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The Management Blog


Don't Blame the Internet for the Post Office Blues

Posted by: on March 18, 2013

As the U.S. Postal Service, running enormous deficits, closes processing centers, sells off real estate, and inexorably counts down to the day in August when it will cease Saturday mail delivery unless Congress intervenes, its senior leaders blame the Internet, Congress, almost everything but the Postal Service itself. Ah, the well-documented tendency to blame problems on the environment and attribute success to leaders’ brilliance. But the problem with the USPS, like problems with most businesses, is inside, not outside, the organization. According to the American Customer Satisfaction Index, the USPS’s customer satisfaction is 75, well below the score for the consumer shipping industry, 82.

Wonder why its customer satisfaction is below competitors’? Here’s a recent experience I had (I’m sure every reader has his or her own example): I am at my local post office and there is no line—but then again, although there are two service windows open, there are no employees at either one. And why am I at the post office to buy stamps? Because the USPS has instituted a policy that it won’t accept checks for its stamps-by-mail program without printed addresses on the checks. This means I can buy a $20,000 Toyota Camry with a check, but not $36 worth of postage. In general, lines at the post office are long, service is poor, mail gets misdelivered, and, most significant, as a consequence the USPS is losing revenue and market share to its competitors.

Let’s be clear—the Internet has decreased the volume of first-class mail as people send fewer cards and letters and pay bills online. But people now shop on the Internet in increasing numbers for an enormous volume of goods. Online commerce totaled $289 billion in 2012 with retail shopping comprising some $186.2 billion, and one market forecast of online shopping projects $362 billion in sales by 2016. Many, if not most, of these retail purchases get delivered to people’s homes. That’s why UPS (UPS) and Federal Express (FDX) are doing pretty well. Not only are both companies profitable, but UPS, for example, had 2012 U.S. package delivery revenue of almost $33 billion, compared with the Postal Service’s $11.6 billion. Simply put, there are plenty of available customers and business for the USPS to obtain, presuming it enhanced its operations and service to be able to do so.

Research demonstrates two things, both of which help account for the USPS’s underperformance. First, companies that blame their problems on seemingly uncontrollable, external factors do worse—for instance, in terms of subsequent stock price—than those that attribute underperformance to controllable, internal causes. This finding makes complete sense because seeing a problem as something external and uncontrollable reduces everyone’s motivation and sense of efficacy to fix it.

Second, financial performance is not about the industry—in this case, package and mail delivery. Although there is much discussion in the strategy literature of the importance of being in the “right” industry, a recent study by consulting firm Booz & Co. confirmed what several previous studies had shown: that industry didn’t matter that much but organizational competence and execution did in explaining company performance. The study of more than 6,000 companies in 65 industries from 2001-2011 revealed that there were top-performing companies in every industry and also that the intra-industry differences in returns were many times larger than the differences in returns across industries.

Ironically, the Postal Service’s efforts to cut costs may drive even more business away as both small and large shippers seek reliable and convenient service. So instead of complaining about external factors over which it has little control, the USPS should do what it takes to enhance the service and customer experience that would enable it to compete effectively in the many package delivery markets that are actually growing.

Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at Stanford University's Graduate School of Business, where he has taught since 1979. He is the author or co-author of 13 books, including his latest, Power: Why Some People Have It—and Others Don't (HarperCollins, 2010).
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