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level is being abolished and consolidated into a new level. In a briefing on this process, the Postal Service states that the rationale behind this reorganization is to "[put] as much operating management expertise as close to locations where postal service is actually provided.” I would like to hear from Mr. Casey on how the new structure will effect this purpose.

The sweeping nature of the changes means that a large number of people will be displaced in some manner. People, as I said, are waiting on details. In a recent Federal Times article, Mr. Casey is quoted as saying that no employees will be separated or terminated and that the necessary personnel changes will be accomplished by attrition and early retirement. Many employees, however, will be transferred and I would like to know what accommodations the Postal Service will make for these people. Also I would like to have a reassurance that postal employees will not be fired on a large scale in order to implement the changes of the reorganization.

Besides the field reorganization, there are changes taking place at headquarters as well. A new position, that of Associate Postmaster General, has been created. As I understand it, this position is designed to encompass the broader goal of system development, as opposed to day-to-day running of the operation. The day-to-day operation will fall under the province of the Deputy Postmaster General, with the Postmaster General coordinating the various facets. Again, I would like to know what the effect of these changes will be on headquarters employees and how they tie in with the headquarters reorganization begun under former Postmaster General, Mr. Carlin.

Now I would like to turn to the studies being conducted by Mr. Garrity. The rationale for hiring Mr. Garrity presumably was to acquire an accurate picture of how the Postal Service functions now and how it could be changed to operate at the highest level of efficiency and service. Since several significant changes have been implemented already, I would assume that some of Mr. Garrity's work has been substantially completed. I am greatly interested in obtaining an update from him today on the status of the individual operational areas under study. I would also like to get an idea of when the study will be completed and when the members of this committee will have access to the results of his review.

Essentially then, this hearing was called to give postal officials a chance to explain the details of reorganization to members of the committee. I like to be absolutely clear on the rationale behind the changes and the effects on efficiency, service, and the postal work force. It is essential that Congress, the Post Office and Civil Service Committee in particular, be kept informed on this reorganization.

At this point without objection, let me enter Congressman Garcia's opening statement into the record.

[The statement of Congressman Garcia follows:

STATEMENT OF HON. ROBERT GARCIA Good afternoon. I would like to thank Chairman Leland and Chairman McCloskey for holding this hearing on the reorganization of the Postal Service.

I realize that the Postal Service is at a crossroad now, and I appreciate their efforts to increase efficiency in its operations. However, we must make sure that the costs involved in a reorganization does not outweigh the efficiency gained from it. We must also make sure that a reorganization does not have a detrimental impact on the employees of the Postal Service.

While increased efficiency is a very important goal, I hope that the Postal Service ensures fair treatment for the employees as it continues with the reorganization process. Thank you very much. Mr. McCLOSKEY. Mr. Dymally. Mr. DYMALLY. Thank you, Mr. Chairman.

I think I will abstain from any statement now. I have a couple questions for Mr. Casey later.

Mr. McCLOSKEY. Thank you.
Mr. Horton.

Mr. HORTON. Mr. Chairman, it is a pleasure to join you here today for these oversight hearings on the reorganization of the U.S. Postal Service. It is a pleasure also to welcome Postmaster General Al Casey.

Mr. Casey, it was said with your appointment as Postmaster General that you were a man who could face a problem and make a decision. You certainly have lived up to that reputation. In less than 60 days, you seem to have grasped the operation of the Postal Service and moved forward in a direction that you believe will improve service, create greater operational efficiencies and thereby ensure the long-term viability of our universal mail delivery system.

We are familiar with the steps you have taken and the policies you have implemented. I look forward to receiving your thoughts on the Postal Service now that you have been in your position for nearly 242 months. Specifically I am interested in the reorganization of the Postal Service operational structure, from the regional level to the local post office. You have made some sweeping changes, and I look forward to your testimony.

Finally, I want to express again my position that a strong universal mail delivery system is in the best interest of all Americans. The private express statutes are the guarantee that keeps this system in place. These statutes, however, are not a license; they should not be abused. They should be backed by service and efficiency. It is the men and women of the U.S. Postal Service who ultimately make or break these statutes. I, my chairman, Congressman Leland, and the majority of our committee members believe that the Postal Service benefits substantially from a dedicated work force. We are interested in your testimony, Mr. Casey, because the policies you implement set the direction of this essential $30 billion organization. These policies affect mail delivery in this country and, therefore, affect all Americans. I know that our chairmen, Mr. Leland and Mr. McCloskey, and other members of our committee generally share this view. We look forward to your testimony.

Mr. McCLOSKEY. Thank you very much, Mr. Horton.
I will turn to Mr. Casey now. Please proceed.

STATEMENTS OF ALBERT V. CASEY, POSTMASTER GENERAL, U.S.

POSTAL SERVICE; AND JOHN T. GARRITY, MANAGING DIRECTOR, KENDALL ASSOCIATES

Mr. CASEY. Congressman McCloskey and Congressman Dymally and Congressman Horton, I would like to introduce Mr. John T. Garrity Mr. Garrity is a distinguished management consultant who is working with us on

our concentrated reviews of the organization and operation of the Postal Service in order to identify opportunities for improving the service and the financial results of the Postal Service.

We appreciate your invitation to report to the subcommittee on the status of these reviews.

Our purpose has been to take a fresh look at each of the major areas and hopefully make changes that will contribute to a more effective postal system.

I would like to enumerate the 10 areas we are reviewing and we will give you the status of each.

The 10 areas are: First, management structure in headquarters, regions and districts; second, cash and financial management; next, intercity transportation; facilities planning and procurement; technology; management structure in major operating centers; operational alternatives and mechanization; services, prices and markets; compensation and productivity; and, finally, management information.

Many of these reviews are now underway.

The number one area, the review of management structure, has advanced to the implementation stage. The headquarters portion is nearly completed.

We have added an Associate Postmaster General position and realigned reporting relationships of several departments in order to provide a more responsive structure. We believe the U.S. Postal Service headquarters serves four essential roles. These are: First, to operate the vast postal system; second, to develop that system for the future; third, to meet legislated requirements; and, fourth, to maintain key relationships with the public, employees, Congress and major customers.

Also the field reorganization is intended to make decisionmaking more timely and responsive. In a few minutes we shall illustrate this reorganization.

Briefly, we are merging the district office functions into roughly 80 major management sectional centers which are to be reclassified as divisions. There were 240 of these MSC's and 80 will be the major ones. The remaining 140 management sectional centers will report to the divisions.

Regional office staffs, to which these 80 divisions report, will be streamlined by moving certain operational and administrative functions from the region down to the divisions. With the transfers of staff, the divisions will be substantially self-sufficient for their ongoing management needs. That is, the 140 MSC's that were not selected to be one of the 80, their staffs and themselves will move up to the 80 major MSC's, the division staffs go down to the 80 major and large portions of the about 300 people out of the regions will go down to the MSC's.

The responsibilities of the five regional Postmasters General are thus refocused. They will concentrate on the continuing improvement of service, productivity and financial performance.

By eliminating administrative layers, we intend to put operating management expertise as close as practical to the locations where postal services are provided to the public.

Quite naturally, we are doing everything we reasonably can to complete these changes in a fair and equitable manner. Our intention is to rely on attrition and not disruptive separations or terminations. Of course, sensible relocation provisions will be provided and we are exploring early retirement benefits for employees who do not wish to be relocated.

The field reorganization should be mostly complete by late June. It affords a basis for lasting improvements in the way management communicates and makes decisions. The organization will be better focused. It will be more responsive to market needs and economic realities.

The pressures of the marketplace and the Federal budget picture require the Postal Service to improve its service and its financial position. The organization changes and the other reviews being made will help put the Postal Service in a better position to continue to meet its responsibilities to the public.

I originally planned to have Mr. Garrity discuss these reviews in some detail, particularly those dealing with management structures. Then we were going to respond to questions. What I would like to do instead, with your permission and approval, is have Mr. Garrity discuss these subjects instead of going through the details of the slide presentation. If you wish, we would be very happy to provide printed copies of the slides as they may evoke further questions at another time. However, we stand ready to perform the magic lantern show or have Mr. Garrity cover it informally. What is your pleasure?

Mr. McCLOSKEY. I was thinking along the same lines you were, Mr. Casey. I think we can do it informally and have some good discussion. I think most of us are at least moderately acquainted with the principal proposals and stand ready for discussion.

Along those lines, I would like to ask two questions, Perhaps it is my relative newness to the committee that leads to my ignorance, but will Mr. Garrity state his management background and expertise in regards to the postal area. Then-not to be too much of a historian–I would like to know exactly how, why and where, before we get into the dozens of obvious commonsense questions we can ask, this particular reorganization plan philosophy originated. To whom do we really owe the credit, how old is the idea, and where did it come from?

Mr. Garrity or Mr. Casey, however you care to handle it.

Mr. CASEY. I will ask Mr. Garrity to give his oral resume and I will explain how we came to make our association. Then Mr. Garrity will describe the steps we went through.

Mr. GARRITY. My background is in professional management. I received a master's degree in business administration from the Harvard Business School. I spent almost my entire professional career, roughly 30 years plus, with McKinsey & Co., the international management consultants. Half of those years were spent in the New York office where my practice was substantially concentrated upon working in the private sector. The other half was spent as Director in the office here in Washington where a fair portion of our practice was involved in the public sector and public enterprise.

I have for the last 4 years lectured at the School of Organization and Management at Yale University in New Haven. This current academic year I am a visiting fellow at the Institution for Social and Policy Studies, in the graduate schools at Yale. My research subject is the management of Government-sponsored organizations: Such as Fannie Mae, Sally Mae, Amtrak, Conrail and the U.S. Postal Service.

Mr. McCLOSKEY. Thank you.
Mr. Casey.

Mr. CASEY. I have known Mr. Garrity for many years, since 1946. We came back from World War II together. We were classmates at the Harvard Business School. We have stayed in touch. I was familiar with his background and his examination of Government funds and corporations: When I was asked to take on this responsibility, he is the first person I sought out. That is all there is to it.

Mr. McCLOSKEY. Could you state something about who first had the idea for this particular structure and reorganization, how it blossomed forth. Who is the author and how old is the idea?

Mr. CASEY. Mr. Chairman, there was not a single idea and it was not a single plan. I would have to say—and Jack can surely speak for himself—that this evolved. I put a management team together under Mr. Garrity. That team decided on the 10 areas of inquiry, and they made personnel assignments to make those inquiries. We were constantly in touch. I would say several times a day.

Mr. McCLOSKEY. I am talking about your management plan rather than the whole set of reviews, Mr. Casey.

Mr. GARRITY. The overall comments are relevant as to how the team was organized and how we went about this organization study. One, we made extensive reviews of past studies and analyses relevant to the organization. Two, we developed additional information where necessary. Third, we conducted extensive interviews not only within the organization itself but we also made an effort to talk to a whole range of interested and informed parties, and then, as we go along, we maintain close touch with people interested to get some reaction.

Mr. McCLOSKEY. Specifically, the elimination of the district offices, the consolidation into the division offices, and, I guess, the more functional structure at the regional offices. Obviously those are four or five key ideas. Did they blossom new or have they been in the Postal Service for some time?

Mr. GARRITY. I would say part of each. Certainly we went in with objectives drawing on the comments, criticisms, suggestions that had been made. We also had a number of key organizing principles. First of all, let's get operating management down close to the point where the service is being rendered in order to shorten communication lines, give operating managers the range of staff and professional support in carrying out their activities. One of the first steps was to look for what we call the general management least common denominator; namely, that unit which does the work but

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