APPENDIX B — Executive Summary of Outline for 
Discussion: Concepts for Postal Transformation, U.S. Postal 
Service, September 30, 2001
The United States Postal Service is one of America’s most enduring institutions, an enormous 
communications network designed to “bind the nation together through the personal, educational, literary, 
and business correspondence of its people.”  An independent entity of the federal government, it is directed 
by law to provide universal postal communications to all persons residing in the United States. It was 
established before the American Revolution and has functioned without interruption for 226 years. Today, 
with annual revenues approaching $68 billion, it is the eighth largestorganization in the country, and, if 
included, would rank as the twenty-sixth largest enterprise on Fortune magazine’s Global 500. It has a 
career workforce of nearly 800,000, which makes it one of the largest employers in the nation, and its 
diverse products and services anchor an $871 billion mailing industry, which in turn employs nearly 9 
million Americans.
However, today’s soft economy, changing global markets, new technologies, and the need to deliver mail to 
an ever-increasing number of addresses are combining to put the future of the Postal Service at risk. The 
Congress and the General Accounting Office have taken note of this and asked the Postal Service to 
produce a Comprehensive Transformation Plan by the end of the year that will address how the Postal 
Service proposes to meet these challenges. This document, Outline for Discussion: Concepts for Postal 
Transformation, is a progress report on the Postal Service’s first steps toward transformation and an open 
invitation to stakeholders to join the discussion. The Postal Service is reaching out to the American public 
andpolicy makers and asking them to consider how the Postal Service can best serve them and the American 
economy in the 21st century. 
The Postal Environment 
While much of the previous decade was marked by financial success for the Postal Service, significant 
marketplace shifts – emerging alternative communicationstechnologies, new competitors both domestic and 
international, and changingconsumer attitudes and behaviors – have altered the landscape. Within the next 
decade technological innovations such as mobile commerce, broadband Internet access, interactive TV, data 
mining software, and new printing technologies will change the way businesses and consumers interact. 
Domestic delivery firms, such as United Parcel Service (UPS) and FedEx, and liberalized foreign posts, 
such as Deutsche Post World Net and TPG  of the Netherlands, are aggressively competing in Postal 
Service markets. These drivers for change are moving rapidly and will continue to change the traditional 
postal business whether or not the Postal Service transforms.
Meanwhile, although the six major markets in which the Postal Service operates – retail, financial services, 
communications, advertising, logistics and delivery services – are expected to grow, the long-term role of 
the Postal Service in those markets is uncertain. Electronic billing and payments, pre-authorized debits to 
bank accounts and credit cards, and Internet-enabled Electronic Data Interchange will reduce the need for 
and use of paper bills and payments. Electronic communications will grow at a much more rapid pace than 
traditional hard-copy communications, particularly on the Internet. Using modern technology, advertising 
will be more targeted, personalized,and interactive. The logistics and delivery markets will use increasingly 
sophisticated information systems to provide integrated, supply chain management solutions tocustomers’ 
needs. Global liberalized posts are acquiring logistics companies and other mail-related businesses both in 
and outside of the United States to position themselves as communications and logistics global 
conglomerates. The United States Postal Service, operating under current law, has not joined them.
Challenges
The current legal framework is but one of several challenges that has led the Postal Service and its 
stakeholders to seek change. Future challenges to success exist within postal operations, in the structure of 
postal finances, and in the necessity to find, train, and equip the workforce and its future leaders. Each of 
these areas requires attention in any discussion of the future. Among the specific issues to address is that 
possible reduced mail volume, when combined with cost increases for labor, employee health care and 
retirement costs, fuel, and facilities will drive a continuing gap betweenrevenue and expense with severe 
financial implications for the Postal Service. 
As the Postal Service nears its statutory $15 billion debt ceiling, it faces a criticalchallenge in terms of cash 
flow and capital investments. Capital investments have reduced costs through mail processing automation, 
but future productivity gains may be harder to find. Technology investments, likewise, are necessary to 
transform service offerings and prices to meet future customer requirements. The break-even requirement of 
the Postal Service and the uncertainty of the future economy will also make these investment needs difficult 
to fulfill. 
Controlling the costs associated with the universal service obligation is anotherchallenge. A transformed 
Postal Service must consider alternative methods of reducing these costs and providing universal service as 
mail volume growth declines and the delivery network expands. Network improvements will be considered 
in the Transformation Plan to reduce these costs. Challenges in the human capital arena include workforce 
planning and complement adjustments within the constraints ofcurrent labor agreements. Today’s binding 
arbitration processes eliminate the threat of labor stoppage, but many believe that these processes could be 
improved. Postal Service compensation must also be reviewed, since today’s salary caps drive some 
potential leaders as well as skilled, experienced executives to other organizations.
Taken together, these internal and external issues form a series of challenges that the Postal Service, as 
currently structured and regulated, must address. If a privatecorporation faced these same challenges, it 
might close facilities, reduce output or services, sell assets, abandon some unprofitable ventures, merge with 
anothercompany, or even close its doors. These are not options for the Postal Service. It must continue to 
operate to fulfill its obligation to the nation. How it will do so and in what structure are the challenges of 
transformation.
Transformation Strategies
The Outline for Discussion proposes three phases of organizational transformation for consideration and, 
within each phase, discusses several strategies. The three parallel phases to be considered are:
*	Incremental administrative and operational improvements possible under current law; 
*	Moderate legislative reforms; and, 
*	Fundamental structural transformation. 
Current Postal Service actions to freeze capital expenditures, reduce the number of managerial employees, 
and take costs out of operations are examples of incremental administrative and operational transformation, 
and fall within the legal and public policy framework that exists today. Through administrative and 
operational action that ispermitted under the current law, the Postal Service would continue to use existing 
authorities to reduce costs, increase efficiency and generate new revenues. The model for this phase is 
continuous improvement of the current Postal Service. 
The objective of moderate legislative reform would be to improve the flexibility ofthe Postal Service and 
prepare it for the future. Key reforms could include moreflexible pricing, allowing the Postal Service to 
make a profit, adoption of network improvements, and compensation changes. The options for legislative 
reform range from modest reforms that would enable streamlined rate-setting processes, to reforms that 
would grant the Postal Service greater commercial freedom. One aspect of this change might be structural 
separation between monopoly services and competitive services, a topic discussed for several years during 
debate over legislative reform.
Fundamental structural transformation would reconstruct the basic postal modelbased on a redefinition of a 
universal service obligation. This phase could entailtransformation into a for-profit corporate enterprise, 
owned either by the government, Postal Service employees, or the public through an offering of stock. Still 
otherfundamental structural reform models may be suggested by stakeholders in coming weeks. All would 
seek to achieve fundamental reform of the factors that contribute to postal costs and revenues and the basic 
business model of the Postal Service that has existed since 1970. 
Stakeholder Input and Next Steps
A Steering Committee of senior executives selected by the Postmaster General willformulate the 
Transformation Plan. The Postal Service will coordinate stakeholderinput and internal analysis of the 
transformation phases. Subject matter experts and specialists throughout the enterprise will develop 
strategies and analyze the impact of proposed changes. Specialists from other government agencies and the 
private sector will also be asked to focus on and address Postal Service transformation issues.
To obtain stakeholder participation in the development of the Transformation Plan the Postal Service has 
developed a two-step stakeholder engagement plan. Step One was designed to provide background for this 
Outline for Discussion and entailed a dozen informal meetings in August and September 2001. Postal 
Service executives and representatives of postal policy makers, unions, management associations, the Postal 
Rate Commission, major mailers, and postal trade associations participated. Outreach during Step Two will 
include publication of the Outline for Discussion on the Postal Service’s Strategic Direction web site at 
www.usps.com/strategicdirection. In addition, a special notice will be placed in the Federal Register, 
directing interested parties tothe web site for their comments. Focus groups of small business owners 
andconsumers will be convened, and postal employees will be reached through internal communications. 
Additional meetings will be conducted with representatives of postal unions, management associations, the 
Postal Rate Commission, major mailers,suppliers, competitors, critics and others. A summary and analysis 
of stakeholdercomments will be incorporated in the Comprehensive Transformation Plan to besubmitted at 
year end.
This Outline for Discussion is a “living document,” the first step in a complex, ongoing process. 
The collected input, analysis, and conclusions will assist policy makers as they guide the future of the 
United States Postal Service. The basic questions that are raised in this document are: 
*	To best serve the needs of the American people and the American economy in the 21st century, what 
should America’s postal system be like (or transform to) in the next decade? 
*	Should that postal system provide universal service and what should that entail?
*	What should the “core” services of the future postal service be? 
*	How should the nation structure a future postal system to be as productive andefficient as possible and 
to ensure that consumers pay only what they wish to pay, for as much service as they can afford?
*	Can the Postal Service continue to provide universal service under the currentfinancial arrangements if 
volume slows or declines significantly? Are there other financing mechanisms needed?
*	What steps should be taken today to anticipate the human capital requirements of the future postal 
system in a manner that embodies core values of respect, dignity and diversity while providing 
incentives to encourage continuous serviceimprovement? 
*	Is it possible to design a government postal system in the United States thatoperates more commercially 
and still serves important social objectives includinguniversal coverage?
*	How would a privately owned postal entity or entities perform against publicexpectations for postal 
services? Are there other models that may do a better jobfor the American people?
Informal discussions with stakeholders and policy makers have reconfirmed that there is a lack of policy 
consensus about the answers to these questions and others. There may not be a need for all stakeholders to 
agree on every question. But it is expected that there may need to be a process of public policy discussion 
before issues can be resolved and a widely accepted transformation plan can be crafted. The purpose of this 
Outline for Discussion is to facilitate that process.
  Title 39, U.S. Code, Sec. 101 (a).
United States Postal Service Transformation Plan
April 2002 | Appendix B–1