COLUMN ONE : Sending the Post Office a Message : As mail service woes mount, unhappy customers are turning elsewhere--to private carriers, faxes and e-mail.

By ROBERT A. ROSENBLATT and MICHAEL A. HILTZIK

Dec. 14, 1994 12 AM PT

TIMES STAFF WRITERS

UC Irvine doesn’t plan to mail registration and financial aid materials to its 17,000 students next fall.

Don’t worry; it’s not the latest fallout from Orange County’s fiscal crisis. The school simply is dumping the post office in favor of electronic distribution by computer. On-time--indeed, instantaneous--delivery is guaranteed, and the university expects to save $225,000 a year in postage, as well.

UCI’s decision is but one sign of the unprecedented technological and competitive challenges shaking the foundations of America’s postal system.

Outraged by deteriorating service or seizing upon faster, more convenient forms of communication, Americans who can afford to are dumping the U.S. Postal Service for all but the most pedestrian tasks.

The post office’s share of express mail--a business it invented--dropped below 9% this year. Electronic communications such as e-mail and fax transmissions grew by as much as 15%--or five times the growth rate of regular mail. Business-to-business mailings have plummeted, down 10 billion pieces in the last five years. Person-to-person mail, meanwhile, accounts for less than 4% of the postal stream, a figure that is steadily falling.

Yet even as it loses grasp of some of the most profitable lines of communication, the post office finds itself buried under an ever-increasing volume of mail.

This week, its army of 782,000 mail handlers, clerks and letter carriers and supervisors--the largest civilian work force in the nation--is grappling with the closing days of its busiest Christmas season ever.

But it’s been that kind of year: In the 12 months that ended Sept. 30, the post office handled a record 177 billion pieces of mail.

It was a year, too, in which thousands of pounds of undelivered mail were discovered in trailer trucks and under roadside culverts in Chicago, a year in which service in Washington, D.C., was so bad that 10,000 of Vice President Al Gore’s holiday cards were delivered up to 10 weeks’ late.

For the Postal Service, restoring public confidence in its ability to deliver the mail on time while it tries to reinvent itself for the paperless society is a daunting task--one that former Postmaster General Anthony M. Frank once compared to “rebuilding and remodeling an airplane while we are flying it.”

No one believes the plane is about to drop out of the sky. Indeed, current Postmaster General Marvin T. Runyon Jr. insists that doubts about the agency’s future are overblown.

“When they invented the telegraph, people said, ‘That’s it, the mail is going out of business,’ ” he said in an interview. “When the telephone came along, they said, ‘People will stop writing letters.’ ”

Still, there is no denying that the U.S. Postal Service is chronically, critically ailing:

* Ordinary Americans are angrier than ever about the deterioration in service, with a record number of formal complaints topping 513,000 this year.

In metropolitan areas with antiquated facilities such as Chicago, New York, Washington and Baltimore, more than a quarter of all letters fail the agency’s own standard of overnight local delivery for first-class mail. Carnegie Hall in Manhattan refuses to mail out tickets for events less than eight days in advance, even if the buyer lives a few blocks away.

Rates will go up Jan. 1, with the price of a first-class letter climbing to 32 cents from 29 cents. That is expected to give the Postal Service a badly needed cash infusion of nearly $5 billion.

But it is a stopgap measure--the system is likely to plead for another rate hike in 1997--and it comes with no assurance that customers will get better service along with the higher costs.

* An automation campaign once regarded as the key to the Postal Service’s ability to handle increased mail flow is at least two years behind schedule. Critics in part blame Runyon, who suspended vital elements of the program upon taking office two years ago.

The lag means slower processing--at much higher cost--as workers continue to sort 10% of the mail by hand, much the way things were done when Benjamin Franklin established a post office for the American Colonies 240 years ago.

* In a baleful omen for an organization that spends 83% of its budget on labor, employee morale is disastrously low. In a September report, Congress’ General Accounting Office said dictatorial managers, adversarial union attitudes and a lack of programs to reward good workers and weed out bad ones all fostered a “dysfunctional organizational culture.”

One out of 12 employees has a pending grievance that had to be referred to regional supervisors, meaning it could not be resolved informally or locally. Pending grievances reached 51,827 in 1993, an increase of 47% from four years earlier.

“Working six days a week, nine and 10 hours a day under a lot of pressure is finally taking its toll,” one exhausted worker complained.

* The Postal Service fails consistently to meet challenges from private competitors. Companies such as Federal Express and United Parcel Service use lower-paid workers, pricing flexibility and better service to take business away. After 20 years of struggling against such competition, the Postal Service still has trouble tracking down a letter or package that goes astray in its vast network. Next-day Express Mail is the only guaranteed service it offers.

Indeed, Lou Taverna, a photo processor in Coral Springs, Fla., was so frustrated by the time it took his Priority Mail packages to reach their destinations that he filed a complaint with the Federal Communications Commission charging postal authorities with false advertising for promising two-day delivery for $2. The Postal Service changed its ads 1993, dropping the promise.

* Despite ambitious claims of increased efficiencies, the postal payroll is growing rapidly. A generous buyout program--designed to provide $1 billion in annual savings--prompted 48,000 of the Postal Service’s then 721,000 employees to leave in 1992 and 1993. But the departing workers included many experienced clerks, letter carriers and mail handlers. Runyon says the program will produce hefty long-term savings, but critics point to costly overtime and recruitment of new workers to fill many jobs since the buyout.

The bottom line: The agency is bigger than when Runyon took over.

To be sure, when Congress created the Postal Service in 1971 and charged it with running as a business instead of a government bureaucracy, it left the new agency saddled with many of the constraints that had hobbled the old Post Office Department.

One was the cherished tradition of universal mail service at a uniform price. A one-ounce letter costs the same whether it is going across the street or to Guam. That means the stamp on a local letter to Grandma subsidizes delivery to remote areas of Alaska, where supermarkets receive their inventory by mail.

Heavy Fixed Costs

“So long as you have to deliver six days a week and for the same price no matter where people live, you will have very heavy fixed costs almost impossible to cut dramatically,” says Thomas Ellington, a former assistant postmaster general. He recalls being pilloried in the 1970s for daring to propose that delivery be cut back to alternate days. “You would have thought I declared World War II,” he says.

Moreover, when the post office wants to raise rates or offer a new product, it cannot jump headlong into the marketplace. First, it must get approval from the Postal Rate Commission, a regulatory body also established in 1971, which has up to 10 months to render a decision.

Mindful of the advantages the Postal Service enjoys over private businesses--including a tax exemption and the right to borrow money from the Treasury at preferential rates--the commission always has refused to let it undercut the prices charged by private competitors.

And, of course, the 535 elected officials in Congress--each of whose districts has a postal payroll and constituents demanding their mail on time--can exert political pressure on the system in ways a private business could barely imagine.

Steering the Postal Service through these shoals is Runyon, a 70-year-old Texas native and veteran executive of Ford Motor Co., Nissan Motors Inc., and the Tennessee Valley Authority who was appointed postmaster general by the Postal Board of Governors in 1992.

Postmasters general have always been lightning rods for criticism when the system is under stress. But the silver-haired Runyon’s imperious demeanor, his preoccupation with cutting costs and holding down rates and the unparalleled economic and technological challenges faced by the postal system have combined to make his stewardship the focus of special scrutiny.

“We’re giving too much credence to the financial side of things and letting service go down the tubes,” complained Robert Setrakian, a San Francisco businessman who is completing 10 years on the board of governors.

Even Runyon’s moves to appease important postal customers do not always meet unalloyed appreciation.

By having delayed the rate increase for one year and limiting his request to 10.3% across the board, Runyon sought to ensure the support of major customers--notably third-class advertising mailers--who otherwise could have stretched out the rate-approval process for months. But the Postal Rate Commission judged his plan to be too generous to the big mailers; its recommendation--a 14% rate hike for newspapers, magazines and third-class mail--won the board of governors’ approval.

Still, Runyon’s rate increase deferral cost the agency as much as $6 billion, contributing heavily to its current negative net worth--that is, piled up losses and debts exceeding its assets--of $9 billion. Much of the shortfall has to be covered by borrowing, which will increase costs down the line.

And by waiting so long and requesting so little, Runyon has heightened the chance of another rate increase soon, according to Tim May, an attorney for big mailers. The result is “a huge cloud hanging over the post office, both the service and the financial condition.”

How thick are the clouds?

The Postal Service suffered a loss of $914 million during the fiscal year that ended Sept. 15, compared with $371 million in the previous year. For postal planners, the bright spot was that the expected loss had been even bigger--$1.3 billion.

Service on Decline

By most measures, mail service has steadily deteriorated.

Postal standards for first-class mail generally call for overnight delivery within a metropolitan area; that is, letters dropped in a mailbox before the last pickup of the day should be delivered the following day. Two-day service is promised within a 400- to 600-mile region, with three-day delivery the standard anywhere in the United States.

For items mailed within the Los Angeles basin, the overnight zone includes all of Los Angeles and Orange counties, and the city of San Diego. The two-day zone covers the rest of California and such Western cities as Denver, Phoenix, Las Vegas and Seattle. The rest of the continental United States should receive letters from Los Angeles by the third day.

According to the latest Postal Service survey, 80% of Los Angeles’ overnight mail is delivered on time--as good as it gets in the nation’s five biggest cities, but still below the expectations of both customers and the Postal Service itself.

Even so, authorities have loosened the standards to make their performance look better.

In 1990 and 1991, for example, the agency relaxed its national service standards by shifting some overnight and two-day mail in many localities into the next slower delivery category. The change--which moved 5% of overnight mail to two-day delivery and 7.5% of two-day mail to three-day--was akin to an airline trying to improve on-time performance record by stretching out the scheduled length of chronically late flights.

By the original standards, performance sharply deteriorated--to 76% on-time delivery of overnight items and 70% on-time delivery of two-day mail, according to a study this year by the New York State Consumer Protection Agency.

“You don’t train an athlete to pole-vault by lowering the pole,” said Richard Bossert, the New York consumer analyst who conducted the study. “As recently as 1976, they were talking about having one-day delivery throughout the country. But when you have a management that says, ‘our statistics don’t look good, so let’s reduce the standards,’ that attitude will permeate the system.”

Postal officials said at the time that they adjusted the standards to better approximate reasonable expectations.

Customer discontent, meanwhile, is rising as service levels sink.

A record 513,000 written and telephone complaints reached officials this year, up nearly 100,000 from a year ago and far above the 299,000 five years ago.

The letters flowing into Postal Service headquarters at L’Enfant Plaza in Washington are poignant, helpless and angry. One citizen asked, in vain, for $677; his auto insurance was canceled when his premium check arrived late, forcing him to buy a more costly policy.

Kathleen Carpenter-Kester, a Washington lawyer on the board of a charitable trust, was shocked to learn that three donations the trust mailed to Washington-area homeless shelters in the metropolitan area disappeared. “Three checks simply never arrived at those institutions,” she complained at a congressional hearing, “and we didn’t know it until that long, hard, cold miserable winter for the homeless was over.”

Carpenter-Kester’s personal mail was a litany of missed letters, bills that never arrived, “20 examples of invitations, professional and personal, that I didn’t even receive until after the events were over--sometimes weeks later.”

Things got worse when she moved from one house to another 2 1/2 miles away.

“Eventually I found out that there were construction workers in the house I had moved from, that they were hoarding the mail there, that hundreds of pieces of my mail had gone through the mail slot, although I had done everything I was supposed to to indicate the change of address,” she said.

Runyon acknowledges that overnight delivery, in particular, remains a major source of dissatisfaction. “We’ve got to get overnight service in the big cities up,” he said. “I really think we ought to have at least a 90% target.” But beyond resuming the automation program Runyon suspended, the Postal Service has no program in place to hit that goal.

95% Goal Sought

The automation program--initiated in large part by Frank, Runyon’s immediate predecessor--aimed at having virtually all mail electronically sorted by next year. The slogan: “95% in ’95.”

The program’s focus was the bar code--strips of short, vertical lines that first became familiar in the grocery store and are visible on many envelopes. For postal purposes, the marks are a digital rendering of the nine-digit Zip Code and part of the street address, all readable by sorting machines.

Frank’s idea was to give big mailers a discount for pre-printing their mailings with bar codes. He hoped that by 1995, about 40% of the mail would be pre-coded; another 40% would be encoded by post office equipment that would read a printed address, spray the bar code on the envelope and sort the mail. The rest--much of it hand-addressed or otherwise unreadable by machine--would have to be manually encoded.

“You need all of the mail stream automated or you can’t get efficiencies out of it,” Frank said.

Instead, Runyon froze automation spending when he took over, temporarily scattering the headquarters team responsible for training workers on the new machines. He says the postal governors wanted to take a second look.

“When I was being interviewed,” Runyon said, “I was told by the board: ‘We have a $1.7-billion (automation) project before us. We’re not ready to approve it, because we’re not sure we’re getting what we thought we were getting with automation.’ ”

Because of the delays, today less than 60% of the mail carries bar codes; the 95% automated goal has been put off until 1997 at the earliest. And the slowdown comes at great cost: The Postal Service itself says it spends $42 to sort 1,000 letters by hand, compared with $19 to handle them mechanically and just $3 for a machine scanning addresses.

Some critics say the delay sent exactly the wrong message. “They didn’t need a breather, but more of a push,” said Harry T. Whitehouse, president of Envelope Manager Software of Menlo Park, a firm that markets technology to both the Postal Service and big mailers.

In any event, it remains unclear that automation is capable of making the Postal Service more efficient overall.

One reason is how hard it is to lay off postal workers whose jobs have been taken by machines. Under civil service rules, it can take as long as five years to fire a worker even for cause; economic layoffs are considered “reductions in force” and demand a complicated administrative process.

Already, major mailers told the rate commission earlier this year, one result of advanced technology has been the creation of a large cadre of “automation refugees”--workers given make-work jobs after their original responsibilities were taken over by machines.

As proof, the mailers noted that “non-productive time”--the portion of the workday comprised of break time, clocking in and out and moving empty equipment such as trays and carts--soared to 28.4% of worker hours in 1993, from 18.3% in 1983 and 7.5% in 1971.

“In some places, they’d have 150 people doing manual sorting,” said Hallstein Stralberg, a postal consultant to magazine publisher Time-Warner, which spends $400 million a year on postage. “They’d put in a machine to do that work, but they’d still have the 150 people.”

For their part, postal officials argue that the growth in non-productive time reflects not the failure of automation but its success. Fewer people are engaged in sorting the mail by hand, they say, but a larger share of hours are spent tending the machines--a category of work so novel to the postal world that it is misleadingly labeled “non-productive.” They say the bulk of automation’s benefits are invisible, because they come in expenses not incurred.

“If we didn’t have automation,” said William J. Henderson, the service’s senior vice president, “then today’s volume would have cost us a cumulative $6 billion more (to handle) since 1981.”

Meanwhile, Runyon is promising to offer a revolutionary scheme for classifying mail, reassessing the discounts big mailers get for doing the Postal Service’s work--sorting, boxing and otherwise preparing advertising-related mail for delivery.

But that plan won’t alleviate the crushing pressures on the postal work force.

Some employees report being overloaded during their regular hours and then harassed when they put in for overtime. Others say they have run afoul of a concerted management campaign to cut down on sick leave, which the unions define as legitimate and management treats as absenteeism needing to be quashed.

Moreover, the fight against overtime has been hampered by the aftermath of Runyon’s buyout. Though the hope was to cut layers of bureaucracy, just 18,000 managers left--along with 30,000 veteran clerks and carriers. The typical departing worker had 25 years of experience.

“You had a lot of good people leave, and overtime went sky-high,” observes ex-postmaster general Frank. “There was an overwhelming emphasis on cost without looking at service.”

Runyon responds that the increase in volume contradicted all of the received wisdom of the time, which held that electronic mail was going to begin cutting even more deeply into the mail stream.

“I don’t consider it a failure to improve your business by 10 billion pieces and have to hire some people to deliver the mail,” he said. “The people that are new are taking care of new business.”

Still, without service improvements, the agency will be hard-pressed to retain the big customers it needs to keep its huge work force busy--customers whose business is constantly being solicited by a host of private firms offering alternate delivery or attracted by the allure of electronic alternatives.

“I have to get things to the customers on time,” said Chris Rubello of Current Inc., which mails 64 million catalogues each year, offering wrapping paper and other household items.

Rubello complains that over the last two years, delivery of his catalogues has been getting erratic--not only in the big cities, which are chronic problem spots, but even in suburban and rural areas.

“If I can’t do it through the Postal Service,” he said, “I will just have to find another way.”

Rosenblatt reported from Washington, Hiltzik from Los Angeles.

Next: Working for the post office.