« Political Speech | Main | What Should I do with My Money? »
U.S. Post Office
By John | March 8, 2010
The U.S. Post Office recently announced it was considering eliminating Saturday service. Why? Budget problems. It is losing money.
The U.S. Post Office is not a private company. It was established by the U.S. Government and remains controlled by the U.S. Government. Why is that an important distinction? For the answer, let’s explore the budget problem the Post Office is facing and how they characterize it.
First, if I am a private company, I exist to serve the customer. However, I must serve the customer in an efficient, cost-effective manner, so that the customer pays me enough for my services that I cover my costs and have money left over (profit). If that is not the case, I go out of business.
If, as a private business, I am losing money, I must define my problem. The service I am providing costs more than the customer is paying for. I can increase my prices, cut my costs, or change the way I am delivering services. Since this is now a competitive industry, raising prices is difficult. That has been tried repeatedly in the past, and revenues go down; not up.
The Post Office solution of cutting services by one day will reduce costs somewhat, but will also reduce services to the customer, encouraging that customer to choose competitive services, such as Fed Ex, UPS, e-mail, etc. It is likely to result in greater losses; not less.
If I were running the Post Office as a private company, I would perceive my challenge as providing maximum service at minimum cost. The Post Office solution of cutting services by one day per week does little to address the cost issue. The Post Office operates out of buildings in every little town across the nation. In each of those little towns, it has a “Postmaster” - someone paid an executive salary to spend half his time socializing with all of his small-town neighbors who stop in to the post office each day to chat.
No, I would not reduce services if I were running the Post Office as a private company. I would find a way to deliver services more efficiently. Unfortunately, small-town post offices deliver friendly service with an emphasis on “friendly.” Clearly, facility costs and labor costs are out of line with revenues and need to be reduced. But, in a government-controlled entity, the political costs associated with cost reductions are too great to pay, so the Post Office reduces services to the customer, keeps its overhead costs high, and continues to lose money.
Now, I know what you’re thinking. If the government runs the Post Office that way, won’t it also run health care that way once it completes its takeover?
You are a clever one.
Topics: Commentary |