclassification and cost-cutting initiatives, and revenues are rising faster than costs. The USPS is increasingly focusing on the customer. It is operating more like a business and less like a sleepy government agency. Service to mailers is improving. The economy is strong, and inflation is the lowest in recent memory. What better time than now to make strategic changes that will have a long-lasting, positive impact for all mailers?
In the end, the Board of Governors will determine if an increase is needed and when it should occur. It is this group's statutory duty, and we must trust that the governors will do their job in a way that is fair to both the postal service and its customers. They can do that job only if the Postal Rate Commission issues a decision that supports the sound business principle upon which the USPS filing rests.
No one wants increased costs, especially during good times. But the time to seize this opportunity is now. And a small increase is a minor sacrifice, if it will help give us smaller, more predictable rate increases that are less than the rate of inflation in the future. That is something even our CEOs can agree upon.
Vincent Giuliano is senior vice president of government relations at Advo Inc., Windsor, CT.