Postal bonuses: Paid on delivery

A salary plan that links pay to job performance may not be enough to turn around an organization such as the U.S. Postal Service, which is struggling financially. But USPS officials say they are determined to reinvigorate the organization's managers by giving raises to only those who help the service meet high service standards and difficult cost-cutting goals.

Last October, all 75,000 postal management employees began working under the new incentive plan. Postal officials say they won't know its effectiveness immediately. Many experts who are watching pay-for-performance plans disagree about whether USPS is on the right track.

The new pay plan replaces a confusing and ultimately unsuccessful one. Under the old plan, managers gave raises "if they liked you," said Vincent Palladino, president of the National Association of Postal Supervisors, which represents 35,000 active and retired supervisors, managers and postmasters.

Now, raises for information technology managers depend on how quickly they meet deadlines for replacing old computers and networks with new equipment, which USPS officials call the Advanced Computing Environment. IT managers also earn incentive pay based on how many percentage points they can trim by eliminating nonessential IT spending.

"They're all on the same corporate score card, if you will," said Lynn Malcolm, manager of compensation for USPS.

Supervisors and managers who exceed performance goals could earn salary increases as high as 12 percent in a year. Most managers will earn less, said Walter Olihovik, president of the National Association of Postmasters of the United States, which represents 42,000 active and retired postmasters and postal officials. But many could earn more incentive pay raises than they have received in the past — about 3 percent a year.

Olihovik, a postmaster in Nashua, N.H., said he likes the new pay plan. It bases

80 percent of a supervisor's performance evaluation on objective measures, and

20 percent on subjective factors such as how well a supervisor treats customers and employees. "Too many times in the past we found too many overly aggressive managers making the numbers by sometimes mistreating people," he said.

The pay plan works like this: If the maximum salary a supervisor could make is $50,000, and he or she is earning $44,000, he or she can now earn, say, $9,000 in incentive pay, Olihovik said. The first $6,000 would be added to the base salary, and $3,000 would be paid as a lump sum.

But some outsiders doubt the incentive pay plan can succeed. Michael Beer, a professor emeritus of business administration at the Harvard Business School and chairman of its Center for Organizational Fitness, views pay-for-performance plans with skepticism.

"The real problem in the post office is not about pay," he said. "It's about how they're organized and managed,

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