Key Features of USPS’s PFP Program Include Quantitative Performance Indicators and Individual Performance Elements

The PFP program includes quantitative corporate and unit indicators of  performance and individual performance elements, both of which are used  to rate PFP participants. In fiscal year 2008, 12  corporate indicators apply to all PFP participants, including measures of  timely mail delivery, productivity, revenue, and net income, among other  things. A total of 53 unit indicators apply to selected groups of  participants, such as groups of postmasters and managers at various mail  processing facilities, depending on their responsibilities and spans of  control. Some individual performance elements have target  levels of performance defined by narrative standards that are centrally  established by USPS. USPS then calculates the overall PFP rating for each participant  based on the results of corporate and unit indicators and ratings for  individual performance elements; this rating is used to determine  adjustments to the participant’s salary and any lump sum award. For PCES executives, PFP awards take the form of salary increases and  lump sum awards. Overall PFP Ratings Primarily Depend on Results for Indicators Related to Efficiency, Service, and Revenues

Overall PFP ratings primarily depend on results for corporate and unit  indicators related to USPS’s strategic goals of increasing efficiency,  improving service, and generating revenue. The Weight of PFP Indicators Varies Considerably by Participant Group

The weight of PFP indicators varies considerably by participant group,  based on the responsibilities and spans of control of various managerial  and executive positions. Opportunities to Incorporate New Delivery Performance Indicators into USPS’s PFP Program Will Follow Implementation of Delivery Measurement Systems

As USPS implements the postal reform law’s requirements for measuring  and reporting its delivery performance for all market-dominant products,  which collectively make up nearly 99 percent of mail volume, USPS will  have opportunities to incorporate new indicators into its PFP program,  notably for Standard Mail and bulk First-Class Mail. Once  such systems are fully implemented and mailers’ participation is sufficient  to generate representative data, USPS will have the opportunity to  incorporate new delivery performance indicators into its PFP program. To put these developments into context, in 2006, USPS said that its goal of  improving service—which continues to be one of its primary goals—is  supported by a “balanced scorecard” that uses service performance  metrics for the mail that is measured to support personal and unit  accountability. Postal  Service’s (USPS) pay for performance (PFP) program, (2) provide  information on the weight of the PFP program’s performance indicators in  determining participants’ ratings, and (3) assess opportunities for USPS to  incorporate new indicators of delivery performance into its PFP program.
Why GAO Did This Study

The U.S. Postal Service (USPS) pay for performance (PFP) program for managers includes quantitative performance indicators. PFP ratings are the basis for salary increases and lump sum awards for nearly 750 Postal Career Executive Service (PCES) executives and about 71,700 other participants, mostly Executive and Administrative Schedule (EAS) employees. GAO was requested to provide information about USPS's PFP system. This report (1) describes the key features of USPS's PFP system, (2) provides information on the weight of its performance indicators in determining PFP ratings, and (3) identifies opportunities for USPS to incorporate delivery performance indicators into its PFP system. GAO obtained USPS documents and data, interviewed USPS officials, and primarily based its assessment on laws related to timely delivery and interviews with senior USPS officials.

What GAO Found

Key features of the PFP program are quantitative corporate and unit indicators of performance and individual performance elements that are used to rate participants and provide the basis for awards. Quantitative performance targets are established for corporate and unit indicators. Corporate indicators apply to all participants and include measures of timely delivery, productivity, revenue, and net income, among others. Unit indicators apply to selected groups of participants and vary according to the groups' responsibilities and span of control. Individual performance elements are tailored to the participant group and, within some groups, to individuals. Individual performance elements may be defined by narrative standards or may be quantitative indicators defined with specific target performance levels. The overall PFP rating is based on results of corporate and unit indicators and individual performance elements and is used to determine the salary adjustment and any lump sum award. PFP indicators related to three USPS strategic goals--increasing efficiency, improving service, and generating revenues--collectively account for two-thirds of the average participant's rating (see fig.). However, indicator weights vary considerably by participant group, based on the responsibilities and span of control of various positions. As USPS implements requirements of the postal reform law for measuring delivery performance, it will have opportunities to incorporate new indicators into its PFP program, notably for timely delivery of Standard Mail (49 percent of mail volume in fiscal year 2007) and bulk First-Class Mail (25 percent of volume). Once new delivery performance measurement systems are fully implemented and mailers' participation is sufficient to generate representative data, USPS will be able to incorporate new delivery performance indicators into its PFP program. These new indicators would create a more "balanced scorecard" that uses service performance metrics for the mail that is measured to support personal and unit accountability.