USPS Planning Retirement Incentives To Help Downsizing, Donahoe Testifies

The U.S. Postal Service will offer retirement incentives if it is allowed to make cost-cutting moves like eliminating Saturday delivery, its CEO told a Congressional panel today.

Rep. Dennis Ross, chairman of the House subcommittee overseeing postal legislation, stated that USPS needs to lose nearly 150,000 employees via attrition "to rightsize the expenditure side of the Postal Service." He asked Postmaster General Pat Donahoe whether he would offer employees retirement incentives to make that happen.

"We do plan on issuing some incentives based on the fact that we make some changes in our operation," Donahoe responded during a hearing. "As we shrink the network, as we move from six- to  five-day delivery, we would put in some incentive money to move people along."

He did not specify what sort of incentives would be offered or how they would be funded. Nor did he state whether retirement incentives would be offered if Congress blocks some of his cost-cutting proposals.

"We think that by the year 2015 we need to be at about 400,000 career employees," Donahoe said. USPS has about 545,000 career employees today. About 155,000 are eligible to retire now, and another 100,000 are scheduled to become eligible within the next five years, he said.

"It's critical for us to move the headcount down but at the same time we've got a lot of non-career people on our rolls who are less expensive to work with but they are also younger people. If we had to take them off the workforce they would end up unemployed, and I don't want to do that," the PMG added.

The hearing, Can a USPS-run Health Plan Solve Its Financial Crisis?, was called to focus on the Postal Service's proposal that it be allowed to offer its own healthcare plan for employees and retirees.

But Donahoe presented that proposal within the context of the various efforts to reduce USPS's costs in light of declining mail volumes. (See USPS Seeks 'Soft Landing' For Downsized Employees, Donahoe Says for more about his prepared testimony.) If Congress takes no action on the various proposals, USPS will run out of cash in October 2013, Donahoe predicted.

"This is much more of an issue of a crisis of confidence about the postal industry than it is just our cash flow," he said, to which Ross replied, "I agree."

Related articles:

• How Does the Postal Service Discourage Early Retirement? Let Me Count the Ways 
• The Downsizing of the Postal Workforce Slows 
• Donahoe's Downsizing Plan for USPS Yields Huge PR Coup

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USPS Seeks 'Soft Landing' For Downsized Employees, Donahoe Says

The U.S. Postal Service plans to provide a "soft landing" for employees affected by downsizing and is looking for ways to avoid closing rural post offices, the Postmaster General will testify Tuesday.

"The Plan to Profitability focuses on workforce reductions through employee attrition versus layoffs or wage reductions, meaning impacted career employees would be able to retire or find another job in the Postal Service," PMG Pat Donahoe will tell a House subcommittee. USPS released his prepared remarks today.

"In response to declining mail volumes and to increase productivity, the Postal Service consolidated over 200 mail processing facilities in the past five years from our peak number of 673 facilities in 2006. In doing so, we have customarily provided a 'soft landing' for employees through retirements and reassigning staff, in an effort to minimize impacts on employees. We have been, and continue to be, a responsible employer."

Donahoe will largely reiterate his plea that Congress enable the Postal Service to adjust to declining mail volumes with such cost cuts as eliminating Saturday delivery, closing facilities, and letting it leave the federal government's inefficient employee-healthcare plan. But he will also provide hints that USPS's plan to balance its budgets is still a work in progress.

"Post Office optimization efforts are continually evolving and the Postal Service is continuing to work toward solutions that will enable communities to retain retail access, under various scenarios. We continue to evaluate and consider multiple alternatives."

"The Postal Service is developing a number of alternatives to closing Post Offices that could sustain offices in rural communities at a reduced cost to the Postal Service. This is still in the discussion  stage."

One approach that does not look promising, however, is developing new lines of business that are based in the post offices, Donahoe will say.

"It is true that many international posts derive a larger percentage of revenue from non-mail products and services, such as banking and insurance. Research has confirmed that our retail units do not have the wage levels or foot traffic to profitably expand into such services. However, we are looking at new and emerging communications technology, like digital mail."

Donahoe thinks the Postal Service can save money and provide lower premiums for employees by exiting the Federal Employee Health Benefits (FEHB) program and creating its own plan for employees and retirees.

"Unlike employers in the private sector, the Postal Service does not have the authority to actively manage its health care costs. We cannot introduce targeted wellness incentives and disease management programs for employees. We cannot leverage the significant purchasing power of our more than one million employees and retirees directly to negotiate a better deal in the competitive health insurance market. We cannot ensure that Medicare-eligible retirees fully participate in the Medicare benefits both employees and the Postal Service paid into. And we are not able to take advantage of the savings available to employers providing retiree health care benefits through coordination with the prescription drug benefits provided under Part D of Medicare."

Related articles:

• Greece Is the Word for USPS, Donahoe Says 
• Wanted: New Postmaster General; Must Be Able To Kiss 535 Backsides Simultaneously 
• Why Mailers Support Radical Downsizing of the Postal Service 
• Why USPS Must Consolidate Its Mail-Processing Network 

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Are E-Book Sales Reaching a Plateau?

When the U.S. magazine industry gets hot and bothered about the latest craze, you can usually bet that trend is about to run out of steam.

E-books were the talk of many magazine people at this week’s Publishing Business Conference in New York, my spies tell me. The web – which is so hopelessly last year – was hardly mentioned. Everyone wanted to chat about their e-books and tablet editions, more so about their cool factor than about whether they were earning much profit.

Meanwhile, the book-publishing half of the huge conference was getting some rather startling news: The once-exploding sales growth of e-books in the U.S. has slowed dramatically, according to research from RR Bowker. (My correspondent’s account is corroborated by Paul Biba of TeleRead.) This just proves Stein's Law of Economics: An unsustainable trend cannot be sustained.

“We went from exponential to incremental growth,” said Kelly Gallagher, a Bowker vice president, who also referred to "some level of saturation" in the U.S. market. The breathless predictions of two years ago, which suggested that the growth of e-books would soon shut down all the book printing presses and brick-and-mortar bookstores, turned out to be way off the mark.

E-book sales will probably continue to grow incrementally, Gallagher said, but no one has the market figured out. “Anyone who tells you they have figured it out is probably trying to get some consulting money out of you.”

Despite the massive purchases of tablets and e-readers during the 2011 holiday season, the proportion of book buyers who bought an e-book rose from 17% late last year to only 20% in January, according to Bowker’s research.

Recent buyers of e-reading devices are not purchasing as many e-books as the early adopters do, Gallagher said. Many of those who have switched over to full-color tablets may be caught up in “Angry Birds Syndrome”and not doing much book reading on their new gizmos.

E-book buyers going retro
And here’s the real shocker: The power purchasers of e-books (60% of the U.S. volume comes from people who buy at least four titles per month) are buying more ink-on-paper books than previously

All reports indicate that the conference had very few of the print-vs.-digital discussions of previous years. Most publishers seemed to accept that they would be making money from print for a long time to come, that digital editions had real promise, and that they needed to figure out how they could make actual money from the web.

The only “print is dead” sort of talk came in regards to textbooks, which some said would be rapidly replaced by e-books and educational software. But the children’s non-textbook book market is a different story, with e-books having less than 5% market penetration and not showing much promise in the tablet world.

“The App Store is a nightmare for finding children’s book apps,” one publisher complained. What we have here is a rare piece of good news for the future of print-media industries: Today’s children will be trained to associate e-editions with work and printed editions with fun reading.

Related articles:

• Printed Magazines or Digital Magazines: Do We Have To Choose?
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Not Dead Yet: Son of Black Liquor Has Not Been Vanquished, Contrary to News Reports

It’s alive!

Recent media reports about the death of the Son of Black Liquor tax loophole for U.S. paper companies turned out to be greatly exaggerated.

The Washington Post stated Thursday that the transportation bill approved by the Senate the previous day would be paid for partly by ending a tax credit for black liquor, a pulp byproduct.

“At Last, the Final Chapter in the Black Liquor Saga,” Mother Jones trumpeted the same day. Like the Post, it subsequently issued a correction.

The legislation at one time indeed included language that would have made black liquor ineligible for Cellulosic Biofuel Producer Credits (CBPCs, also known as Son of Black Liquor credits), for an estimated savings of $2.8 billion, as Dead Tree Edition reported last month.

But the Senate Finance Committee removed that provision in February after Sen. Mike Crapo, a Republican committee member from Idaho, objected; it was left out of the bill the Senate passed. Idaho is home to Boise Inc. and to several pulp and paper mills. The American Forest & Paper Association had also complained about the proposed “retroactive tax increase.”

One issue is fairness: Some paper companies have already claimed more than $200 million in CBPCs, while others were planning to claim theirs in future years. The fairness argument, however, is a bit like a person demanding $100 because someone else found a $100 bill.

The credits are for using black liquor as a fuel during 2009, but the paper companies didn’t even realize they might qualify for the credits until the IRS issued an odd ruling the next year. They fueled their mills with black liquor not because of any government program but because that’s the most efficient way to run a kraft pulp mill. The credits were found money.

The past week wasn’t completely devoid of legislative activity involving the U.S. paper industry, however. Congress approved and President Obama signed legislation allowing the continuance of trade sanctions against Chinese-made paper.

The sanctions are a response to the various ways the Chinese government has helped some of the country’s paper manufacturers, which American competitors claim creates an unfair competitive advantage.

Silly Chinese! They didn’t think to disguise their subsidies as biofuel incentives.

Related articles:

• Son of Black Liquor Finally Enters the Limelight
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Printed Magazines or Digital Magazines: Do We Have To Choose?

Which are better, printed magazines or digital magazines? I’ve heard some passionate arguments on both sides of the question.

For those of us in the publishing industry, there’s only one correct response: It's a stupid question.

The real issue for us: What does the customer want (and what is she willing to pay for)?

With apologies to my friends in the printing and paper industries, publishers are not in the business of creating printed products. We’re in the business of informing, entertaining, and advertising; the medium is just the means to an end.

Fellow print lovers, it’s time to stop pretending that electronic publications aren’t real magazines or that print is always superior to digital.

The healthiest approach is to drop the either/or thinking and recognize that printed magazines are a niche medium. A niche product cannot be all things to all people, but it can do some things for some people that no other product can do.

Print publications are subject to postal delays and don't have hot links to related articles. E-readers don't stand up well to a cup of spilled coffee or a day at the beach. An iPad app isn't much good to a NOOK owner. Browser-based editions seem convenient, unless you don’t have a wi-fi connection.

But they all have their place. They can all be profitable niches.

In an article published today in Publishing Executive magazine (34 Tricks Print Mags Can Do That Apps Can’t), I point out many of the things publishers can do with printed magazines that they can’t do, or do very well, with electronic editions.

I left out a few obvious ones – like posters, cover wraps, refrigerator magnets, blow-in cards, and polybagging. And not-so-obvious ones that were suggested by members of the Print Production Professionals LinkedIn group, like augmented reality, swatting flies, and training puppies. I’m sure I’ll hear about plenty more omissions.

In the same issue, Noelle Skodzinski, Publishing Executive’s web-savvy editor, chimes in with a thoughtful piece called Have You Forsaken Print?

Printed magazines have a future if we publishers can avoid false dichotomies (“Print is dead.” “No, print is best.”) and focus on exploiting the unique strengths of each medium.

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Why Not Allow Phased Retirement For Postal Workers?

The U.S. Senate approved a concept this week that, if applied to the U.S. Postal Service, could be a big help both to the beleaguered agency and to many of its employees.

As written, the “phased retirement” amendment may not even apply to USPS and would not be particularly relevant to the financially strapped independent agency. But the concept of enabling retirement-eligible employees to switch to part-time status without messing up their benefits could offer the Postal Service a relatively employee-friendly method of reducing costs.

The Senate’s amendment to a major transportation bill (Why transportation? Don’t ask.) fleshes out a concept introduced in the Office of Personnel Management’s FY 2013 budget proposal – “to help ensure continuity of operations and facilitate knowledge management by allowing valued employees to transition into retirement.” OPM proposed that employees be able “to reduce their work schedules at the end of their careers and receive income from a combination of reduced salary and a partial retirement annuity.”

The Senate bill would enable a retirement-eligible employee to move into an open part-time position. Such “phased retirees” would work a fixed number of hours per week and would have to spend at least 20% of their time mentoring others.

The Senate’s approach would help the Postal Service counter the “brain drain” that has plagued its administrative ranks and often robbed it of key managers and experts. But omitting the mentoring requirement would make phased retirement even more valuable to USPS, enabling it to expand the pool of experienced part-time craft employees while reducing the number of full-timers.

Relying more on part-time labor is a major part of the Postal Service's plan to create a more flexible and efficient workforce.

Without the fixed-hours requirement, the concept could also help the Postal Service manage the usual seasonal fluctuations in mail volume more efficiently if, for example, phased retirees stepped up their hours during the busy holiday season.

A boon for older employees
Managed properly, phased retirement could also be a boon for USPS employees, whose median age is 50 and about half of whom are eligible for retirement. Many older employees in physically strenuous jobs would welcome the opportunity to work shorter hours without having to quit entirely.

But opportunities to switch to other assignments within USPS are rare. Changing employers would mean a big pay cut for workers whose knowledge and skills are not easily transferable to other organizations. And even retiring from the Postal Service can be an unattractive prospect.

As I wrote last year, “USPS employees have good reason to fear retirement, including inaccurate pension estimates, inconsistent answers to retirement-related questions, and months-long waits to receive full benefits after retirement.”

Lowering such barriers to retirement should be a key part of any plan to fix the Postal Service.

Related articles:

• Postal Service Plans to Use More Part-Time Employees 
• It's Official: Postal Service Has More Older Workers Than Any Fortune 500 Company 
• Obama Hints At Changes To Postal Service Workforce 
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Yankee Invasion: Quad/Graphics' Jonesboro Closing Marks End of an Era

Quad/Graphics cemented its status today as the General Sherman of the printing industry with the announced closing of its last big Mid-South plant, in Jonesboro, Arkansas.

Quad's rapid downsizing following its purchase of Worldcolor less than two years ago has done for the South's printing industry what the Union general did for Georgia agriculture.

"At one time, the former Quebecor’s Mid-South facilities employed more than 3,000 workers at plants in Memphis, Olive Branch, Miss., Corinth, Miss., Jonesboro, Covington, Tenn., and Dyersburg, Tenn.," Memphis Business Journal noted today. Employees say the Wisconsin company recently shut down the bindery at another former Quebecor/Worldcolor plant, in Franklin, Kentucky.

"So, ALL the Tennessee plants will be closed, ALL the Mississippi plants will be closed, They are starting on ALL the Kentucky plants now........ Looks like a pattern to me," one Tennessean commented on a Topix.com forum.

"Looks like the Second War of Northern aggression if you ask me, to arms," responded a Kentuckian.

Only a few decades ago, U.S. printing companies were shifting work from the Midwest to new plants in lower-wage, less union-friendly locations across the Ohio River. But Quad has actually reversed the pattern the past two years, shifting work and employees from the South to Yankee territory, especially the Midwest. Quad still has Southern plants -- in Georgia, Texas, and Virginia.

With its emphasis on employee ownership, generous benefits, and rah-rah culture, Quad has been able to avoid unionization even in union-friendly states. The Worldcolor purchase brought many unionized plants into the company, but Quad's aggressive post-acqusition downsizing has fallen especially hard on those plants and in fact on ex-Worldcolor plants in general.

Only two of the dozen plants Quad has closed since the acquisition had not been Worldcolor operations, and both of those had only been part of Quad for a few years.

The company's long-standing practice of investing heavily in new equipment and technology has helped make the legacy-Quad plants nearly immune from the cutbacks. Quad sometimes replaced presses that were far from obsolete with new ones that were faster and more efficient. Worldcolor/Quebecor, however, was known for trying to stretch out the useful life of its equipment to minimize equipment purchases.

Related articles:

• After Massive Cutbacks, Quad/Graphics Investing in 'Redefining Print' 
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Battleships or Motorboats: Which Publishing Model Will Thrive?

In the new world of multichannel publishing, is it better to be a big company with well-known brands or a small and nimble outfit?

Industry pundit BoSacks, who has worked for magazines at both kinds of outfits, has definitely made up his mind: “There are people making it on the web, but it’s not the big giants,” he told Dr. Joe Webb of WhatTheyThink? recently. And he doesn’t think the big publishers' recent scramble to change CEOs is paying off.

“They’re just shifting one corporate head for another, and they need to reach deep and get an entrepreneur there who understands this new environment that we’re in.” (Question for Bo: Does anyone really understand this new environment that we’re in? Or how it will look two years from now?)

A major publishing company “is a big battleship, and it’s awfully hard to turn,” BoSacks (AKA Bob Sacks) said. “When you spend 35 years learning how to make money with ink on paper and then you try to make that adjustment [to the web], that adjustment is not what you know best.”

But navigating stormy seas in a motorboat has its own challenges, entrepreneurial publishers tell me. Nimbleness alone doesn’t cut it when the waves are as tall as your boat is long. (Plenty of small publishers have shown that they too can run crappy, ill-conceived web sites.)

How do you thrive on the Web with a one-person IT department that occasionally needs vacations and could be hired away at any moment? How do you “mobile optimize” your Web site when your tiny staff is already swamped? How do you make your publications available on the increasing variety of e-reading devices, in ways that are acceptable to your advertisers, when you don’t have the deep pockets to afford big mistakes?

One entrepreneur tells me the answer is to do what magazine publishers have always done – outsource. We don’t do our own printing or deliver our own magazines, so why do we have to build our own apps?

“It’s not about knowing how to do everything that needs to be done,” this small publisher says. “It’s about knowing what you do best and figuring out who you can get to do the rest.”

Perhaps the real competitive advantage that the “motor boats” have is absence of the kind of hubris that makes the “battleships” think they can do everything themselves.

The BoSacks interview, by the way, has additional Bo insights, including why “print is not dead” and how “Flipboard and Twitter can be a horrible experience” – the latter an interesting comment from someone who has created a pretty good online “daily newspaper” from the Twitter feeds he follows.

Editor's Update: BoSacks chastized me in his newsletter for misrepresenting his view of Twitter. These quotations from the interview provide a fuller picture of what he said: "Twitter can be about painting your wall green or using onions with your tomatoes at dinner, or it can be about extremely relevant things about the industry. . . .  I have cut my list down to 100 of what I think are the best agents in the business. . . . I use Twitter as a filter for information without branding."
Related articles:

• Facebook Is Doomed, BoSacks Says 
• The Magazine Industry's Identity Crisis
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