The mail man cometh.

• Author: Riley, Michael J.
• Position: Management of the U.S. Postal Service

After you master the economic value added measurement and post annual profits of $1 billion, what's next? The CFO of the U.S. Postal Service shares his ideas.

The U.S. Postal Service ended FY 1997 on target with a record 92 percent of local first-class mail delivered overnight. Mail volume grew by 4.1 percent, the highest level in nearly a decade, while managers and employees drove down costs. We got lots of attention. So how did we go from being a long-time money-loser and the butt of countless jokes to posting profits in excess of $1 billion three years in a row?

The answer is that we redefined ourselves, thinking, planning and working more like a business than a government agency. And, like many businesses, we began measuring our performance using the economic value added (EVA) formula, proudly making economic strides that few mainstream businesses can match.

We chose EVA because of its public successes with companies like Coca Cola and Briggs and Stratton. Only a small percentage of private industry uses it, so we're in the forefront. It's an innovative approach for a government agency to take and has been key to our turnaround. We focus on a small number of goals, such as service and cost reductions, and pay enough in cash incentives to 80,000 supervisors and managers to motivate behavior change. Private enterprise is asking about our success in pioneering its use.

The Postal Service is legally required to achieve revenues at least equal to costs plus an allowance for contingencies. Many long-term government employees interpreted this to mean either break even or lose money. In fact, in one survey, a majority of our senior executives thought it was wrong to even earn a profit. So we had net losses in 17 years and profits in only six between 1971 and 1994. This starved the company of cash for capital improvements and led to higher percentage price increases than is the case today.

Recent profits enable us to replace and update buildings, vehicles and technologies, and pay down debt to reduce costs. Profits, all of which are re-invested, also have set a tone for our workers to be more business oriented. Our sales people and field managers are asking for information on which products are the most profitable. That's especially ironic because, until recently, the Postal Service didn't use the term "profit."

Instead, like a government bureaucracy, we said "contribution toward costs" and "surplus" or "deficit."

The $3.2 billion we earmarked for capital projects involving facilities, vehicles and technologies in 1997 is double the average we spent annually over the past decade. Our plan calls for $17.3 billion in projects from 1998 to 2002. For example, in the past two years, optical character readers have gone from scanning less...