VARIABLE PAY AT THE USPS United States Postal

VARIABLE PAY AT THE USPS United States Postal Service Presentation at the Strategic Compensation Conference Washington, DC August 29, 2000 8/29/00 1

VARIABLE PAY AT THE USPS OUTLINE n How determine right for USPS? n What n How decisions are involved? implemented? n Could 8/29/00 you benefit? 2

VARIABLE PAY AT THE USPS HOW DETERMINE VARIABLE RIGHT? n Statutory compensation mandate? n Economics of “new pay”? n Organizational 8/29/00 climate? 3

VARIABLE PAY AT THE USPS LEGAL MANDATE n Postal Reorganization Act (Title 39) n Comparability n Level I of Executive Schedule n Collective n Pay to the private sector bargaining consultations 8/29/00 4

VARIABLE PAY AT THE USPS LEGAL MANDATE (cont. ) n Required federal – Retirement system – Unemployment – Workers’ compensation comp. – TCOLA 8/29/00 5

VARIABLE PAY AT THE USPS LEGAL MANDATE (cont. ) n Voluntary – Health – Life compensation (USPS rates) – Leave 8/29/00 federal (USPS rules) 6

VARIABLE PAY AT THE USPS ECONOMICS OF NEW PAY 8/29/00

VARIABLE PAY AT THE USPS ORGANIZATIONAL CLIMATE n Then: financial crisis – Helping the federal deficit – Compensation not comparable to private sector – Pay 8/29/00 not related to performance 8

VARIABLE PAY AT THE USPS 1995 MARKET STUDIES 8/29/00 9

VARIABLE PAY AT THE USPS 1995 MARKET STUDIES 14% 8/29/00 10

VARIABLE PAY AT THE USPS MARKET STUDIES OF BENEFITS 18% 8/29/00 11

VARIABLE PAY AT THE USPS ORGANIZATIONAL CLIMATE n Now: strategic focus – Economic – Quality – Pay 8/29/00 value added focus for performance 12

VARIABLE PAY AT THE USPS WHO HAS PAY FOR PERF? n. Management – Merit employees pay program – Variable pay program – Recognition 8/29/00 program 13

VARIABLE PAY AT THE USPS WHO HAS PAY FOR PERF? n. Craft employees – Recognition – Ideas 8/29/00 program (suggestion) program 14

VARIABLE PAY AT THE USPS WHAT DECISIONS INVOLVED? n Variable pay objectives? n Variable pay basic design? n Balance focus? n Employee 8/29/00 concerns? 15

VARIABLE PAY AT THE USPS VARIABLE PAY OBJECTIVES n. Drive organizational behavior n. Make employees stakeholders n. Drive continuous improvement n. Focus on short and long term results 8/29/00 16

VARIABLE PAY AT THE USPS VARIABLE PAY BASIC DESIGN n Team-based group incentive program n Funded by Economic Value Added (EVA) financial performance n Credit based on achieving unit goals n Reserve Account allows pay-at-risk; promotes continuous improvement 8/29/00 17

VARIABLE PAY AT THE USPS BALANCED FOCUS E C I V SER CUSTOMERS EMPLOYEES 8/29/00 BUSINESS 18

VARIABLE PAY AT THE USPS EMPLOYEE CONCERNS n Base pay differential between craft and supervisors/postmasters n Treatment of excluded or unacceptable employees n Different n VPP 8/29/00 sharing factors under VPP not added to retirement income 19

VARIABLE PAY AT THE USPS HOW IMPLEMENTED? n Employee mailings - example n Company newsletters n Association newsletters n Satellite TV training/shows n Training videos - example n Intranet 8/29/00 home page 20

VARIABLE PAY AT THE USPS COULD YOU BENEFIT? n Customer results n Employee results n Business n Labor intensity n Payment 8/29/00 results history 21

VARIABLE PAY AT THE USPS WHAT HAVE WE ACHIEVED? EXFC OVERNIGHT: ANNUAL ON-TIME SCORES Start of Variable Pay Program 8/29/00 22

VARIABLE PAY AT THE USPS WHAT HAVE WE ACHIEVED? LOST WORKDAY INJURIES PER 200, 000 WORKHOURS Start of Variable Pay Program 8/29/00 23

VARIABLE PAY AT THE USPS WHAT HAVE WE ACHIEVED? NET INCOME Net Income Start of Variable Pay Program Years 8/29/00 24

VARIABLE PAY AT THE USPS WHAT HAVE WE ACHIEVED? NET INCOME Net Income Start of Variable Pay Program Years 8/29/00 25

VARIABLE PAY AT THE USPS WHAT HAVE WE ACHIEVED? LABOR INTENSITY Start of Variable Pay Program 8/29/00 26

VARIABLE PAY AT THE USPS WHAT HAVE WE ACHIEVED? AVERAGE PERCENT PAYMENTS Start of Variable Pay Program 8/29/00 27