Most Americans use the U.S. mail service. Their opinions of that service may depend on such factors as the timeliness of mail delivery compared to their expectations, the time spent waiting in line for window service, the availability of vending machines that work, and the helpfulness of window clerks who are there to serve postal customers. Concerned about untimely mail service at post offices, the Chairman of the former Subcommittee on Information, Justice, Transportation, and Agriculture, House Committee on Government Operations, asked us to review selected aspects of the Postal Service’s efforts to measure and improve customer service. Subsequently, we agreed to also report the results of our review to the Chairman of the Subcommittee on the Postal Service, House Committee on Government Reform and Oversight. Under the Postal Reorganization Act of 1970, as amended, the Postal Service is an independent establishment in the executive branch operated as a basic and fundamental service provided to the people by the government and accountable to Congress. It is to provide “prompt, reliable, and efficient services” to patrons in all areas and render these services to all communities. Over the years, the Service has increasingly functioned as a businesslike entity competing with electronic communication and private businesses to provide communication and merchandise delivery services to residential and business customers. Today, the Postal Service’s customer base is diverse, and the quality of mail service has many dimensions, such as whether the time to deliver mail meets standards, access to service is convenient, and service is timely and courteous at post offices. Until recent years, the Postal Service’s measurement of service quality was internally focused. For example, it measured the time to process mail from points within the postal system; it did not measure the time from deposit of mail into the system to delivery of mail to customers. The Service’s customer orientation continues to change. Increasingly, it is focusing on customer needs, expectations, and perceptions. Its two principal measures of service quality are the Customer Satisfaction Index (CSI) and Business Customer Satisfaction Index (BCSI), which measure how residential and business customers, respectively, perceive the Postal Service’s performance; and the External First-Class Measurement System (EXFC), a quantitative measure of total delivery performance. Both measurements are done independently of the Postal Service: residential CSI by Opinion Research Corporation; business CSI by Gallup Organization, Inc.; and EXFC by Price Waterhouse and Co. The Vice President/Consumer Advocate, who reports directly to the Postmaster General, oversees the CSI survey process and the EXFC end-to-end measurement system and, until December 1994, was responsible for analyzing and disseminating CSI and EXFC results. The quality focus of the Postal Service leadership team is consistent with current national objectives of making government more responsive to the American public. These objectives, outlined recently by the National Performance Review (NPR) task force, emphasize the need to change the way government works by putting the customer first, giving the customer a voice, and setting customer service standards. The Postal Service is following the NPR guidance by recognizing the need to continuously improve customer service to remain competitive. Establishing and maintaining consistently high levels of delivery and retail service are critical to the Service’s success in an increasingly competitive communications marketplace. We previously reported that the Postal Service is losing profitable business to the private sector, especially in the parcel post and overnight mail markets. Private carriers dominate the profitable business-to-business segment because they offer cheaper and faster service and have left the Postal Service with the more dispersed and less profitable household market segment. Soon after taking office in July 1992, the Postmaster General outlined broad strategic goals that included improving service quality and empowering employees to act responsively when customer satisfaction is at stake. In 1992, the Postmaster General downsized the Postal Service but also reorganized it to focus greater attention on serving customers. The positions of vice president for customer services and vice president for processing, both reporting to the chief operating officer, were established at postal headquarters as part of the reorganization. The Postmaster General created 10 area customer service offices, which oversee 85 customer service districts, and 10 area processing offices, which oversee hundreds of mail processing plants in the field. In 1994, to better coordinate customer service and mail processing functions, the Postmaster General eliminated the two above-mentioned vice president positions at headquarters. He also combined the two manager positions in each area into a single vice president position responsible for both customer service and mail processing. Below the area level, district and plant managers continue to report separately to the area vice president. Postmasters report to customer service district managers, who report to an area vice president and oversee retail service operations of about 40,000 post offices, stations, and branches nationwide. Plant managers report directly to an area vice president and oversee about 500 air, bulk, and general mail processing plants. The Postal Service serves 125 million households 6 days a week. Its residential customer surveys are done every postal quarter to measure these customers’ perceptions of virtually all postal services. Its surveys cover the Postal Service’s 10 geographical areas; 85 service areas, which include customer service districts and processing plants (called “performance clusters”); and 170 metropolitan areas of the United States.Under the $10.9 million contract with Opinion Research Corporation, through December 1994, the Service had received residential CSI results for 13 postal quarters dating back to April 1991. The results show the perceptions of residential customers regarding the Service’s overall performance (question 1a of the CSI survey questionnaire) and other aspects of U.S. mail services (37 other questions) for the 3 months preceding the survey. (A copy of the CSI survey questionnaire is included as app. I.) Customers receiving the questionnaire are also asked to provide written comments on (1) especially good experiences with the Postal Service and (2) anything that the Service could do to increase customer satisfaction. We previously reported that the CSI surveys were designed to provide a statistically valid survey for measuring customer satisfaction with the quality of postal services. The Service makes some residential CSI results publicly available each quarter showing overall customer satisfaction nationally and for the 170 metropolitan areas. The results are to be used internally to help track trends in customer satisfaction over time and by organizational component. The results also are to serve as a diagnostic tool for improving the quality of both delivery and retail services. In April 1993, the Postal Service awarded a 4-year $8.3 million contract to The Gallup Organization, Inc., to develop and operate for the Postal Service a Business Customer Satisfaction Index (BCSI) measurement system. Subsequent contract amendments increased the estimated total cost to about $11.9 million, and the Service had spent about $6.0 million under the contract through September 1995. The information from the system was to be used to measure the satisfaction of these customers and determine the allocation of resources needed to maximize customer satisfaction. The system was to produce valid and projectable data for each of 170 metropolitan areas and provide for aggregating the data for performance clusters and higher postal organizational levels. The Chairman of the former Subcommittee on Information, Justice, Transportation, and Agriculture, House Committee on Government Operations, requested that we review selected aspects of the Postal Service’s efforts to measure, report, and improve customer satisfaction. Subsequently, the Chairman of the Subcommittee on Postal Service, House Committee on Government Reform and Oversight, requested that we report the results of our review to that Subcommittee. Our objectives were to determine (1) to what extent the Postal Service disseminates residential and business CSI data internally and to Congress and (2) whether opportunities exist for the Postal Service to improve the dissemination of CSI data and their potential use by Congress and the Postal Service. We were also to determine (3) the steps that the Postal Service is taking to improve customer satisfaction using CSI and other data and (4) any additional steps the Service could take to improve customer service and thereby improve customer satisfaction. Because the Postal Service had not made public any BCSI data at the time of our review, our work on the dissemination and use of customer satisfaction data was limited to residential CSI data. We reviewed the Gallup contract, analyzed Postal Service data on the relative importance of residential and business mail to the Service’s overall mail volumes, and obtained explanations from Postal Service officials of the status of the Gallup contract and plans for dissemination of BCSI data. As part of our work on residential CSI data collection, dissemination, and use, we interviewed Postal Service headquarters officials, including the Chief Operating Officer and the Vice Presidents for Customer Services, Consumer Affairs, and Quality. We interviewed various other headquarters officials responsible for customer retail service to find out how residential CSI data were used and what improvement initiatives were under way. We reviewed various materials and documents, such as reports, video tapes, and briefing documents, used by postal headquarters and selected field offices to disseminate CSI data. We analyzed annual reports sent by the Postal Service to Congress during fiscal years 1991 through 1994 as part of our efforts to determine any opportunities for the Service to improve the sharing of information on customer satisfaction and its performance with Congress. Along with interviews with numerous headquarters and field postal officials, we reviewed CSI-related reports prepared by Opinion Research Corporation and the Postal Inspection Service to identify opportunities to improve the dissemination and potential use of CSI data. We used the results of all of these tasks to assess the planning and monitoring of initiatives undertaken to improve customer satisfaction by improving customer service. To determine the extent of improvement in customer satisfaction with postal services, we obtained CSI metropolitan area data on question 1a responses relating to customers’ perceptions of satisfaction with the “overall performance” of the Postal Service and 22 other questions on window, telephone, and related retail services. We also analyzed EXFC data to determine changes in on-time delivery rates since the measurements began in 1990 and compared EXFC data with CSI data for the nation and selected metropolitan areas. We estimated sampling errors for the CSI results in each of 170 metropolitan areas using CSI data provided by the Service for the first quarter of fiscal year 1992 through the third quarter of fiscal year 1994. Estimates of sampling errors for each area are based on simple random sampling assumptions. Sampling errors are not reported for specific metropolitan areas because the Postal Service did not provide us with the names of specific metropolitan areas associated with the data. We also analyzed national and metropolitan area CSI results from the first quarter of fiscal year 1991 through the fourth quarter of fiscal year 1994. We could not calculate sampling errors for national CSI results using the data provided. The Postal Service uses 95-percent confidence intervals as indicators of sampling errors for percentages. This means that the chances are about 95 out of 100 that the actual percentage falls within the confidence interval. For example, if 83 percent are reported to be satisfied with Postal Service performance and the sampling error is reported to be – points, the chances are about 95 out of 100 that the actual percentage satisfied is between 80 and 86 percent. To identify steps that the Service is taking to improve customer satisfaction using CSI and other data, we held numerous interviews at postal headquarters and selected postal field offices and, as appropriate, obtained supporting documentation. We visited six customer service districts—three having among the highest CSI ratings for retail services in the nation (Billings, MT; Central Plains in Omaha, NB; and Springfield, MA) and three having some of the lowest CSI scores for retail services (Chicago, IL; New York, NY; and San Francisco, CA). Our purpose in selecting a mix of high-scoring and low-scoring districts was to identify innovative service improvement initiatives in some districts with different levels of customer satisfaction. We interviewed the six area managers for customer services with responsibility for the six districts we visited. We held discussions with the district manager and his/her key assistants, the consumer affairs manager, representatives of employee groups, retail specialists, and selected postmasters and/or station managers. We toured several post offices or stations in each district. Appendix II presents background data on the six districts. Our review followed generally accepted government auditing standards. Our visits to postal field offices were made between November 1993 and May 1994. For a significant period of time during our review, a portion of our work was delayed because we did not have access to CSI data needed to analyze customer satisfaction with retail services. We requested the data needed for this work in January 1993. In February 1994, the Postal Service provided the data we requested, and we were then able to complete our CSI data analysis. Our analysis of CSI data was done between April 1994 and October 1995. We received written comments on a draft of this report from the U.S. Postal Service. Summaries of these comments and our evaluation are included at the end of chapters 2 and 3. The comments are reprinted in appendix VI. The Postal Service makes extensive internal dissemination of residential CSI data to track customer satisfaction and identify opportunities to improve customer service. However, it has not disseminated much of that data to Congress and recently further limited the data provided in required reports to Congress. Moreover, the Service has gathered business CSI information but has not disseminated it internally or to Congress. Along with improving CSI data dissemination, the Postal Service can potentially improve use of the residential data by giving field offices more guidance on analyzing certain CSI results. Postal Service officials believe that the use of residential CSI results can help improve organizational and employee commitment to customer satisfaction. Accordingly, the Consumer Advocate and other officials have taken numerous steps to make Postal Service leadership and employees aware of and help them use CSI results. Soon after residential CSI results became available each quarter, the Consumer Advocate provided the results to the Postmaster General and other top postal leaders. The results were disseminated widely within the organization in several ways: • The Postmaster General highlighted CSI results in his quarterly report to the Board of Governors. • The Consumer Advocate provided more detailed briefings for the Board of Governors on the survey results each quarter, highlighting customers’ ratings of the Service’s overall performance and identifying the highest and lowest ranked customer service districts. The Consumer Advocate also visited postal facilities in metropolitan areas having the highest rating for the quarter to commend local management and employees. • The Service’s contractor, Opinion Research Corporation, provided quarterly written reports detailing CSI results for use by postal headquarters and each subordinate management level in Washington, DC, and field locations. • The Postal Service made CSI results available electronically to executives, managers, and employees through automated information systems. To further promote the use of CSI results, in November 1992, the Consumer Advocate established an Independent Service Analysis Group to assist offices and individuals throughout the Service in using CSI and other customer service data, such as EXFC and customer complaint data. The group made various analyses and issued reports of CSI results periodically and on demand for postal leadership, including the Board of Governors, and postal managers at all levels. Each quarter the group identified the top 10 and bottom 10 metropolitan areas of the total 170 metropolitan areas. The group also made comparisons each quarter to show whether and to what extent each performance cluster’s CSI ratings differed from (1) the current median rating for all clusters and (2) the cluster’s rating for the same quarter of the previous year. The Service made available to all management levels, through an automated information system, the results of these comparisons for those performance clusters and CSI questions having significant differences from the prior year. Along with data analysis, the group provided instructions to field offices on how to use CSI results for changing internal processes that caused customer dissatisfaction. The manager and other members of the group had visited all 10 area offices and numerous district offices to assist with CSI data analysis. The group also developed and furnished video tapes on how to analyze and use CSI data. At the time of our review, Postal Service headquarters had not prescribed specific procedures and methods for area, district, and processing plants to use in disseminating and using CSI results. The three area offices and six districts that we visited used a variety of means to provide CSI results to managers, supervisors, and employees. For example, the Central Plains District in Omaha, NB, published Newsbreak, a monthly information newsletter for its employees that periodically included CSI information. The Pacific Area Office in San Francisco, CA, had prepared a 12-minute videotape to be shown to employees in which area managers provided an overview of the CSI process and employees then spoke about their roles in improving customer service. District managers said that they discussed CSI results in regular meetings with postmasters and employees. Local managers said that they found narrative comments included in CSI reports to be especially useful because the managers could identify customer concerns about service at specific post offices. For example, customer service managers in the New York District said that every quarter they analyze hundreds of narrative comments made by customers to better understand customers’ perceptions of service quality in specific locations. Although the Postal Service has generated valuable information from its residential customer surveys since 1991, it has provided relatively little of the information to Congress. The Postal Service also shares very little information on residential customer satisfaction with the public. In recent years, the Service has reduced the amount of residential customer satisfaction data and other performance data provided in required annual comprehensive statements to Congress. The Service publicly discloses the responses to only 1 CSI question on the Service’s overall performance for the nation and 170 metropolitan areas each quarter. The Service included data on only this one CSI question in comprehensive statements to Congress that are required annually by the 1970 act (39 U.S.C. 2401). Provisions of the act calling for comprehensive statements specify several categories of data to be included in each statement. The statements are to cover the Service’s plans, policies, and procedures for carrying out its universal mail service mission, which is stated in section 101 of the act. The statements are to also describe postal operations generally and include data on the speed and reliability of service provided for the various classes of mail and types of mail service, mail volume, productivity, trends in postal operations, and analyses of the impact of internal and external factors on the Postal Service. The act also says that the Senate and House postal oversight Committees of Congress are to hold hearings on the Postal Service in March each year. As a stakeholder in the delivery of U.S. mail, Congress has not only described in the 1970 act certain information it needs from the Service but also has often expressed interest in particular aspects of the Service’s performance and customer satisfaction. In 1994, this interest was manifested in congressional hearings and public statements of several Members of Congress regarding the quality of service in the Washington, DC, and Chicago, IL, areas. Typically, Members of Congress have responded after news accounts and complaints from the public regarding the quality of mail service in particular areas of the country. The Postal Service reacted to concerns about the quality of delivery service in testimony before Congress several times in 1994. More recently, the House oversight committee has held numerous general oversight hearings with a view toward determining the need for any changes in the 1970 act. The Postal Service has submitted the required comprehensive statements, and the oversight Committees have held hearings on the Postal Service’s operations and services. However, the usefulness of the comprehensive statements has been limited by the scant CSI and other performance data included in them, particularly in the statements for fiscal years 1993 and 1994. Our review of the last four statements (fiscal years 1991 through 1994) showed that the Postal Service has reduced the amount of information on customer satisfaction and delivery performance provided to Congress. The 1992 statement tabulated on-time delivery rates from EXFC for overnight, 2-day, and 3-day delivery service for each quarter and the year. The 1992 statement also included CSI results for each quarter, with the results broken out into several categories of customer responses, i.e., excellent only; excellent and very good combined; good only; excellent, very good, and good combined; fair only; poor only; and fair and poor combined. Following the Service’s efforts to downsize and reduce overhead costs, the 1993 statement to Congress provided less CSI information than the 1992 statement. The 1993 statement showed only one rating for the year, which included the sum of all excellent, very good, and good responses for only the fourth quarter of 1993. For comparison purposes, the sum of these same responses was included for the fourth quarter of 1992. The 1994 statement had even less CSI information than the 1993 report. The 1994 statement showed one rating (excellent, very good, and good combined), and it was for the fourth quarter of fiscal year 1994 only. No comparison was presented of the 1994 rating with the same quarter of 1993. The Postal Service provided more CSI information to the general public than was provided in its required comprehensive statements to Congress. In quarterly publications available to the public, the Service included CSI ratings for 170 metropolitan areas. In addition, the publications also provided the EXFC ratings for 96 of these same areas. Further, the Service recently added new measurements of its on-time delivery performance for the mailings of those publishers and mailers participating in the external second-class and third-class mail measurement systems. The Service is also participating with some foreign postal administrations in the development of processes for measuring international air letters. No data were provided in any of the four comprehensive statements that we reviewed relating to these new measurements. The Service could use data that it already routinely releases to the public and that it previously provided to Congress for more informative analysis and presentations in required comprehensive statements to Congress. Use of these CSI results and other performance indicators could provide a more complete picture of customer satisfaction and the Service’s performance. No additional data-gathering would be necessary. CSI and EXFC results are available to the public in quarterly publications prepared by the Consumer Advocate, but the results are not compared, analyzed, and summarized for potential use by Congress. The following illustrates some ways in which the Postal Service might present additional CSI and EXFC results to Congress. Although the Service compiles data similar to EXFC for other mail classes, we did not include data on these classes because the Service does not release any of that data to the public. Congress could use comparisons of CSI results for several years to review the progress the Postal Service has made in improving perceptions of its overall performance. The Postal Service’s annual report for 1994 did not present comparative CSI results for the current year and preceding year. In future annual reports and other communications with Congress, the Service could use available CSI data that are currently or were previously made public to compare customer satisfaction, by postal quarter, for the current and previous years. (See fig. 2.1.) The Postal Service could also use tables or graphics to show how the results differ among the 10 postal area offices and 85 performance clusters. CSI ratings differ significantly among geographic areas of the country, and with better disclosure of the ratings, Congress could compare and contrast customer satisfaction levels and changes not only nationally but also for various regions and cities. For example, the Postal Service could show how the results compare among the 10 postal areas for selected periods. (See fig. 2.2.) CSI results could also be presented for the Service’s performance clusters. For its internal use, the Postal Service arrays CSI results by cluster and compares current and preceding year results. Thus, the Service would need little additional effort to include such information in required annual reports to Congress. Although the Service does not currently present CSI data to the public in this manner, it does publish CSI ratings every quarter on smaller geographic areas—the 170 metropolitan areas. Presenting the data for larger geographic areas would not appear to pose any greater threat to the Service’s competitive interests than disclosing the data by metropolitan areas, as is done now. CSI and EXFC are the Service’s two most widely publicized externally developed performance measures. Although the two systems are very different and so are the results, the Service presented quarterly ratings from the two systems, both for metropolitan areas and nationally, side by side in its publicly disseminated documents. The Service could present CSI and EXFC data in a way that helps ensure that the extent of and reasons for differences in customer perception of the Postal Service’s performance and measurement of delivery performance are understood. The Service has tended to focus much of its attention on publicizing customers’ perceptions of the Service’s overall performance and improving these perceptions. While the publicized ratings disclose perceptions of overall performance, various data compiled by the Service show that customers are most concerned about the length of time that the Service takes to deliver mail and the consistency of mail delivery service. However, the Service recognizes that a number of factors, not necessarily related to mail delivery, influence customer perception of the Service’s overall performance, as measured by CSI surveys. To illustrate how performance perceptions can differ from delivery measurements, in postal quarter 4, 1994, EXFC scores for 28 of 93 metropolitan areas varied by more than 5 percentage points from CSI scores for the same areas. For 16 of the 28 areas, the CSI ratings were higher than the EXFC ratings. For 8 of these same 28 metropolitan areas, the difference between the EXFC and CSI ratings was 10 or more percentage points. For five of these eight, the CSI ratings were higher than the EXFC ratings. (See fig. 2.3) For the remaining three metropolitan areas (Chicago, IL; Queens, NY; and Washington, DC), the CSI ratings were lower than the EXFC ratings in postal quarter 4, 1994. Of the 170 metropolitan areas for which CSI results are reported, these 3 areas were the 3 lowest ranked in quarter 4. In all three of these metropolitan areas, the CSI ratings had dropped below the EXFC rating during 1994. The EXFC results improved in all three areas during the year, but the CSI ratings for all three were still well below their EXFC ratings at year’s end. (See figs. 2.4-2.6.) As indicated above, for some areas, customer perception of overall performance remained relatively low after overnight First-Class delivery performance improved. Because of such differences, it is important that the results of the CSI and EXFC systems be presented in a way that makes clear that they represent two very different measures of the Service’s performance. A Postal Service manager responsible for CSI data analysis said that the Service does not expect a “match” between CSI and EXFC results, either overall or by specific CSI question or service attribute. He said there is a tenuous relationship between internally driven commitments, e.g., overnight delivery service, and customer expectations. He said that responses to CSI question 1a are affected by many factors, such as the Service’s announcements of postage rate increases and adverse publicity in the news media, and that on-time delivery explains about one-half of the question 1a results. After reviewing a draft of this report, the Vice President/Consumer Advocate agreed with the manager’s comments summarized above. She said, however, that the impact of adverse publicity on CSI ratings is short-lived and does not affect the ratings in every metropolitan area across the nation. We believe that the above comments by the manager and Vice President are all good reasons why CSI and other performance data need to be analyzed and presented to Congress in a way that provides as complete and accurate a picture as possible of both the Service’s delivery performance and customer perceptions of its performance. In presenting CSI results to Congress, the Postal Service could break out the results to show more clearly how satisfied, in terms of specific response categories, customers are with the Service’s overall performance. As stated previously, in some earlier reports to Congress such breakouts were provided. Customers can rate the Service’s performance as excellent, very good, good, fair, and poor. The Postal Service disclosed only what it termed “favorable” responses when presenting CSI information in quarterly pamphlets to the public. These responses were the sum of excellent, very good, and good responses for each of 170 metropolitan areas and the nation. If the Service disclosed the percentage of customers giving the higher ratings of excellent and very good combined, as it does for its internal reports, Congress would have a more precise picture of how customers’ perceptions have changed over time. For most of its internal purposes, including calculation of performance incentive payments for executives and employees (discussed in ch. 3), the Service uses excellent and very good ratings only. Most of its management reports use these two ratings alone or in combination with the overall favorable rating, which includes not only excellent and very good responses but also good responses. Disclosing excellent and very good responses is important because, as figure 2.7 shows, good responses alone accounted for almost one-third of all responses. Combining good responses with excellent and very good responses and reporting only the totals can mask shifts in customer satisfaction, and the changes can sometimes be statistically significant. This masking occurs when customers either increase their ratings from good to the higher ratings or drop ratings from excellent and very good to good. For example, for the San Francisco, CA, metropolitan area, the favorable rating increased by 4 percentage points, from 82 to 86, which the Service considers to be statistically significant, between quarter 4, 1993, and quarter 4, 1994. However, excellent and very good responses did not have a significant change, decreasing by 1 percentage point. Conversely, in 14 metropolitan areas, the percentage of excellent and very good responses together increased even though the overall favorable rating went down between these same 2 quarters. Service officials include good responses in the publicized CSI ratings and disclose that excellent, very good, and good responses are combined. However, the sum of excellent and very good ratings alone, or together with the good ratings, nationally and for each of the 10 postal areas and 170 metropolitan areas, would give Congress a more complete picture of the status of and changes in customer satisfaction. In addition, such presentation would be more consistent with the Postal Service’s internal reporting. This further breakout of customer responses would not appear to jeopardize the Service’s commercial interests because the favorable ratings are already available to the public. Along with providing more comprehensive CSI information to Congress, the Postal Service could potentially improve the usefulness internally of residential customer survey results. CSI results for some questions have lower levels of precision. While the Service has taken steps to inform CSI users of the level of precision, written reports distributed by the CSI contractor do not fully disclose the level of precision. Quarterly reports distributed by the CSI contractor to the Postal Service contain extensive CSI data, including various satisfaction percentages for 38 questions detailed to 3-digit ZIP code areas and metropolitan areas. The reports indicate which of these percentages are significantly higher or lower than the national results. However, the usefulness of some of the percentages is limited by the lower levels of precision. While the Service had provided some guidance to users on this data limitation, users of the contractor-generated reports may not be sufficiently aware of how to use those percentages having lower levels of precision. The reports give little guidance on how to interpret CSI data that are not as precise as some other CSI data in the same reports. The Postal Service requires that the contractor survey enough customers in each metropolitan area each quarter to provide a margin of “sampling error” associated with the responses for each CSI question that is to be no 3 percentage points for question 1a on the CSI survey questionnaire. Our review of response rates for the 11 postal quarters from postal quarter 1, 1992, through postal quarter 3, 1994, showed that the Postal Service obtained the number of responses necessary to provide this required precision each quarter. However, CSI results for some questions sometimes have sampling errors that are much greater than – 3 percent. This occurs because customers who have not used a particular service are instructed not to answer questions about that service. Because of this, the number of responses for such questions, 22 of 38 in total, can be much lower, and the sampling error much higher, than for question 1a. For example, customers who do not have any of their household’s mail delivered to a post office box are instructed not to answer the two questions on this service. In one metropolitan area, satisfaction with delivery of mail to the correct post office box was 69 percent in 1 quarter and 79 percent in another metropolitan area for the same quarter. However, both ratings were based on a small number of responses: 29 responses in 1 metropolitan area and 36 responses in the other. The small number of responses results in a large margin of sampling error. (Details on sampling errors for metropolitan areas are included in app. III.) Postal managers and employees are expected to use all CSI reports for tracking progress in improving customer service and analyzing processes at post offices and processing plants that affect customer satisfaction. However, high rates of sampling error for some questions can result in inappropriate inferences if users of CSI results compare one metropolitan area with another. To illustrate how this can happen, we will use the above example involving post office box services. After sampling errors are considered in this case, the rating is between 53 and 85 (69 percent, 16 percentage points) for one area and between 63 and 95 percent 16 percentage points) for the other area. Thus, an inference that the 79 rating indicates higher satisfaction than the 69 rating may be inappropriate because the difference could be due to sampling error. Consumer Advocate officials we contacted were aware that CSI results for some questions do not have the same degree of precision as the overall ratings that are published quarterly using question 1a responses. They said that they inform field personnel of this imprecision during all briefings and that the Corporate Information System shows whether changes in responses to each question are statistically significant. They believe that even the less precise results for some CSI questions can still be useful to managers, particularly when combined with other data and when the results are compared for several postal quarters or several years. We agree that the CSI results can be useful but also believe that users of written CSI reports could be provided with additional information on how sampling errors limit the precision of some CSI data. Because such errors can vary depending on the question, users might benefit from additional information in the reports on the sampling error for each CSI question. This might help to ensure more informed comparisons between metropolitan areas and over time. Although the Service disseminated CSI results for residential customers, these customers represent a small portion of the Service’s mail volume. Under a contract with the Service, The Gallup Organization, Inc., gathers data on the satisfaction of business customers, who account for the vast majority of the mail. However, the Service has not disseminated the results within the Service or shared any results with Congress. The Service is concerned that the data might be made public if brought into the organization, thereby jeopardizing its competitive interests. It is important that the Service regularly obtain, analyze, and use BCSI results, which are currently being generated for each postal quarter, because business customers account for most of the Service’s mail volume. Further, Postal Service studies show that these customers are more likely than residential customers to switch to another supplier of mail services. Most mail is a consequence of business transactions, including billings, payments, advertising, and other economically motivated activities. Studies by the Postal Service show that 59 percent of the total mail stream originates outside households and is sent to households. An additional 30 percent originates outside households and is sent to nonhouseholds. Overall, the flow of mail from nonhousehold customers accounts for almost 90 percent of the total mail. (See fig. 2.8.) Similarly, almost 90 percent of the Service’s revenue, totaling $58 billion in fiscal year 1994, is generated by business mailers. The level of satisfaction of these mailers and their continued use of the U.S. mail service are critical to the Postal Service’s financial viability. Residential customers have limited alternatives for letter mail service because of the Private Express Statutes requiring the delivery of nonurgent letters by the Postal Service. But business customers often can and do use other private carriers because of urgent delivery requirements, which are exempted from the Private Express Statutes, and because their mailings are not what the Service defines as letters for Private Express Statutes purposes. The Service began planning for quarterly surveys of business customer satisfaction in 1991 and awarded a contract for the surveys to Gallup in April 1993. Under the contract, the contractor is required to provide information for use by Postal Service management from the national level down to the performance cluster level. Management was to use the information to determine the allocation of resources needed to maximize customer satisfaction and analyze how to better understand customer expectations and improve service. During the first year of the contract, Gallup was to conduct research and do a pilot test of the measurement system. The results of the first BCSI survey were available to the Postal Service in April 1994. Through June 1995, Gallup said it had completed five quarterly surveys, but the Service had not obtained and disseminated data from any of the surveys for use in improving customer satisfaction. According to the former Consumer Advocate, who left the Service in December 1994, some top Postal Service officials were briefed at least once by the contractor on the BCSI results in 1994. Subsequently, the contractor was directed not to provide the quarterly BCSI results to the Postal Service. She said that the Gallup surveys had produced “rich” data on business customer satisfaction, which she believed postal management could use to improve customer service. Under the contract, Gallup was to provide quarterly BCSI reports to all 170 performance clusters, 10 area offices, and the Service headquarters. Postal Service officials confirmed that these required reports were not being submitted by Gallup. Service officials believe that the indiscriminate sharing of customer satisfaction information with Congress and the public can be self-defeating. We agree that the Service’s commercial interests could be harmed by indiscriminate sharing where there is competition for its services. While most of the Service’s mail volume is protected by the Private Express Statutes, private companies compete with the Service to provide certain mail services, particularly expedited and parcel delivery, to residential and business customers. Competitors might use customer satisfaction and other performance data, which the Service had gathered to improve its service and become more competitive, to gain a competitive advantage over the Service. The 1970 act allows the Service to withhold from the public data that are of a commercial nature. In particular, competitors might benefit from detailed CSI results showing specific aspects of service and particular geographic areas of the country where the Postal Service is not meeting customer expectations. Competitors could target their market development efforts to these areas. We previously reported that the Service’s decision to publicly report only overall residential CSI ratings, but not ratings of specific services, is permitted under the Postal Reorganization Act of 1970. Although the Postal Service is covered by the Freedom of Information Act (FOIA) (5 U.S.C. 552), the 1970 act does not require it to disclose information of a commercial nature, including trade secrets, that under good business practice would not be disclosed publicly. In our earlier report, we also discussed the practices followed by some of the Service’s competitors in measuring and reporting customer satisfaction. The four competitors we contacted (Federal Express, United Parcel Service, Associated Mail and Parcel Centers, and Tribune Alternative Delivery) used independent contractors to assess customer satisfaction. Their goal was to achieve 100 percent customer satisfaction for the specialized services they offered. In the highly competitive overnight and parcel business, only a customer rating of “completely satisfied” (very good and excellent) was acceptable to private carriers. These companies did not release detailed information on their customer satisfaction surveys because they believed the information would be used to the advantage of their competitors. One of the companies, Federal Express, was a 1990 Malcolm Baldrige National Quality Award winner. It released overall information on customer satisfaction, and we reported in 1992 that 94 percent of Federal Express’ customers contacted were completely satisfied with the overall service. Unlike its competitors, however, the 1970 act established the Postal Service as an executive branch establishment accountable to Congress. Since that time, it has increasingly functioned as a businesslike entity, competing with technology and private companies to deliver certain services in a competitive marketplace. However, the duel objectives of operating as both a public and private entity require that the Service balance the protection of its competitive interests with the potential value to the Service and Congress of using the data, with appropriate safeguards, to help assess and improve customer service. We did not review the business customer satisfaction data compiled by Gallup, but such data would seem useful to Postal Service management for improving customer service and to Congress for its oversight activities. Both the Service and Congress have found similar data on residential customer satisfaction useful. By not receiving any data on business customer satisfaction from the contractor, the Service and its customers are denied potential benefits of the Service using the data to improve customer service. The data are accumulated by Gallup at considerable cost (projected at $11.9 million over 4 years). Meanwhile, as discussed in chapter 3, the Service is developing plans and has begun numerous national and local service improvement initiatives. This is being done without analyzing and using BCSI results to identify the aspects of service and the geographic areas indicating the greatest business customer dissatisfaction. Disseminating BCSI results to postal management and providing some of the results, with appropriate safeguards, to Congress would appear to require little additional cost. The limited release of some customer satisfaction data to Congress, such as was done earlier for residential customers, would not seem to harm the Service’s commercial interests. Given its experience with the external distribution of residential data, it appears that the Service may be able to similarly share some BCSI results with Congress. This could perhaps be done by presenting indicators of business customer satisfaction nationally, for broad customer groupings, and/or for larger geographic areas. Where it is determined that release of the data might hurt the Service, the data could be made available to appropriate congressional Committees using appropriate safeguards, such as an agreement with the Committee not to release the data to the public because it could jeopardize the Service’s commercial interests. Congressional oversight Committees for the Postal Service could use BCSI and other performance data for a variety of purposes, including ongoing postal oversight activities and consideration of changes to laws and regulations affecting the Service’s performance. In this regard, the Postmaster General has said that changes are needed in aspects of the legislative and regulatory framework that constrain the Service in pricing its services, introducing new products, and managing its employees. Further, legislative proposals are now pending in Congress to fundamentally change the Service’s governmental status and its responsibilities relating to universal mail service. Concerning its plans to distribute BCSI data, Service officials told us that an officer-level team had been chartered to develop an overall plan and recommendation for the deployment of both internal and external measurements used to determine customer satisfaction and improve customer service. As part of this effort, the Postal Service said that it would determine the most effective disposition of the BCSI. No date was provided on when the effort would be completed and whether any BCSI results would be disseminated within the Service or provided to Congress. Consequently, the Service did not have a plan and timetable for using business customer satisfaction data internally, disseminating the data as appropriate to congressional oversight Committees, and designing safeguards to protect against the improper release of sensitive data to competitors. In commenting on a draft of this report, the Vice President and Consumer Advocate said that plans were under way to identify which managers will receive BCSI results and how frequently they will be distributed. She also said that the competitive nature of this information requires that great care be exercised in making the information dissemination decisions. The Postal Service’s residential customer surveys have provided valuable data for potential use within the Service and by Congress. Postal leadership, particularly the Consumer Advocate, has made significant progress in disseminating CSI results within the Service and promoting greater CSI use. However, opportunities exist to improve the dissemination and use of CSI results and mail delivery performance data. Perhaps most important is the need for postal management and Congress to have some indication of how well business customers perceive the quality of mail service because these customers represent the vast majority of the Service’s business. Postal leadership is developing plans, allocating resources, and implementing new service initiatives without analyzing and using business satisfaction data. By not using both business and residential customer satisfaction data, management attention and resources could be directed disproportionately at improving those processes that are not of the greatest importance to overall customer satisfaction and, ultimately, the Service’s success. It is not reasonable to expect the Service to disclose data on specific aspects of its services or particular geographic areas that could jeopardize its competitive interests. However, the Service’s divergent roles as both a public entity and a business dictate that it strike a better balance between (1) obtaining and using business customer satisfaction data to identify and respond to areas of customer dissatisfaction and providing information to Congress and (2) protecting business interests by safeguarding against the release of sensitive, proprietary information. More general measures of business and residential customer satisfaction, along with other performance data such as EXFC ratings, can provide useful yardsticks for Congress to use in its routine oversight activities and consideration of legislative proposals that relate to the Postal Service. Such data are already compiled and with appropriate safeguards could be included in the reports that the Service files annually with oversight and appropriation Committees. Because of the Postal Service’s investment in national CSI surveys and the importance of the results to its overall service improvement efforts, it is important that field offices know both the strengths and limitations of CSI results and are committed to using the results as intended by postal headquarters. CSI reports generated by the contractor can more fully disclose the level of precision and usefulness of data. Users of the reports need to be aware of the different levels of precision to avoid reaching unwarranted conclusions, particularly when comparing one organizational component or geographic area with another or making comparisons over time. To improve the dissemination and potential use of CSI data, we recommend that the Postmaster General take the following steps: • As part of the Service’s ongoing performance data study, establish a plan, safeguards, and timetable for distributing business customer satisfaction results to all appropriate management levels of the Postal Service for use in improving customer service. • Consult with appropriate congressional committees to determine what analyses of business and residential CSI data and other available performance data would be useful to them and, using appropriate safeguards, provide that data in periodic reports to and other communications with Congress for its use. • Provide more information in the detailed internal CSI reports provided by the contractor, including the sampling errors for CSI questions and explanations to users on the level of precision and usefulness of customer data on certain questions. The Service said that our report presents a generally accurate picture of what the Service was doing to measure customer satisfaction and delivery performance at the time of our review and how the Service could better use the resulting data to improve service quality. The Service did not comment specifically on each of our recommendations but rather said that it had recently undertaken an extensive, systematic review of all of its functions and processes. The Service said that based on criteria and guidelines of the Malcolm Baldrige National Quality Award (which we discuss in chapter 3), the review helped the Service to identify and organize actions necessary to make its goal of a customer-driven, customer-oriented, and customer-responsive organization a reality. The assessment led to a program the Service calls CustomerPerfect!sm The Service said that our recommendations and concerns regarding information sharing will be addressed in that program. For example, the Service said that a team headed by the Consumer Advocate was studying the dissemination of customer satisfaction results, both for business and residential customers. The team was to develop a strategy for making survey results available to the public and Congress. The Service expressed some minor disagreement regarding our comparison of CSI and EXFC ratings. The Service inferred that we anticipated more of a connection between the CSI and EXFC ratings than the data actually show and explained that the two ratings are different. We agree that CSI and EXFC are very different measures, and we had no preconceived notion that the results of the CSI surveys would “match” or closely relate to measures of on-time delivery performance under EXFC. Rather, our purpose was to show how the ratings differ and emphasize how the Service could explain the extent and reasons for differences in customer perception of the Service’s performance, as measured in CSI, and its delivery performance, as measured in EXFC. To help clarify this point, we made some changes to the section of the report comparing CSI and EXFC ratings. The Service also said that its customer satisfaction and delivery systems are useful as measurement tools but less useful for diagnostic purposes. The Service wants to improve the systems to provide more precise and immediate feedback for making real-time improvements in service quality. The Service has had many innovative and promising service improvement efforts under way but, as discussed in chapter 2, it has not used business customer satisfaction data as part of these efforts. Available residential CSI data show that the level of customer satisfaction remained about the same in 1994 as in 1991. Despite its many initiatives, most of which began in 1990 and 1991, the Service has not implemented at the performance cluster level a corporatewide strategy for improving customer satisfaction and focusing all field offices on the most significant underlying cause of customer dissatisfaction; namely, unreliable mail delivery. The Service’s performance incentive plans for managers and employees did not include available measures of delivery service reliability, such as EXFC data. Further, postal headquarters did not follow a systematic approach for (1) monitoring field offices’ progress in improvement initiatives and (2) sharing information among all field offices on the best customer service practices. Using residential CSI data and other performance indicators, the Postal Service has begun numerous efforts to improve customer service and reduce significant levels of customer dissatisfaction. These efforts have included (1) encouraging, training, and rewarding employees to better serve customers; and (2) setting new policies and standards to focus greater corporatewide attention on customer service. In line with national customer service goals, field offices have pursued a broad array of efforts to improve service. The Service’s employee-related efforts are designed to better recognize the importance of postal employees to substantial and sustained improvements to customer satisfaction. The influence of postal employees on customer satisfaction can be seen in CSI results. Customers indicate in the residential CSI surveys whether they have visited, phoned, or complained to their local post offices during the quarter covered by each survey. Analyses of CSI data done by the Office of Consumer Advocate and the Postal Inspection Service show that the more contact a customer had with the Postal Service, the lower the customer rated its overall performance. For example, the Inspection Service reported in December 1994 that customers who had not gone into a post office in the 3 months preceding the CSI survey gave the Service higher marks than those who had visited a post office during the same period. The Postal Service, acting unilaterally in some cases and in cooperation with the unions in other cases, has taken numerous steps to stimulate greater employee commitment to serving customers. Its initiatives since 1990 include the following. • Employee opinion surveys (EOS) are done annually to obtain and track over time the views of employees at all organizational levels regarding their jobs, the organization, customers, and other topics. • New incentive payment plans were implemented to base employee rewards, in part, on the Postal Service’s performance in improving customer satisfaction and meeting financial goals. • As part of a corporatewide “Quality First!” initiative, training was provided to thousands of headquarters and field office employees to promote a total quality approach uniformly throughout the Postal Service. Subsequently, in lieu of the Quality First! initiative, the Service adopted the Malcolm Baldrige National Quality Award criteria for encouraging, facilitating, and measuring the Postal Service’s commitment to improving customer satisfaction. • Courtesy and sales training was provided for both craft and management employees involved in retail operations to improve skills and the motivation that leads to greater customer satisfaction and revenue generation. The Service has also adopted new corporatewide retail policies and standards and, at the time of our review, it was acquiring new retail equipment and facilities to improve responsiveness to customer needs and expectations. These efforts, begun or expanded since 1990, include the following. • The Service increased customer convenience by expanding an “Easy Stamp” program to allow customers to buy stamps by phone, mail, a computer network, and automatic teller machines. • Debit and credit cards are accepted for the purchase of stamps and certain other transactions. • A national standard of “Service In Five Minutes or Less” was adopted to reduce customers’ waiting time in line at some post offices, and post office hours were adjusted to better meet customer needs. • New retail service equipment was acquired, such as stamp vending machines, terminals for use by window clerks, and postage validation machines. • A new postal retail store design was approved for post offices to be constructed or renovated, and a new design for lobbies in some existing post offices was also approved. Both efforts were intended to provide interior appearances more appealing to customers than traditional post offices and make services more readily accessible. • Customer advisory councils were formed to solicit customer feedback from local community residents. • “Customer care centers” were established to help improve receipt and handling of customer calls, and a 1-800 toll-free service was set up for resolving the complaints of customers who continued to have problems after contacting local post offices. Our review, and two related reviews done by the Postal Inspection Service, revealed a wide array of imaginative and potentially successful efforts under way at some field offices. Following are brief summaries of some efforts that were under way in one or more of the six districts that we visited. The Postmaster of Springfield, MA, undertook a box call project at his main post office to enable post office box customers to call a central phone number to determine whether they had mail in their boxes. The basic premise for the project was that customers would appreciate saving a trip to the post office if they did not have mail. Post office employees input into a hand-held device the box numbers that have no mail. These numbers are then downloaded into a personal computer. Customers access the computer by telephone, key in their box numbers, and are told whether they have mail. The New York, NY, District initiated a program to place parcel lockers in apartment buildings. When a tenant who is not at home receives a parcel, the parcel is put into one of the lockers and the key to the locker is put into the tenant’s mail box. After the tenant inserts the key into the parcel box to retrieve the package, the key has to be removed with the carrier’s master key. One program objective was to serve senior citizens and disabled persons who may have difficulty getting to the post office or carrying heavy packages back to their homes. It also allows other customers who are not home during the day to obtain parcels conveniently without delay, and without having to wait in post office window service lines. Criteria the Service used in deciding whether to install a parcel locker inside an apartment house included the number of undelivered packages on a carrier route and how far the post office was from the apartment building. As of August 1993, the District had more than 2,000 parcel boxes in 172 high-rise buildings in Manhattan. Recognizing the need to improve CSI scores for telephone assistance, the New York, NY, District established a Mystery Caller Program in 1993 under its Customer Services Support group. The aim was to ensure quicker response time, improve the accuracy of answers to customers, and improve clerk courtesy. During each 2-week period, 4 calls were placed to each of the district’s 117 stations. To achieve satisfactory performance, a station must score 26 out of 32 possible points, or a score of 80 percent. The program was nicknamed the “100 Club” to encourage stations to respond enthusiastically and to seek a perfect score. Any station receiving a perfect score of 100 for six consecutive rating periods receives a bronze plaque recognizing that accomplishment. Silver, gold, and platinum plaques are presented when a station receives a perfect score for two, three, and four consecutive rating periods, respectively. Plaques are displayed in the station lobby. On the other hand, a station receiving a score of 80 or less must submit a plan to improve its rating. Retail units can accept change of address notices from customers who move so that First-Class mail arriving at their former addresses is forwarded to them for a period of 12 months. The Postal Service employs computerized forwarding sites (CFS) for keeping track of forwarding addresses and applying new address labels to mail to be forwarded. However, if a post office sends mail to a CFS for forwarding but the CFS finds no forwarding data in the computer, the CFS returns the mail to the post office as “no-record” mail. Mail is frequently returned when the customer’s mail forwarding date has expired. In February 1993, the Bellevue, NE, (Central Plains District) post office had a no-record rate of 17 percent (5 percent or below is considered good). The Bellevue Postmaster agreed with the post office operations manager to whom he reports to reduce the post office’s rate. A task force composed of management and craft employees was set up to work toward reducing the rate of no-record mail. The task force met to establish project objectives, develop an action plan, and set time frames. Subsequently, the task force visited the CFS to observe the processing of Bellevue’s CFS mail. The CFS processed Bellevue’s no-record mail during the visit and sorted it by carrier route so the task force could speak with the individual carrier about his or her mail. Later, the postmaster developed a procedure to double-check mail before it is sent to the CFS. The task force evaluated the project through weekly reports from the CFS. It also planned an ongoing dialog with the CFS supervisor to correct future problems. As of June 1993, the no-record mail percentage at Bellevue had been reduced to the Postmaster’s goal of about 10 percent. Appendix V provides information on other improvement initiatives that we identified in the six districts that we visited. Many of the Service’s improvement initiatives were still being implemented at the time of our review. Further, the Service believes that many more years of concentrated effort at all levels of the organization will be required before breakthrough improvements in customer satisfaction can be expected. The Service’s measures of residential customer satisfaction and its delivery performance support this notion. Through 1994, residential CSI data and other performance data show that the Postal Service is having little sustained success in its efforts to reduce customer dissatisfaction by improving customer service. In November 1993, the Postmaster General announced a favorable CSI rating (excellent, very good, and good responses) of 89 percent—the highest ever achieved. He said that actions were under way to improve that rating by 2 percentage points. Since that time, however, the favorable rating dropped to 85 percent in postal quarter 4, 1994 (May 28, 1994, to September 16, 1994). This was the same rating reported for the first quarter in which all 170 metropolitan areas were measured by CSI in 1991. During the 14 postal quarters through September 1994, the favorable ratings ranged from 85 to 89 percent nationally, and the excellent and very good ratings ranged from 51 to 60 percent, with a rating of 52 percent reported for postal quarter 4, 1994. (See fig. 3.1.) The 85 percent CSI rating meant that on the basis of the Service’s survey of a representative sample of about 90 million households, 13.5 million households rated the Postal Service’s performance as fair or poor—an increase of about 3.6 million from a year earlier. The national CSI ratings for postal quarters 1, 2, and 3, 1995, were 85 percent, 85 percent, and 86 percent, respectively. National CSI ratings differ from those for many metropolitan areas. The ratings for quarter 4, 1994, for some metropolitan areas were up to 6 percentage points above the national average. For some other areas, the ratings were as much as 34 percentage points below the national average. As discussed in chapter 2, neither we nor postal management have access to similar data on levels and trends of business customer satisfaction gathered by an independent contractor. As a result, we could not determine whether the satisfaction of these customers is better or worse than residential customers and if business customer satisfaction has improved since it was first measured in early 1994. EXFC data show that the national rating for on-time delivery has yet to exceed 90 percent, even though the Service’s goal is to deliver all First-Class mail on time 95 percent of the time. As indicated in figure 3.2, EXFC ratings have ranged from 79 to 84 percent nationally for the 14 quarters ended September 1994, with a rating of 83 percent reported for postal quarter 4, 1994. The national EXFC rating was 87 percent for postal quarter 4, 1995, ending in May 1995. This was the highest national EXFC rating ever reported by the Postal Service. We also reviewed CSI and EXFC data to determine the number of metropolitan areas that had higher and lower ratings during postal quarter 4, 1994, compared with the same period 3 years earlier in fiscal year 1991. We identified those metropolitan areas with CSI and EXFC changes of more than 3 percentage points during this period because percentage changes of less than this could be due to chance. For most metropolitan areas, customer satisfaction and on-time delivery performance dropped. Specifically, CSI ratings dropped for 20 of 31 metropolitan areas and increased by more than 3 percentage points for the remaining 11 during the 3-year period. EXFC ratings dropped for 27 of 43 areas and increased for 16. “Right now the only way to mail a First-Class letter is through the U.S. Postal Service, but if there were another mail service which you could use to mail a letter at the same price, would you switch to another service?” According to the Inspection Service report, many customers who rated the Service’s overall performance as excellent, very good, and good are at risk of shifting to another service. Postal Service management officials also said that many residential customers might switch to another service. They said that over 40 percent of the residential customer market is vulnerable to competition from another service, assuming that the postage charged is the same as that of the Postal Service. Our review, and related reviews done by the Postal Inspection Service, show that the use of CSI data and the development of related improvement initiatives have not followed an overall national strategy for focusing field offices’ attention on the principal causes of customer dissatisfaction. To a large extent, the improvement efforts initiated on the basis of CSI results have focused on post office operations, such as window and lobby services. The efforts did not always encompass employees and operations in mail processing plants or focus on specific aspects of service, such as the consistency and reliability of mail delivery, that CSI results indicate offer the greatest opportunity to improve customer satisfaction. Residential CSI data can be analyzed to identify aspects of service causing the greatest customer dissatisfaction. Such analyses show that improving the reliability (i.e., on-time delivery rates) of mail service offers the greatest potential for the Postal Service to improve customer satisfaction. Each quarter, detailed CSI reports prepared by the contractors rank responses to 37 questions in terms of their relative importance as “drivers” of customer satisfaction. The rankings represent the level of improvement potential calculated on the basis of the number of customers responding to each question and the number of good, fair, and poor responses to each. Of the 37 questions on specific aspects of service, those on the reliability of delivery time for local and nonlocal mail represented the greatest opportunity for the Postal Service to improve customer satisfaction. Those aspects of service that offer the least potential for improvement are under the control of postmasters and include window and lobby services offered at post offices, mail forwarding, and telephone service. While the Service has not obtained and analyzed BCSI data, as discussed in chapter 2, other data show that reliable delivery service is of greatest importance to all of the Service’s customers, both business and residential. According to Consumer Advocate data, customers complained more about late and missent mail than any other aspect of the Postal Service’s performance in fiscal year 1994 and other recent years. Moreover, we previously reported that the Postal Service has lost overnight and parcel delivery service, involving primarily business customers, to competitors, in part because those competitors offered faster and more reliable delivery. How mail processing plants operate can significantly affect customer satisfaction, but the plants have been less involved than customer service districts and post offices in using CSI data to improve customer satisfaction. The work done at processing plants can have a major influence on the reliability of mail delivery, the most important aspect of service to customer satisfaction. Postal Inspection Service reports on CSI issued in September 1992 and December 1994 showed that postal management had tended to focus improvement initiatives on processes and employees in customer service districts. In its December 1994 report, the Inspection Service reported that while all aspects of customer service require continuing attention, processing plants continued to be minimally involved in analyzing CSI data and planning and implementing activities to increase customer satisfaction. Customer service districts had taken the lead in using CSI data, and their actions generally included only post office and carrier services and not the operations at processing plants. The Inspection Service also reported that the districts tended to direct efforts at “quick fix” categories of CSI questions, such as complaint handling and telephone service, that have relatively low potential for improving customer service. Managers in mail processing did, however, use EXFC data to emphasize timely processing of mail. They also used other performance indicators, such as volumes of mail left at plants at the end of processing cycles. Some of our earlier reviews showed that the Postal Service’s principal improvement initiative in processing plants has been the automation of mail sorting, which began in 1982. In 1993, the Service began to automate the sorting of letter mail to each home and business address to relieve carriers of this workload. The Service’s automation goal has primarily been to reduce work hours and employees, not to improve delivery service by reducing mail cycle times. However, in December 1994, Postal Service officials did report to the Board of Governors for the first time that certain barcoded mail, which can be sorted automatically, was delivered faster to customers than nonbarcoded letters. “A mailhandler pulling a container of trayed mail to the dock for dispatch was asked how he affected customer satisfaction. He replied he doesn’t see or deal with customers. It was pointed out to him if a carrier makes a misdelivery, that carrier has affected one, maybe two customers, but if a mail handler places a container of mail on the wrong truck, he may affect 50,000 customers in a detrimental way.” Several of the Service’s initiatives, such as the EOS and Quality First! initiatives, did encompass managers and employees in mail processing plants. In providing Quality First! training, the Service instructed field employees on use of CSI and EXFC data in improving the reliability of mail service. Most of the employees at mail processing plants are members of the American Postal Workers Union (APWU), which in the past has not participated in the Service’s initiatives to involve employees in service improvement efforts. In this regard, we recently reported that breakthrough improvements in customer service cannot be achieved unless the Postal Service and labor unions representing postal employees resolve long-standing workfloor problems. Postal management has had difficulty getting labor unions to agree on the involvement of employees with each other and with management in solving customer service and other problems. For example, APWU is the largest postal union and did not participate in initiatives, such as Striving for Excellence Together (SET), Employee Involvement, and Quality of Work Life, which are described in our earlier reports. Neither APWU nor the National Association of Letter Carriers, which together represent about 85 percent of the total number of craft employees, participate in the SET program. As we reported earlier, a lack of labor-management cooperation has been a serious limitation on the Service’s ability to make significant, sustained improvements in customer satisfaction. As of July 1995, the Service and three of its four major unions (the rural letter carrier union being the exception) had not agreed to meet and begin developing new approaches to involve employees with union and management leaders in improving the processing and delivery functions of the Postal Service. Although it had numerous improvement efforts under way, the Postal Service did not have at the time of our review an overall plan to guide and integrate all of its CSI-related improvement efforts at post offices and processing plants. During our review, the Postal Inspection Service issued its December 1994 report and recommended that the Service develop a plan involving all field offices in the use of residential CSI data to improve customer satisfaction. In response to that recommendation, the Vice President for Work Force Planning and Service Management said that a corporate service plan would be developed, with emphasis on the role of processing and distribution as well as customer service in jointly improving service levels, as measured by CSI and other systems. The development of the plan was to begin in January 1995, and implementation was to begin within 120 days after the plan was finalized. We did some follow-up after completing our field work to determine the status of the plan and were told that some effort had been made to develop a plan. This included identifying 108 separate headquarters service improvement efforts, relating to business and/or residential customers, under way in early 1995. However, this effort to integrate all of the Service’s CSI-related initiatives was discontinued as such. In June 1995, the Vice President responsible for developing the plan advised the Postal Inspection Service that major changes had occurred in the corporate approach to improving customer satisfaction. One such change was a decision to apply the Malcolm Baldrige National Quality Award Criteria to the Postal Service, mentioned earlier. According to Service officials, the Baldrige initiative was started in 1994, with the guidance of a new Vice President for Quality and outside consulting services. In this initiative, the Service had set up 10 teams, including a team of senior leaders headed by the Postmaster General and an information and analysis team headed by the Vice President for Work Force Planning and Service Management. The functions of these teams included those described in seven categories of Baldrige criteria. As a first step, an outside consulting firm worked with the 10 area offices and 10 of the 85 performance clusters to assess current conditions against the criteria and provide baseline data for future assessments. In March 1995, the 10 teams were created and began developing actions plans for applying the criteria to the particular deficiencies identified by the Baldrige assessment. The Service’s plan to apply the Baldrige criteria, in what it refers to as CustomerPerfect!, appears to be another innovative and promising initiative that could make a difference in future levels of customer satisfaction. However, as with some of the Service’s past initiatives, labor unions representing postal employees are not a part of this new initiative. According to the Vice President for Work Force Planning and Service Management, leaders of major unions discontinued their participation in meetings with postal leadership when contract negotiations began in August 1994. He said that the unions are not represented on any of the 10 teams set up to implement the Baldrige criteria. Along with developing an overall plan and pursuing other service improvement efforts, the Postal Service has continued to reward certain employees for their performance partly on the basis of CSI results. These performance incentives, which we consider an innovative approach to linking employee pay more closely to organizational performance, are used to focus greater management and employee attention on customer service. The incentive payments are based on residential customers’ perceptions of the Service’s overall performance and other measures relating to financial performance and employee relations. However, it seems to us that the plans may be more effective if they also incorporate some of the key measures of service reliability, such as EXFC delivery performance data. Moreover, because the Service has not yet obtained and used BCSI results, the incentive plans do not incorporate levels and changes of satisfaction among the business customers, representing about 90 percent of the Service’s business. Some craft employees, all supervisors and managers, and most executives are all rewarded, in part, on the basis of CSI results. As part of union contract negotiations in 1990, the Service and 2 unions agreed to use 2 factors, CSI results by performance cluster and Service-wide financial (budget) performance, to make annual performance incentive payments to certain craft employees (92,852 employees, or about 15 percent of the craft work force in 1994) under the SET program. Subsequently, in consultation with the management associations, the Service extended the performance incentive plan to all supervisors and managers, i.e., those covered by the Service’s Executive and Administrative Schedule (EAS). In addition, the Service later began to base incentive payments to most executives (about 950) in the Postal Career Executive Service (PCES) on local and national CSI results, financial performance, and EOS results. Customers’ perception of the Service’s overall performance, as indicated by responses to question 1a in the residential CSI surveys and reported by performance cluster, dictate the difference in incentive payments to those craft employees, supervisors, and managers covered by the incentive plans. Payments based on financial performance are the same for all of these employees. Incentive payments to executives vary depending on question 1a results for groups of performance clusters or nationally and national financial performance. In fiscal year 1994, the Service incorporated EOS survey results into the incentive program for PCES-I employees. (App. IV provides additional details on the incentive pay plans.) None of the incentive plans include available EXFC data and other available delivery measures (e.g., measures of second- and third-class on-time delivery). We believe that the recognition of such delivery measures in the incentive plans is important because, as discussed previously, CSI data analysis shows that improving service reliability offers the greatest opportunity for improving customer satisfaction. Moreover, CSI and EXFC data show that a wide gap often exists between customers’ perceptions of the Service’s performance and its actual delivery performance. Consequently, in using only the overall CSI rating as one component in determining performance payments, the Service rewards employees on the basis of factors that are less under their control, i.e., perceptions of the Postal Service, than some other factors that are more under their control, i.e., mail collection, transportation, sorting, and delivery. If CSI and EXFC ratings generally were consistent with each other, the use of CSI alone would not be nearly as consequential. However, the Service’s delivery performance often differs significantly from customers’ perceptions of its overall performance for many metropolitan areas. We visited the Springfield, MA, and Chicago, IL, metropolitan areas because the former was among the highest-ranking of all clusters in CSI ratings and the latter was among the lowest. We found that management in both areas were using CSI results to emphasize the need to improve customer service and had a number of initiatives under way to improve service. Moreover, the differences in EXFC ratings for the two areas (shown in figure 3.3) were much smaller than differences in their CSI ratings (shown in figure 3.4). Our analysis showed that the relationship of EXFC and CSI ratings for some other metropolitan areas was similar to the above two areas. Further, many metropolitan areas having the highest CSI ratings in 1994 also had similarly high ratings at the time of the first CSI survey in 1991, before the Service began many of its current improvement initiatives. In contrast, some areas having the lowest ratings experienced significant change in CSI scores over the same period, as figures 3.5 and 3.6 show for selected high-ranking and low-ranking areas. Customer perception of the Service’s overall performance is only one indicator of its performance and service quality. Other indicators that are available to the Postal Service include not only the results of the Service’s independent measurements of First-Class, second-class, and third-class mail delivery service, but also customers’ responses to some of the specific CSI questions. CSI surveys include questions that relate directly to delivery performance; customers are asked about their satisfaction with both local and nonlocal mail delivery. Including the Service’s available delivery performance measures, broken out by performance cluster, in the calculation of incentive payments would appear to provide a more direct link between the incentive payments and both (1) mail delivery processes that are most under performance cluster employees’ control and (2) the factors that are most important to customer satisfaction. Postal officials administering the incentive plan said that the incentive payments for some employees were developed as a result of 1990 contract negotiations with unions, before the first CSI and EXFC results were available. These officials said that the objectives at that time were to get the plan adopted and to keep it simple. The Service’s Vice President for Quality, who came to the Postal Service in July 1994, said that he was concerned about the Service’s heavy reliance on customer perception as a single or principal performance measure. The Vice President said the Service is reexamining its collection and use of all externally generated data. He also said that several new efforts, including the application of Baldrige criteria, are under way to focus greater attention on those processes that employees can improve. In September 1995, after reviewing a draft of this report, the Vice Presidents for Quality and Human Resources said that as part of CustomerPerfect!, the Service will be aligning the PCES compensation system for PCES employees. The Vice President for Quality said that this new compensation alignment will consider EXFC, CSI, and BCSI measurements. He also said that a similar alignment will be proposed in the next round of consultations with management associations and negotiations with the unions. After starting some national improvement initiatives in 1992, postal headquarters did not regularly follow up to determine the extent to which the initiatives were implemented and if they improved customer satisfaction. Such follow-up would allow headquarters to assess field offices’ progress in implementing national initiatives in a timely manner and share with other field offices the best practices of post offices and processing plants in serving customers. The Postal Service followed a decentralized approach to implementing new initiatives. Its approach encouraged employees in post offices and processing plants to be innovative in working together and with customers to solve service problems. This approach recognizes that the field structure is large and complex—hundreds of mail processing facilities and more than 40,000 post offices, branches, and stations. For example, the number of postal employees assigned to the 6 customer service districts that we visited ranged from 2,300 in Billings, MT, to 10,800 in New York, NY. (See app. II for additional information on the relative size of the six districts.) Post offices also operate in a variety of environments to meet a broad array of customer needs. For example, postal officials in Billings, MT, had relatively little concern about the security of postal customers, employees, and equipment, allowing them to provide convenient access to window and lobby services. In contrast, physical security was of great concern to some post offices in the New York City area. There, bullet-proof glass protected clerks from the public, and lobbies were locked after certain hours. Without changing its decentralized approach to implementing improvement initiatives, Postal Service headquarters could use a more systematic and uniform approach for tracking field offices’ implementation of national initiatives and reporting the impact of the initiatives on CSI ratings and revenue. As indicated above, field offices were pursuing numerous retail initiatives. The time projected for completing the initiatives spans many years, and a number of postal headquarters’ offices were overseeing the initiatives. The tracking of national initiatives that we reviewed varied among headquarters offices, with procedures and data on some initiatives being more extensive than for others. The Office of Consumer Affairs had gathered fairly extensive data for monitoring the status and results of efforts to improve telephone service. For example, for the centralized call centers, the Office had set time standards for resolving customer complaints and keeping customers informed. Each customer complaint was to be logged, and a case history and caller profile were to be developed so that the complaint could be tracked until final resolution. The office’s data showed that about 60 percent of complaints received at the centralized call centers through December 1994 were resolved by employees at the center. The remaining calls required assistance from district or post office employees. The Office of Consumer Affairs was also monitoring the use of Consumer Advisory Councils. Postmasters were to decide when they wanted to set up a council, and through December 1994, relatively few post offices had formed councils. The first council was established by the Honolulu, HI, district in 1988, and 16 additional councils had been formed by the end of that year. By December 1994, 1,572 councils were operating nationwide. Some other headquarters units were still developing procedures to track the implementation and results of national initiatives under their responsibility. For example, a retail support group under the Vice President for Marketing was responsible for overseeing several initiatives to be implemented by post offices. In June 1993, the group requested area and district offices to provide data on post offices that had announced the service in 5 minutes or less standard and that had adjusted window hours. However, the data provided were incomplete. Of the 85 customer service districts, only 56 districts responded to the request. The 56 districts reported that of the approximately 40,000 post offices, branches, and stations nationwide, about 5,000 post offices had posted the 5 minutes or less service standard. The retail support group did not have data to show if those post offices serving large numbers of customers each day, and thus possibly having the greatest difficulty providing service, had announced the standard and adjusted hours. Postal retail officials said that no further effort had been made to obtain data on the two initiatives. The group was planning to track changes in CSI ratings as field offices implemented the 5 minute or less standard and expanded window hours. In addition, the group was considering different methods for determining whether post offices were meeting the service within the 5 minutes or less standard, and the group was considering methods for measuring the impact on postal revenue of adjusted window hours. Headquarters staff were also developing a plan to track the implementation and results of the new retail store initiative. Evaluations were to include customer and employee responses to the new design as well as revenue analysis. The evaluations were expected to include a breakdown of revenue sources (e.g., packaging products and vending machines) and cost studies of various implementation approaches, contractor performance, and ease of implementation. Although we obtained information mainly on initiatives of customer service districts, the recent planning efforts by the Vice President for Work Force Planning and Service Management discussed earlier showed that postal headquarters was not systematically tracking other national customer satisfaction initiatives. That office did a one-time survey of ongoing initiatives and identified 108 projects under way in early 1995. However, no further steps were taken at that time to integrate and assess the projects because, as mentioned previously, that effort was superseded by other broader headquarters initiatives. Our review and Postal Inspection Service reviews revealed a wide array of efforts under way at post offices and districts. Although many of these efforts were innovative, postal headquarters had no systematic way of sharing the results of successful efforts. Two mechanisms to facilitate information-sharing across the organization had been developed but were not in use at the time of our review. • An Innovations Network, a computerized database, was set up to allow certain employee groups to share information on successful initiatives. Coordinators at headquarters and in the field were to identify successful initiatives and submit descriptions of them for recording in the database. • A Customer Advisory Council Newsletter, published by the Consumer Affairs Department, was designed as a networking tool to be used by headquarters, field offices, and customer advisory councils that some post offices had established. One purpose of the newsletter was to share the results of successful improvement efforts. According to postal headquarters officials, both of these mechanisms were discontinued after the 1992 downsizing of the Postal Service. They said that after the downsizing, not enough employees were available to maintain and promote these information-sharing efforts. In addition, the officials responsible for the Innovations Network said that the procedures for maintaining and accessing the database were cumbersome and that coordinators did not always update the system to show new innovations. We recognize that developing and maintaining any system of sharing information on innovative approaches to improving customer service will require resources. The cost of sharing such information would need to be weighed against the benefits of giving all field offices the opportunity to implement proven techniques for improving customer satisfaction. In our discussions with the former Vice President for Customer Services, he said that a “clearinghouse” for new ideas and projects was needed. However, neither he nor other headquarters officials had assigned responsibility for developing procedures to share information on successful local initiatives. In April 1993, the Postal Inspection Service reported a need for better communication within and among district offices on successful initiatives to improve customer services. The report said that it was not uncommon to find that some post offices had not shared information on their improvement efforts with other post offices, often in the same district. The inspectors recommended in the April 1993 report that the Service take steps to permit sharing of such information among post offices and districts. They repeated the recommendation in a December 1994 report, suggesting that postal headquarters communicate CSI successes to offices nationwide via an electronic message system. In responding to the latter report, the Vice President for Work Force Planning and Service Management acknowledged that creating a bulletin board for CSI users would potentially be useful. Subsequently, his office provided some information in the Service’s automated information system on best practices. The system now identifies those metropolitan areas with the highest average CSI ratings for specific attributes, such as convenience of window service hours and waiting time in line. For example, 17 metropolitan areas were listed for postal quarter 1, 1995, as having the highest average rating for convenience of window service hours. Users of the system are advised that these areas are presumed to have put into place the best practices for consistently meeting the needs of customers for this service attribute. The purpose of the information is to give those interested in improving performance in particular attributes an idea of where to go and whom to talk with about benchmark procedures related to improvement efforts. Although it appears that this procedure for sharing information can help, Service officials acknowledge that it falls short of fully sharing information across the organization on practices found to have worked best. For example, the automated system does not identify the practices followed by any of the metropolitan areas or recognize the specific work teams responsible for new and innovative practices that have proven successful. Although residential CSI results indicate that significant levels of customer dissatisfaction continue to exist, the Postal Service is taking the important first steps of adopting a policy of measuring customer satisfaction to improve service. Its numerous and promising initiatives currently under way indicate a serious commitment to overcoming policy, operational, and cultural barriers to improving customer satisfaction by improving customer service. Although poor union-management relations constrain the Postal Service, the development of a national strategy to focus all field offices, including mail processing plants, on improving the reliability of mail delivery service is a necessary step to addressing a key cause of customer dissatisfaction. Similarly, the current performance incentive plans, which are innovative and a move in the right direction, can be refined to give more emphasis to encouraging prompt and timely mail delivery—what customers have said that they want most from the Postal Service. The Service could do this by using measures of service reliability from EXFC and other systems. Because such data are already available, the added cost of using these measures might be justified by potential benefits of stronger focus by employees and management on improving service reliability. However, we recognize that the changes cannot be made unilaterally for some employees. For craft employees covered by SET, changing the basis for the incentive payments would require agreement with unions; for some other employees, the change would require consultation with management associations. Many of the Service’s national initiatives were relatively new, and postal headquarters needs to know whether its initiatives are being implemented and whether they are being done so in a timely manner. Without some system of tracking field offices’ progress in implementing such initiatives, headquarters officials cannot be sure that field offices understand and are committed to the initiatives. Nor can officials systematically identify those offices most in need of assistance and those adopting best practices and demonstrating exceptional performance in implementing national initiatives. The Service would need to weigh the cost of implementing and maintaining a system of sharing such information against the potential benefits of improving customer satisfaction through better customer service. As part of the development of the Postal Service’s national service improvement strategy, and to achieve the greatest improvement in customer satisfaction, we recommend that the Postmaster General take the following steps: Incorporate BCSI results in the Service’s initiatives and ongoing efforts to improve its performance and service quality, using safeguards as appropriate. • Determine, in cooperation with unions and management associations, the feasibility of incorporating available measures of mail delivery service, along with CSI and other performance data, into employee pay incentive plans to encourage a stronger commitment to prompt and reliable mail delivery and, as appropriate, use these performance data in incentive plans. Implement cost-effective procedures for headquarters units to use in monitoring and reporting the implementation and results of national service improvement initiatives to ensure that they are implemented as intended. Implement cost-effective procedures for (1) regularly recognizing at the national level the best practices and successes of field offices and employees in improving customer satisfaction and (2) sharing information on such efforts across the organization. In commenting on a draft of this report, the Service said that it believed that our recommendations and concerns regarding employee performance incentives, systematic implementation and monitoring of improvements, and sharing best practices will be addressed in its recently begun CustomerPerfect! program. To explain how that program will address our recommendations, the Service discussed its approach to identifying and sharing best practices. It said that in the past “best” had been a matter more of intuition than measurement, and a team is looking at how to develop systems that will identify possible best practices and validate their effectiveness by measuring their results. According to the Service, once a practice is determined to be truly a best practice, it will be shared with the field, possibly through electronic bulletin boards and presentations at national or area-wide managers’ meetings. The Service’s CustomerPerfect! initiative appears to be a reasonable approach to addressing our findings and recommendations. Moreover, it is clear that the initiative has the commitment of the top-level Postal Service leadership. The program was just getting started at the conclusion of our review, and it was too early to determine how it will be implemented at lower management levels and by various employee groups and how the program might affect delivery performance and customer satisfaction. As noted in this report and our earlier report on labor-management relations, the success of some earlier Service initiatives that were designed to affect pay, duties, and management-employee relationships of craft employees was limited by a lack of support from the unions representing those employees. At the time of our review, the Service had not obtained the involvement and commitment of labor union leaders in the CustomerPerfect! initiative. On the basis of the Service’s experience with similar past initiatives, we believe that this involvement and commitment will be necessary to implement aspects of the new initiative affecting craft employees and to address our recommendation relating to the use of CSI and other performance data, such as EXFC, in employee pay incentive plans.

Summary: Pursuant to a congressional request, GAO reviewed the U.S. Postal Service's (USPS) efforts to measure, report and improve customer satisfaction, focusing on: (1) the extent to which USPS distributes customer satisfaction data for use internally and by Congress; (2) whether USPS can improve the distribution of such data; (3) how USPS is using customer satisfaction and other data to improve customer service; and (4) additional steps USPS could take to improve customer satisfaction. GAO found that: (1) USPS widely distributes residential customer satisfaction data for internal use to improve customer service, but has reduced the amount of performance data it provides to Congress; (2) USPS does not distribute business customer satisfaction data internally or externally because USPS fears compromising its position in an increasingly competitive market; (3) adequate distribution of business customer data could help USPS assess and improve business customer service; (4) although USPS has initiated numerous innovative efforts to improve customer service and satisfaction since 1990, residential customer satisfaction has remained relatively constant; (5) USPS has not developed a well-coordinated overall national strategy for improving customer service or focused on areas causing the most customer dissatisfaction; and (6) USPS has not always made the best use of customer satisfaction and other performance data to evaluate its initiatives, but it is studying ways to improve the use of all of its performance measures to improve customer satisfaction.