    U.S. Postal Service: Little Progress Made in Addressing Persistent
    Labor-Management Problems (Letter Report, 10/01/97, GAO/GGD-98-1).

    Pursuant to a congressional request, GAO reviewed the Postal Service's
    (USPS) efforts to improve employee working conditions and the overall
    performance of the Service, focusing on: (1) the status and results of
    the Postal Service's efforts in improving various labor-management
    relations problems identified in GAO's 1994 report, including how USPS
    implemented specific improvement initiatives; and (2) approaches that
    could help USPS and its four labor unions and three management
    associations achieve consensus on how to deal with the problems GAO
    discussed in its 1994 report.

    GAO noted that: (1) little progress has been made in improving the
    persistent labor-management relations problems that had, in many
    instances, resulted from autocratic management styles, the sometimes
    adversarial attitudes of employees, unions, and management, and an
    inappropriate and inadequate performance management system; (2) these
    problems have generally contributed to a sometimes contentious work
    environment and lower productivity for USPS; (3) also, the number of
    employee grievances not settled at the first 2 steps of the grievance
    process has increased from around 65,000 in fiscal year (FY) 1994 to
    almost 90,000 in FY 1996; (4) these problems continue to plague USPS in
    part because the parties involved, including USPS, the four major labor
    unions, and the three management associations, cannot agree on common
    approaches for addressing the problems; (5) this inability to reach
    agreement has prevented USPS and the other seven organizations from
    implementing GAO's recommendation to develop a framework agreement that
    would outline common objectives and strategies for addressing
    labor-management relations problems and improving the postal workroom
    climate; (6) since 1994, USPS and its unions and management associations
    have tried to improve the climate of the postal workplace by
    implementing specific improvement initiatives; (7) many postal, union,
    and management association officials told GAO that they believed some of
    these initiatives held promise for making a positive difference in the
    labor-management climate; (8) however, GAO's review of specific
    improvement initiative showed that although some actions had been taken
    to implement certain initiatives, little information was available to
    measure their results; (9) in some instances, the initiatives were only
    recently piloted or implemented, and some had been discontinued; (10) in
    other instances, although postal and union officials agreed that
    improvements were needed, they disagreed on approaches for implementing
    specific initiatives; (11) generally, these disagreements have made it
    difficult for USPS and its unions and management associations to move
    forward and work together to ensure that the initiatives' intended
    improvements could be achieved; and (12) with the significant future
    challenges it faces to compete in a fast-moving communications
    marketplace, USPS can ill afford to be burdened with long-standing
    labor-management relations problems.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  GGD-98-1
         TITLE:  U.S. Postal Service: Little Progress Made in Addressing
                 Persistent Labor-Management Problems
          DATE:  10/01/97
       SUBJECT:  Labor-management relations
                 Postal service
                 Working conditions
                 Collective bargaining
                 Job satisfaction surveys
                 Government employee unions
                 Work measurement standards
                 Personnel management
                 Employee incentives
                 Federal agency reorganization
    IDENTIFIER:  USPS Associate Supervisor Program
                 USPS Economic Value Added Program
                 USPS CustomerPerfect Initiative
                 USPS Employee Opinion Survey

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    Cover
    ================================================================ COVER

    Report to the Chairman, Subcommittee on the Postal Service, Committee
    on Government Reform and Oversight House of Representatives

    October 1997

    U.S.  POSTAL SERVICE - LITTLE
    PROGRESS MADE IN ADDRESSING
    PERSISTENT LABOR-MANAGEMENT
    PROBLEMS

    GAO/GGD-98-1

    Postal Service Labor-Management Relations

    (240212)

    Abbreviations
    =============================================================== ABBREV

      AFL-CIO - American Federation of Labor-Congress of Industrial
         Organizations
      APWU - American Postal Workers Union
      ASP - Associate Supervisor Program
      EAS - Executive and Administrative Schedule
      EI - Employee Involvement
      EOS - Employee Opinion Survey
      EVA - Economic Value Added
      EXFC - External First-Class Measurement System
      FLSA - Fair Labor Standards Act
      FMCS - Federal Mediation and Conciliation Service
      MBP - Management by Participation
      NALC - National Association of Letter Carriers
      NAPS - National Association of Postal Supervisors
      NAPUS - National Association of Postmasters of the United States
      NLRA - National Labor Relations Act
      NPMHU - National Postal Mail Handlers Union
      NRLCA - National Rural Letter Carriers' Association
      PCES - Postal Career Executive Service
      PRA - Postal Reorganization Act of 1970
      PMG - Postmaster General
      QWL - Quality of Work Life
      RBCS - Remote Bar Coding System
      REC - Remote encoding center
      TFP - Total factor productivity
      UMPS - Union-Management Pairs

    Letter
    =============================================================== LETTER

    B-272446

    October 1, 1997

    The Honorable John M.  McHugh
    Chairman, Subcommittee on the
     Postal Service
    Committee on Government Reform
     and Oversight
    House of Representatives

    Dear Mr.  Chairman:

    This report responds to your request that we review the Postal
    Service's efforts to improve employee working conditions and the
    overall performance of the Service.  These efforts, referred to in
    this report as initiatives, reflect the Service's attempts to try to
    enhance its working environment.  This report provides updated
    information related to our September 1994 report\1 in which we
    described the existence of various labor- management relations\2
    problems in the Postal Service and made recommendations for
    addressing such problems and improving the adversarial nature of
    postal labor- management relations.  Our objectives in this report
    were to (1) determine the status and results of the Postal Service's
    efforts in improving various labor-management relations problems
    identified in our 1994 report, including how the Service implemented
    specific improvement initiatives; and (2) identify approaches that
    could help the Service and its four labor unions and three management
    associations achieve consensus on how to deal with the problems we
    discussed in our 1994 report.

    --------------------
    \1 U.S.  Postal Service:  Labor-Management Problems Persist on the
    Workroom Floor (GAO/GGD-94-201A/B, Sept.  29, 1994).

    \2 "Labor-management relations" as used in this report is a broad
    term encompassing relations between postal managers/supervisors and
    employees as well as the traditional meaning of relations between
    management and labor unions.

       RESULTS IN BRIEF
    ------------------------------------------------------------ Letter :1

    Since our report was issued in September 1994, little progress has
    been made in improving the persistent labor-management relations
    problems that had, in many instances, resulted from autocratic
    management styles; the sometimes adversarial attitudes of employees,
    unions, and management; and an inappropriate and inadequate
    performance management system.  These problems have generally
    contributed to a sometimes contentious work environment and lower
    productivity for the Postal Service.  Also, the number of employee
    grievances not settled at the first 2 steps of the grievance process
    has increased from around 65,000 in fiscal year 1994 to almost 90,000
    in fiscal year 1996.  These problems continue to plague the Service
    in part because the parties involved, including the Service, the four
    major labor unions, and the three management associations, cannot
    agree on common approaches for addressing the problems.  This
    inability to reach agreement has prevented the Service and the other
    seven organizations from implementing our recommendation to develop a
    framework agreement that would outline common objectives and
    strategies for addressing labor-management relations problems and
    improving the postal workroom climate.

    Since 1994, the Service and its unions and management associations
    have tried to improve the climate of the postal workplace by
    implementing specific improvement initiatives, such as programs for
    selecting and training new postal supervisors and planning the
    redesign of mail delivery routes for city letter carriers.  Many
    postal, union, and management association officials told us that they
    believed some of these initiatives held promise for making a positive
    difference in the labor-management climate.  However, our review of
    specific improvement initiatives showed that although some actions
    had been taken to implement certain initiatives, little information
    was available to measure their results.  In some instances, the
    initiatives were only recently piloted or implemented, and some had
    been discontinued.  In other instances, although postal and union
    officials agreed that improvements were needed, they disagreed on
    approaches for implementing specific initiatives.  Generally, these
    disagreements have made it difficult for the Service and its unions
    and management associations to move forward and work together to
    ensure that the initiatives' intended improvements could be achieved.

    Improving labor-management relations at the Postal Service has been,
    and continues to be, an enormous challenge and a major concern for
    the Postal Service and its unions and management associations.  With
    the significant future challenges it faces to compete in a
    fast-moving communications marketplace, the Service can ill afford to
    be burdened with long-standing labor-management relations problems.
    We believe that in order for any improvement efforts to achieve their
    maximum intended benefits, it is important for the affected parties
    to agree on common approaches for addressing labor-management
    relations problems.  During our review, we identified some approaches
    that could help the Postal Service and its unions and management
    associations reach consensus on strategies for resolving such
    problems.  Although we recognize that achieving consensus does not
    come quickly or easily, we believe that continued disagreements on
    approaches for improving the postal working environment without some
    effort to achieve common ground may lead to escalating workplace
    difficulties and hamper efforts to achieve desired improvements.

       BACKGROUND
    ------------------------------------------------------------ Letter :2

    The Postal Service is the nation's largest civilian employer with
    approximately 861,000 employees as of the end of fiscal year 1996,
    most of whom process and deliver mail and provide postal products and
    services to customers, such as selling stamps and shipping parcels.
    According to the Service's database, the total number of postal
    employees has increased from about 818,000 employees at the end of
    fiscal year 1993 to about 861,000 employees at the end of fiscal year
    1996, an increase of about 5 percent.  As shown in table 1, of the
    approximately 861,000 postal employees, 86 percent were career
    employees and 14 percent were noncareer employees.\3

                                    Table 1

                    Composition of Postal Service Workforce
                         at the End of Fiscal Year 1996

                                                Total number    Percent of
                                                     of paid         total
    Employee functions                             employees     workforce
    ------------------------------------------  ------------  ------------
    Headquarters and area offices employees\a         11,887           1.4
    Postmasters, general managers, and                26,403           3.1
     installation heads
    Supervisors and managers                          35,035           4.1
    Professional, administrative, and                 10,966           1.3
     technical personnel
    Clerks and nurses                                269,916          31.3
    Mail handlers                                     56,182           6.5
    City carriers                                    233,964          27.2
    Special delivery messengers                        1,419            .2
    Motor vehicle operators                            8,175            .9
    Rural carriers/full-time                          47,738           5.5
    Maintenance workers                               43,277           5.0
    ======================================================================
    Total career employees                           744,962          86.5
    Casuals\b                                         22,705           2.6
    Transitional employees\c                          31,964           3.7
    Nonbargaining temporary employees                    594            .1
    Substitutes for rural carriers                    49,730           5.8
    Postmaster relief/leave replacements              11,446           1.3
    ======================================================================
    Total noncareer employees                        116,439          13.5
    ======================================================================
    Total                                            861,401         100.0
    ----------------------------------------------------------------------
    \a This category includes employees who work in postal headquarters,
    at area offices in the field, and at the Service's training
    facilities.  The work of these employees includes such administrative
    functions as training, investigations, personnel matters, accounting,
    and marketing.

    \b Casuals are noncareer employees with limited-term appointments who
    supplement the work of the career workforce.  For example, casuals
    may be temporarily hired as clerks to perform postal work during the
    Christmas season.

    \c Transitional employees are noncareer, bargaining unit employees
    used to fill vacated assignments, such as assignments due to be
    eliminated as a result of automation.  The terms of appointment for
    these employees cannot exceed 359 calendar days for each appointment.

    Source:  Postal Service On-Rolls and Paid Employee Statistics
    National Summary, Accounting Period 13, Postal Fiscal Year 1996.

    Most postal employees were represented by four labor unions and were
    called "bargaining unit" or "craft" employees.  As shown in table 2,
    the four unions that represented the interests of most bargaining
    unit employees included (1) the American Postal Workers Union (APWU),
    (2) the National Association of Letter Carriers (NALC), (3) the
    National Postal Mail Handlers Union (Mail Handlers), and (4) the
    National Rural Letter Carriers' Association (Rural Carriers).  The
    two largest unions are APWU and NALC.  Although union membership is
    voluntary, approximately 80 percent of those represented by the four
    major unions have joined and pay dues.\4

                                    Table 2

                       Organizations Representing Career
                      Bargaining Employees as of September
                                      1996

                                                         Number of
                                                        employees\  Percen
    Organizations and employee functions\a                       b       t
    --------------------------------------------------  ----------  ------
    American Postal Workers Union, AFL-CIO, (APWU)         322,599      49
     represents clerks, maintenance workers, special
     delivery messengers, and motor vehicle operators.
    National Association of Letter Carriers, AFL-CIO,      233,964      35
     (NALC) represents city letter carriers.
    National Postal Mail Handlers Union (Mail               56,182       9
     Handlers), a division of the Laborers'
     International Union of North America, AFL-CIO,
     represents mail handlers.
    National Rural Letter Carriers' Association (Rural      47,738       7
     Carriers) represents rural carriers.
    ======================================================================
    Total                                                  660,483     100
    ----------------------------------------------------------------------
    \a In addition to the four major labor unions, two other unions
    represent specific craft employees.  According to a postal official,
    the 2 unions include the D.C.  Nurses Association (188 nurses) and
    the Federation of Postal Police Officers (1,432 officers), which
    together represent less than 1 percent of the Postal Service's
    workforce.

    \b The number of employees shown is the number of career craft
    employees represented and not the number of union members.  Also,
    these 4 unions represented a total of 81,694 noncareer employees,
    including transitional employees and substitutes for rural carriers.
    These employees are not included in the table.

    Source:  Postal Service On-Rolls and Paid Employee Statistics
    National Summary, Accounting Period 13, Postal Fiscal Year 1996.

    Also, within the Postal Service, supervisors, postmasters, and other
    managerial nonbargaining personnel are represented by three
    management associations, including (1) the National Association of
    Postal Supervisors (NAPS), (2) the National Association of
    Postmasters of the United States (NAPUS), and (3) the National League
    of Postmasters (the League).  Unlike craft unions, management
    associations cannot bargain with postal management.  However, the
    Postal Service is required under the Postal Reorganization Act (PRA)
    of 1970 to consult with and recognize these associations.  NAPS
    represents all supervisors and lower level managers, except those at
    headquarters and area offices, for a total of about 35,000 employees
    as of the end of fiscal year 1996.  Also, as of the end of fiscal
    year 1996, approximately 26,000 postmasters and installation heads
    were represented by NAPUS and the League.  Since 1970, many
    postmasters have belonged to both organizations, which address issues
    of interest to all postmasters.

    In September 1994, we reported that various labor-management
    relations problems persisted on the workroom floor of postal
    facilities.  We found that such problems were long-standing and had
    multiple causes that were related to adversarial employee,
    management, and union attitudes; autocratic management styles; and
    inappropriate and inadequate performance management systems.  In
    part, these problems were identified through our analysis of the
    results of an employee opinion survey administered by the Service in
    1992 and 1993, in which employees expressed their opinions about its
    strengths and shortcomings as an employer.\5

    Generally, craft employees believed that managers and supervisors did
    not treat employees with respect or dignity and that the organization
    was insensitive to individual needs and concerns.  The concerns of
    supervisors and craft employees who worked in mail processing plants
    focused mainly on (1) the insensitive treatment of employees who were
    late or absent from work; (2) the lack of employee participation in
    decisions affecting their work; and (3) the perception that some
    employees were not held accountable for their performance, leading to
    perceptions of disparate treatment.  Also, managers, supervisors, and
    craft employees expressed dissatisfaction with the Service's
    performance management and recognition and reward systems because
    they generally believed that (1) performing their jobs well just got
    them more work, (2) high levels of performance were not adequately
    recognized or rewarded, and (3) poor performance was too often
    tolerated.

    In 1994, we reported that these problems had not been adequately
    dealt with, mainly because labor and postal management leadership at
    the national and local levels were unable to work together to find
    solutions.  We also reported that the effects of such problems were
    multiple and included poor quality of work life for postal employees
    and higher mail processing and delivery costs for the Postal Service.

    Furthermore, in our 1994 report, we stated that despite the efforts
    of the Service and its major labor unions and management
    associations, attempts to improve labor-management relations on the
    workroom floor had met with limited success.  We recommended in the
    report that the Service take various actions to try to improve
    employees' working conditions and its overall performance.
    Generally, the recommendations involved some of the following
    provisions.

      -- Improve labor-management cooperation by having the Service, the
         four unions, and three management associations develop and sign
         a long-term (at least 10 years) framework agreement that would
         establish the overall objectives and approaches for
         demonstrating improvements in the workplace climate.  Also, to
         help ensure that such an agreement can be reached in a timely
         manner, consider arranging for outside assistance to learn
         alternative negotiation techniques that could help resolve
         disputes outside of binding arbitration.

      -- Improve the workplace environment by training supervisors to
         promote teamwork, recognize and reward good performance, and
         deal effectively with poor performers; and by training employees
         in team participation efforts that are focused on serving the
         customer through the continuous improvement of unit operations.

      -- Establish employee incentives by recognizing and rewarding
         employees and work units on the basis of performance.

      -- Improve mail processing and delivery operations by testing
         various approaches for improving working relations, operations,
         and service quality and evaluating the results of such tests.

    --------------------
    \3 Generally, the Service has defined career employees as persons who
    have permanent work appointments and include such employees as
    clerks, postmasters, mail handlers, and city and rural letter
    carriers.  Noncareer employees are those persons who have
    limited-term work appointments and include such employees as some
    data conversion operators who work at postal remote encoding centers
    and substitutes for rural carriers.

    \4 In response to a comment by the Mail Handlers union, we obtained
    estimated figures from union officials on employees who had joined
    and paid dues to each of the four labor unions.  The officials
    estimated the following percentages of union members who had paid
    dues as of September 1996:  81 percent for APWU, 83 percent for Rural
    Carriers, 85 percent for Mail Handlers, and 92 percent for NALC.

    \5 The survey involved mailing a questionnaire to all postal
    employees to determine their satisfaction on 12 performance
    dimensions, such as employee treatment and participation.

       OBJECTIVES, SCOPE, AND
       METHODOLOGY
    ------------------------------------------------------------ Letter :3

    The objectives of our review were to (1) determine the status and
    results of the Postal Service's progress in improving various
    labor-management relations problems identified in our 1994 report,
    including how the Service implemented 10 specific improvement
    initiatives; and (2) identify any approaches that could help the
    Service and its unions and management associations achieve consensus
    on how to deal with the problems we discussed in our 1994 report.

    To identify the improvement initiatives mentioned in the first
    objective, we reviewed various GAO and postal documents, including
    our 1994 report, the unions' collective bargaining agreements, and
    documents prepared by the Service that described the goals and
    results of specific improvement initiatives.  Using this information,
    we developed a list of 32 initiatives that the Service, the 4 labor
    unions, and 3 management associations had piloted or implemented to
    try to improve the postal workplace environment.

    Given time and resource limitations, we determined that detailed
    follow-up on all 32 initiatives would be impractical.  Thus, starting
    with the list of 32 initiatives, we established criteria that we
    believed could help us select specific initiatives from the list that
    warranted additional followup to determine their status and results.
    Generally, such criteria were based on (1) the results of discussions
    on the 32 initiatives with the Postal Service and its unions and
    management associations, and (2) the extent to which we determined
    that various initiatives had the potential to address the
    recommendations in our 1994 report.

    We discussed the list of 32 initiatives with officials who
    represented the Service and its unions and management associations to
    ensure that we had (1) appropriately identified all the initiatives
    that should be included on our list, and (2) described the
    initiatives as thoroughly and accurately as possible.  The Service
    and the unions and management associations generally agreed that our
    list of 32 initiatives included all known postal improvement efforts
    that had been piloted or implemented.  Also, these organizations
    provided us with additional comments and perspective on the
    descriptions of specific initiatives.

    We reviewed the recommendations in our 1994 report to determine the
    extent to which the 32 initiatives had the potential to address the
    recommendations.  Using the information about the initiatives that we
    obtained from our discussions with the Postal Service, the unions,
    and the management associations, we focused our work efforts on 10 of
    the 32 initiatives that in our judgment appeared to have significant
    potential to address some of the Service's labor-management relations
    problems that we identified, such as the difficulties experienced by
    supervisors and employees on the workroom floors of various postal
    facilities.

    To determine the status and results of the 10 initiatives, we visited
    the national Postal Service headquarters in Washington, D.C., where
    we interviewed key postal officials who were responsible for
    establishing, implementing, and monitoring various labor-management
    improvement initiatives.  These officials included the
    Vice-Presidents responsible for Labor Relations, Human Resources, and
    Quality.  We also interviewed program officials in these offices to
    obtain more detailed information on the goals and results of specific
    initiatives.

    Furthermore, to obtain information on status and results from
    officials involved in implementing the 10 initiatives, we spoke with
    various postal field officials in 4 area offices--the Mid-Atlantic,
    Northeast, Southwest, and Western areas.  These locations were
    selected because various initiatives had recently been piloted or
    implemented in these areas.  Also, our staff from the Dallas and
    Denver regional offices were available to visit these areas and
    discuss such initiatives in person with responsible postal officials.
    At these locations, we interviewed the officials who were most
    knowledgeable about labor-management relations activities in the area
    offices, including the area vice-presidents, the managers for human
    resources, and labor relations specialists.  Also, within the four
    areas, we interviewed postal officials responsible for (1) processing
    and delivering mail, which included the managers of processing and
    distribution plants and managers of remote encoding centers (RECs);\6

    and (2) providing services to postal customers, which included
    district office managers.  These officials were close to the
    activities performed on the workroom floor of postal facilities,
    which is where the labor-management relations problems that we
    identified in our 1994 report had become evident.

    In addition, to address the first objective, we interviewed various
    union and management association representatives, including national
    leaders located in the Washington, D.C., area and local
    representatives in the four area offices we visited.  We interviewed
    these officials to gain their views and insights on (1) the reasons
    for the persistence of various labor-management relations problems;
    and (2) the Service's efforts to implement the 10 improvement
    initiatives, some of which were intended to address such problems.
    At the national level, we spoke with the presidents of APWU and NALC
    as well as the presidents of the Mail Handlers and Rural Carriers
    unions.  In addition, we interviewed the presidents of NAPS, NAPUS,
    and the League.  At the local level, we interviewed various union
    representatives, including national business agents responsible for
    union activities in the states covered by the four area offices,
    local union presidents, and shop stewards.  We also spoke with local
    representatives of the three management associations.

    As mentioned in the first objective, to determine the overall extent
    to which the Postal Service and its unions and management
    associations had progressed in addressing persistent labor-management
    relations problems, we obtained information on various events that
    had occurred since the issuance of our 1994 report.  Specifically,
    this information included (1) the results of the most recent contract
    negotiations between the Service and each of the four major labor
    unions; (2) data related to postal employee grievances; and (3)
    efforts by the Service and the unions and management associations to
    address the recommendations in our 1994 report, such as the
    Postmaster General's (PMG) invitation to the other seven
    organizations to attend a labor-management relations summit meeting
    and the implementation of various improvement initiatives, including
    their status and results.

    To address the second objective, we monitored congressional
    activities that occurred since the issuance of our 1994 report,
    including the annual oversight hearings on the Postal Service's
    operations required by PRA.  In addition, we reviewed pending
    legislation intended to reform postal laws that was developed by the
    Chairman of the Subcommittee on the Postal Service, House Committee
    on Government Reform and Oversight, and introduced in June 1996, and
    again in January 1997 as H.R.  22.  We also reviewed the sections of
    the Government Performance and Results Act of 1993 (referred to as
    the Results Act) related to the Postal Service, as well as GAO and
    congressional documents that provided guidance on implementing the
    requirements of the Results Act.  Finally, to obtain more information
    on how the Service was using a third party to serve as a facilitator
    in labor-management discussions as was recommended in our 1994
    report, we interviewed the Director of the Federal Mediation and
    Conciliation Service (FMCS).

    We requested comments on a draft of this report from the PMG; the
    presidents of the four labor unions (APWU, NALC, Mail Handlers, and
    Rural Carriers) and the three management associations (NAPS, NAPUS,
    and the League); and the Director of FMCS.  Of the nine organizations
    from which we requested comments, six provided written comments,
    including the Service, the four unions, and one of the three
    management associations (the League).  These written comments are
    reprinted in appendixes II through VII.  The remaining three
    organizations--FMCS, NAPS, and NAPUS--provided oral comments.  The
    comments are discussed in appropriate sections throughout the report
    and at the end of the report.  We conducted our review from June 1996
    through May 1997 in accordance with generally accepted government
    auditing standards.

    --------------------
    \6 Postal remote encoding centers (RECs) are installations
    responsible for barcoding mail that cannot be read by the Service's
    automated mail processing equipment.

       LITTLE PROGRESS HAS BEEN MADE
       IN IMPROVING LABOR-MANAGEMENT
       RELATIONS PROBLEMS
    ------------------------------------------------------------ Letter :4

    Since our 1994 report was issued, the Postal Service and its unions
    and management associations have made little progress in improving
    long-standing labor-management relations problems.  These problems
    have generally contributed to a sometimes contentious work
    environment and lower productivity.  Such problems may make it more
    difficult for these organizations to work together to improve the
    Service's performance so that it can remain competitive in a dynamic
    communications market.

    According to Postal Service information, in fiscal years 1995 and
    1996, the Service improved its overall financial performance as well
    as its mail delivery services, particularly in the delivery time of
    overnight First-Class Mail.  For example, in fiscal year 1996, the
    Service reported a net income of about $1.6 billion, which was second
    highest only to its fiscal year 1995 net income of about $1.8
    billion.  The Service believed that in large part, improved control
    over its expenses, including savings from automation efficiencies and
    a restructuring and refinancing of its long-term debt, contributed to
    the increased income.  In addition, the Service reported that its
    national average of on-time delivery of overnight First-Class Mail
    reached an all-time high of 89 percent for fiscal year 1996 compared
    to 86 percent for fiscal year 1995.\7

    Although the Service had made financial and First-Class Mail delivery
    improvements, other data indicated that in some areas, its
    performance had not improved.  For example, the rate of change in the
    Service's overall productivity, known as total factor productivity
    (TFP), has decreased in each of the last 3 fiscal years.  TFP
    includes various performance indicators, such as usage rates of
    automated mail processing equipment, the growth in the overall postal
    delivery network, the development of postal facilities, and changes
    in presorted and prebarcoded mail volumes.  Additionally, for fiscal
    year 1996, the on-time delivery of 2-day and 3-day mail--at 79 and 80
    percent, respectively--did not score as high as overnight delivery.
    Such performance has raised a concern among some postal customers
    that the Service's emphasis on overnight delivery is at the expense
    of 2-day and 3-day mail.  Also, although its mail volume continues to
    grow, the Service is concerned that customers increasingly are
    turning to its competitors or alternative communications methods.  In
    1996, mail volume increased by about one-half of the anticipated
    increase in volume.  As discussed in our 1994 report, the Service
    recognized that it must focus on improving customer satisfaction to
    enhance revenue and retain market share.  Also, the Service
    recognized that in all likelihood, customers will not remain
    satisfied in an environment where persistent labor-management
    relations problems continue to cause employee dissatisfaction.

    Our recent work has shown little progress within the last few years
    on addressing long-standing labor-management relations problems, and
    the sometimes adversarial relationships between postal management and
    union leadership at the national and local levels have persisted.
    These relationships have generally been characterized by (1) a
    continued reliance by three of the four unions on arbitration to
    settle their contract negotiation impasses with the Service, (2) a
    significant rise not only in the number of grievances that have been
    appealed to higher levels but also in the number of grievances
    awaiting arbitration, and (3) the inability of the Service and the
    other seven organizations to convene a labor-management relations
    summit to discuss problems and explore solutions.  Various postal,
    union, and management association officials whom we interviewed said
    that the problems persist primarily because the leaders of these
    organizations have been unable to agree on common approaches to
    solving the problems.  As a result, our 1994 recommendation for
    establishing a framework agreement of common goals and approaches
    that could help cascade positive working principles and values from
    top postal, union, and management association officials down
    throughout the Service's approximately 38,000 postal facilities
    nationwide has yet to be implemented.

    --------------------
    \7 The Postal Service currently uses a measurement known as the
    External First-Class Measurement System (EXFC) as a means of
    indicating how well it is serving customers.  The quarterly EXFC,
    administered by Price Waterhouse, measures the delivery time of
    First-Class Mail from deposit to delivery (collection box to mail
    slot).

          ARBITRATION USED TO SETTLE
          MOST CONTRACT NEGOTIATIONS
    ---------------------------------------------------------- Letter :4.1

    In our 1994 report, we discussed the occurrence of past contract
    negotiations, which generally took place at the national level
    between the Service and the four labor unions every 3 or 4 years.
    Since as far back as 1978, interest arbitration\8 has been used to
    resolve bargaining deadlocks that occurred during contract
    negotiations for three of the four unions, including APWU, NALC, and
    Mail Handlers.  Specifically, interest arbitration occurred in 1978,
    1984, and 1990 with APWU and NALC, and in 1981 with Mail Handlers.

    The most recent negotiations occurred for contracts that expired in
    November 1994 for APWU, NALC, and Mail Handlers, during which
    interest arbitration was used to settle bargaining deadlocks.  In the
    case of the Rural Carriers, whose contract expired in November 1995,
    negotiations resulted in the establishment of a new contract without
    the use of interest arbitration.\9

    With APWU, NALC, and the Mail Handlers, the issues that arose in
    interest arbitration over their most recent contracts were similar to
    issues that have surfaced at previous contract negotiations.  The
    issues focused primarily on the unions' push for wage and benefit
    increases and job security, in contrast to postal management's push
    for cost-cutting and flexibility in hiring practices.  According to a
    postal official, such negotiations over old issues that continually
    resurface have at times been bitter and damaging to the ongoing
    relationship between the Service and union leadership at the national
    level.  Union officials also told us that a new issue--the
    contracting out of specific postal functions, also known as
    outsourcing--has caused the unions a great deal of concern, because
    they believe that it could affect job security for employees.

    In his comments on a draft of this report, the president of the Rural
    Carriers union stated that for the most recent collective bargaining
    agreement, the negotiating team, including postal and union
    representatives, held joint training sessions across the country and
    invited various state and local postal management and craft
    representatives to participate in the training.  The Rural Carriers
    president believed that this training helped the parties to better
    negotiate and reach agreement on the language that was included in
    the most recent contract, which in this instance eliminated the need
    for the use of an outside arbitrator.  Also, the president believed
    that the training helped provide both union and postal management
    officials a more thorough understanding of the contract's
    requirements.

    --------------------
    \8 The Postal Reorganization Act (PRA) of 1970 provided that labor
    unions could collectively bargain with the Postal Service to
    establish compensation, benefits, and other terms and conditions of
    employment for the employees they represent.  Unlike employees in the
    private sector, postal employees are prohibited from striking.  Thus,
    PRA established procedures for interest arbitration that are designed
    to resolve bargaining impasses that may occur during discussions over
    the terms of a new contract.

    \9 The rural carriers have had a more cooperative relationship with
    the Postal Service and generally have been able to negotiate
    contracts without arbitration.

          GRIEVANCES CONTINUE TO
          INCREASE
    ---------------------------------------------------------- Letter :4.2

    In our September 1994 report, we discussed the problems associated
    with the grievance/arbitration process, which is the primary
    mechanism for craft employees to voice work-related concerns.  As
    defined in postal labor agreements, a "grievance" is "a dispute,
    difference, disagreement, or complaint between the parties related to
    wages, hours, and conditions of employment." In our 1994 report, the
    problems we described included (1) the high number of grievances
    being filed and the inability of postal supervisors or union stewards
    to resolve them at the lowest organizational level possible and (2)
    the large backlog of grievances awaiting arbitration.

    The process for resolving postal employees' grievances is similar to
    that used in many private sector and other public organizations.
    Generally, according to labor relations experts, a process that is
    working effectively would result in most disputes being resolved
    quickly at the lowest organizational level, that is, by the
    supervisor, employee, and union steward who represents the employee's
    interests.  Employees as well as the four postal unions that
    represent them can initiate grievances.

    Depending on the type of grievance, the process may involve up to 4
    or 5 steps, and each step generally requires the involvement of
    specific postal and union officials.  For instance, at each of the
    first 3 steps in the process, the parties that become involved
    include lower to higher union and postal management level officials
    in their respective organizations, such as post offices, mail
    processing and distribution centers, and area offices.  Step 4 in the
    grievance process occurs only if either the Service or the union
    believes that an interpretation of the union's collective bargaining
    agreement is needed, in which case, national level postal and union
    officials would become involved.  The fifth and final step in the
    grievance process involves outside binding arbitration by a neutral
    third party.

    Generally, at each step in the process, the involved parties are to
    explore and discuss the grievance to obtain a thorough understanding
    of the facts.  During any of the first 4 steps that occur before
    arbitration, the grievance may be settled by the parties.  If the
    grievance is not settled, the Service makes a decision in favor of
    either postal management or the employee.  If the Service denies the
    grievance (i.e., makes a decision in favor of management), the
    employee or union steward can elevate the grievance to the next
    higher step in the process until the last step, which concludes the
    process with a final and binding decision by a neutral arbitrator.
    Table 3 briefly describes the specific steps of the 5-step process
    and the key parties involved.  A more detailed description of the
    grievance/arbitration process is included in appendix I.

                                    Table 3

                      Brief Descriptions of Steps and Key
                       Parties Involved in the Grievance/
                              Arbitration Process

    Step
    number    Brief description of step      Key parties involved
    --------  -----------------------------  -----------------------------
    1         Oral discussion of grievance   Employee or union steward,
              occurs.                        and supervisor

    2         If grievance was denied at     Union steward or
              step 1, a written grievance    representative and
              is filed.                      installation head or designee
                                             (e.g., postmaster, plant
                                             manager)

    3         If grievance was denied at     Union area representative and
              step 2, a written appeal of    area office human resources
              the grievance is filed.        manager or other designated
                                             area-level postal official

    4         Written decision interpreting  Representatives of national
              the union's national           union and postal headquarters
              collective bargaining
              agreement is made by the
              Service (if either the
              Service or union believes
              that such interpretation is
              needed).\a

    5         Arbitration of grievance is    Neutral arbitrator
              decided (final and binding
              decision).
    ----------------------------------------------------------------------
    \a This step may not occur with every grievance.

    Source:  U.S.  Postal Service:  Labor-Management Problems Persist on
    the Workroom Floor (GAO/GGD-94-201A/B, Sept.  29, 1994).

    In our 1994 report, we highlighted issues associated with the
    grievance/arbitration process, including the high number of
    grievances that had been filed and the inability of supervisors or
    installation heads and union stewards to resolve them at the step 1
    and 2 levels.  The Postal Service's national grievance arbitration
    database showed that in fiscal year 1994, a total of 65,062
    grievances were not settled at the steps 1 and 2 levels and were
    appealed at the step 3 level, which involved postal management and
    union officials at the area office level.  According to the Service,
    this number increased to 73,012 in fiscal year 1995 and 89,931 in
    fiscal year 1996.

    As indicated in figure 1, in fiscal year 1996, the average rate of
    step 3 grievances for every 100 craft employees had risen to 13,
    compared to fiscal year 1994, when the average rate was 10 step 3
    grievances for every 100 craft employees.

       Figure 1:  Average Rate of
       Postal Service Grievances
       Appealed to Step 3 per 100
       Craft Employees During Fiscal
       Years 1994 Through 1996

       (See figure in printed
       edition.)

    Note:  Step 3 grievances are grievances that have been appealed by
    the unions to the area level because they could not be resolved at
    the plant or district levels.

    Source:  U.S.  Postal Service.

    Also, figure 2 indicates that according to Service data, increases
    had occurred in the number of grievances that were awaiting
    arbitration by a third-party arbitrator, also referred to as
    backlogged grievances.\10 Figure 2 shows that the number of
    backlogged grievances had increased from 36,669 in fiscal year 1994
    to 69,555 in fiscal year 1996, an increase of about 90 percent.

       Figure 2:  Postal Service
       Grievances Awaiting Arbitration
       for Fiscal Years 1994 Through
       1996

       (See figure in printed
       edition.)

    Note:  These figures include backlogged grievances for which no
    arbitration decision had been made by the end of the fiscal year.

    Source:  U.S.  Postal Service.

    Figure 3 shows that in fiscal year 1996, the average rate of
    grievances awaiting arbitration had risen to 10 grievances per 100
    craft employees, an increase from the average rate of 6 grievances
    per 100 craft employees in fiscal year 1994.

       Figure 3:  Average Rate of
       Postal Service Grievances
       Awaiting Arbitration per 100
       Craft Employees for Fiscal
       Years 1994 through 1996

       (See figure in printed
       edition.)

    Note:  These figures include backlogged grievances for which no
    arbitration decision had been made by the end of the fiscal year.

    Source:  U.S.  Postal Service.

    Generally, the postal management and union officials we interviewed
    said that the total volume of grievances was too high.  However, the
    views of postal and union officials differed on the causes of this
    high grievance volume.  These officials told us that their views had
    not changed significantly since we issued our 1994 report.
    Generally, the officials tended to blame each other for the high
    volume of grievances being filed and the large number of backlogged
    grievances awaiting arbitration.

    In 1994, we reported that from postal management's perspective,
    grievances have always been high because union stewards flooded the
    system with frivolous grievances to demonstrate that they were
    executing their responsibility to represent employees' interests.
    Also, a postal official told us that he attributed the high grievance
    rate to what he termed an overall "entitlement mentality" on the part
    of craft employees who believed that they were entitled to file
    grievances.

    In contrast, union officials told us that postal management was
    largely responsible for the huge volume of backlogged grievances.
    One union official told us that the key problem was not in the filing
    of grievances by employees but in the inability of lower level postal
    officials to settle disputes, especially at steps 1 and 2.  This
    situation has often resulted in many grievances being escalated to a
    higher decisionmaking level and has added to the delays in obtaining
    such decisions.  Also, an APWU official explained that postal
    management is generally reluctant to settle grievances awaiting
    arbitration because the backlog benefits postal management.  The
    official told us that postal management can continue to violate the
    APWU labor agreement with impunity as long as grievances sit in the
    backlog awaiting an arbitration decision.  In his comments, the
    president of the Rural Carriers union stated that he strongly
    encourages union members to file only meritorious grievances.

    --------------------
    \10 For this report, the term backlog is used to describe only those
    grievances awaiting arbitration.

          SUMMIT MEETING ON
          LABOR-MANAGEMENT RELATIONS
          HAS NOT YET OCCURRED
    ---------------------------------------------------------- Letter :4.3

    The Postal Service and its unions and management associations have
    been unsuccessful in their attempts to convene a labor-management
    relations summit that was proposed by the PMG over 2 years ago.  In
    November 1994, the Subcommittee on Federal Services, Post Office, and
    Civil Service of the Senate Committee on Governmental Affairs held a
    hearing on labor-management relations in the Postal Service that in
    large part focused on the information in our September 1994 report.
    Various witnesses testified at the hearing, including the PMG and the
    national leaders of APWU, Mail Handlers, Rural Carriers, and NAPS.
    The PMG extended an invitation to the leaders of the four unions and
    three management associations to join Service officials in a
    labor-management relations summit at which postal, union, and
    management association leaders could explore our recommendations for
    improving the workroom climate and determine appropriate actions to
    be taken.

    The responses from the other seven organizations to the PMG's
    invitation were mixed.  For instance, around January 1995, the
    leaders of the three management associations and the Rural Carriers
    union accepted the invitation.  However, the union leaders for APWU,
    NALC, and Mail Handlers did not.  They said they were waiting until
    the contract negotiations were completed before making a decision on
    the summit.  At the time the invitation was extended, the contracts
    for these three unions had recently expired, and contract
    negotiations had begun.  After all negotiations were completed for
    the three unions in April 1996, they agreed to participate in the
    summit.

    Given the difficulties initially encountered by the Service in trying
    to convene a summit, in February 1996, the Postal Service requested
    the Director of the Federal Mediation and Conciliation Service (FMCS)
    to assist the Service by providing mediation services in helping to
    set up the summit meeting.  Also, in March 1996, the Chairman of the
    Subcommittee on Postal Service, House Committee on Government Reform
    and Oversight, encouraged the FMCS Director to assist the Postal
    Service by providing such services.

    According to a postal official, in September and December 1996, the
    FMCS Director facilitated two presummit meetings that involved
    representatives from the Service, APWU, and NALC.  In January 1997,
    another meeting was held that involved only the Service, APWU, and
    NALC officials.  Although postal and union officials declined to
    reveal the specific issues that were discussed at the presummits,
    they told us that such issues as performance-based compensation,
    outsourcing of specific postal functions, and grievance resolution
    will continue to be major concerns.

    Also, in March 1997, the Director of FMCS told us that another
    presummit is currently being scheduled to provide the other five
    affected parties an opportunity to discuss similar issues with the
    Service.  However, as of May 1997 when we completed our review, no
    summit involving all eight of the parties had taken place, nor was
    one scheduled.

    In his comments on a draft of this report, the Director of FMCS
    provided us updated information on the presummit and summit meetings.
    APWU, NALC, Rural Carriers, and the League also provided us their
    comments on the presummit and summit meetings.  The Director of FMCS
    told us that in addition to the presummit meetings held in September
    and December 1996 with the Service, APWU, and NALC, another presummit
    meeting was held in June 1997, which was attended by officials from
    FMCS, the Service, the Mail Handlers and the Rural Carriers unions,
    NAPS, NAPUS, and the League.  The purpose of the presummit was
    similar to the purpose of the presummit meetings previously held with
    APWU and NALC, which was to (1) discuss information on
    labor-management relations problems that was obtained by an outside
    contractor through interviews with various postal, union, and
    management association officials; and (2) determine the next steps in
    attempting to organize a summit meeting that would involve the
    Service, the four major labor unions, and the three management
    associations.  Generally, the Director believed that the presummit
    meeting went well and that the stage is now set for what he envisions
    will be a summit meeting that should provide the eight organizations
    with a forum for openly discussing the status of labor-management
    relations and the steps that can be taken to help resolve problems.
    He also told us that discussions are currently being held with the
    eight organizations on proposed dates for the summit meeting.

    The president of APWU told us that the prospects of a summit meeting
    being convened were not improved when the Service unexpectedly
    announced its decision to contract out some Priority Mail
    transportation and processing services to Emery Worldwide
    Airlines.\11 According to the president of APWU, after one of the
    presummit meetings, the PMG pledged full communication concerning the
    Service's business plans.  However, APWU stated that it was not
    consulted about this decision before it was finalized, and its
    representatives were disappointed because they believed that the
    Service did not solicit their views on the merits of such a decision.
    The president of NALC said that although a summit meeting has not yet
    been convened, GAO should not use this fact as an indicator of the
    extent to which labor-management relations problems exist.  NALC
    commented that one of the reasons the summit meeting has not yet
    occurred was because the timing of the PMG's suggestion for a summit
    in November 1994 was not appropriate, given that sensitive and
    difficult collective bargaining negotiations were about to begin.
    NALC also stated that some presummit meetings have already been held,
    which could achieve some positive results.

    In its comments, the Rural Carriers union pointed out that it was the
    first organization to accept the PMG's invitation soon after it was
    first proposed.  Like NALC, the League also commented that the PMG's
    attempts to convene a summit with all the employee organizations were
    thwarted by contract negotiations, and since 1994, a summit with the
    participation of all four unions and three management associations
    simultaneously has failed to happen.

    --------------------
    \11 The Service recently entered into a $1.7 billion contract with
    Emery Worldwide Airlines to provide transportation services,
    including trucking and airline services, to help move the Service's
    Priority Mail, which the Service attempts to deliver within 2 to 3
    days.

       STATUS AND RESULTS OF
       INITIATIVES TO IMPROVE
       LABOR-MANAGEMENT RELATIONS
    ------------------------------------------------------------ Letter :5

    Since our 1994 report was issued, the Postal Service and the other
    seven organizations have continued in their efforts to address
    long-standing labor-management problems by taking actions to
    implement specific improvement initiatives, such as the program for
    selecting and training new postal supervisors, known as the Associate
    Supervisor Program (ASP).  Although many postal, union, and
    management association officials we spoke with believed that some of
    these initiatives held promise for making a positive difference in
    the labor-management relations climate, little information was
    available to measure the results of various initiatives.

    For the 10 initiatives that we selected for follow-up, table 4
    includes brief descriptions of the initiatives, identifies the
    organizations who participated in the implementation of the
    initiatives, and indicates the recommendations in our 1994 report to
    which each initiative is related.

                                         Table 4

                          List of 10 Selected Initiatives, Their
                         Major Participants, and Related 1994 GAO
                                     Recommendations

                                            Actual/potential    GAO
    Initiative          Brief description   participants        recommendation(s)
    ------------------  ------------------  ------------------  --------------------
    Associate           A 16-week training  --Postal Service    Provide for the
    Supervisor Program  program that was    --APWU, NALC,\a     selection and
    (ASP)               established in      Mail Handlers, and  training of postal
                        1994 and was        Rural Carriers      supervisors.
                        designed to         --NAPS, NAPUS, and
                        prepare candidates  the League
                        to assume postal
                        supervisory
                        positions.

    New performance-    A revised           --Postal Service    Provide a system of
    based compensation  compensation and    --NAPS, NAPUS, and  incentives for
    system for          bonus system        the League          recognizing and
    executives,         established in                          rewarding employees
    managers, and       1995 that was                           based on corporate
    supervisors         intended to                             and unit
                        provide postal                          performance.
                        executives,
                        managers, some
                        supervisors, and
                        some postmasters
                        with pay increases
                        and bonuses that
                        more closely
                        aligned each
                        individual's
                        performance with
                        the performance of
                        his or her work
                        unit and the
                        overall
                        performance of the
                        Service.

    CustomerPerfect\    A process begun by  --Postal Service    Develop common goals
    sm                  the Service in      --APWU, NALC, Mail  and strategies, and
                        1995 to establish   Handlers, and       test approaches at
                        a Service-wide      Rural Carriers      pilot sites for
                        system of           --NAPS, NAPUS, and  improving postal
                        continuous          the League          operations and
                        improvement for     --Employees         service quality.
                        conducting its      represented by the
                        business of         D.C. Nurses
                        processing and      Association and
                        delivering mail     the Federation of
                        and providing       Postal Police
                        postal products     Officers
                        and services to     --All other postal
                        its customers.      employees not
                                            represented by
                                            unions or
                                            management
                                            associations.

    Summit meeting      The PMG's           --Postal Service    Establish a
                        invitation,         --APWU, NALC, Mail  framework agreement
                        extended in         Handlers, and       to develop common
                        November 1994, to   Rural Carriers      goals and
                        the leaders of the  --NAPS, NAPUS, and  strategies.
                        four labor unions   the League
                        and three
                        management
                        associations to
                        establish a task
                        force whose
                        purpose would be
                        to try to address
                        the labor-
                        management
                        relations problems
                        discussed in our
                        1994 report.

    Delivery Redesign   A program begun in  --Postal Service    Develop and test
                        1995 that was       --NALC              approaches for
                        designed to                             improving mail
                        establish                               delivery by
                        appropriate                             providing for
                        changes to the                          greater employee
                        system by which                         independence in
                        city letter                             sorting and
                        carriers,                               delivering mail,
                        represented by                          greater incentives
                        NALC, sort and                          for early completion
                        deliver mail,                           of work, and a
                        which would                             system of
                        eventually serve                        accountability for
                        as the basis for                        meeting delivery
                        compensating these                      schedules.
                        carriers.

    Labor-management    A 1993 memorandum   --Postal Service    Establish a
    cooperation         of understanding    --APWU              framework agreement
    memorandum          established                             to develop common
                        between the                             goals and
                        Service and APWU                        strategies.
                        to establish
                        principles of
                        mutual commitment
                        that would serve
                        as the basis for
                        their increased
                        cooperation
                        throughout the
                        Service.

    Crew chief          A pilot program     --Postal Service    Develop and test
                        established         --APWU              approaches for
                        between the                             improving mail
                        Service and APWU                        processing
                        through the 1990                        operations through
                        collective                              the use of self-
                        bargaining process                      managed work units.
                        under which
                        bargaining
                        employees would be
                        allowed to assume
                        leadership roles
                        in work units.

    Mediation of        A process           --Postal Service    Develop and test
    grievances          established         --APWU              approaches for
                        between the                             improving working
                        Service and APWU                        relations at postal
                        through the 1994                        pilot sites.
                        collective
                        bargaining process
                        under which
                        trained mediators
                        from both
                        organizations
                        would work
                        together to try to
                        resolve employees'
                        grievances at the
                        lowest possible
                        level.

    Employee            A program           --Postal Service    Train employees and
    Involvement (EI)    established         --NALC              hold them
                        through contract                        accountable for
                        negotiations with                       working as members
                        NALC in 1981 that                       of work teams,
                        was intended to                         focusing on serving
                        end or alleviate                        the customer, and
                        the adversarial                         participating in
                        relationship on                         efforts to
                        the workfloor.                          continuously improve
                                                                unit operations.

    Employee opinion    A survey that was   --Postal Service    Obtain employee
    survey (EOS)        first sent out in   --APWU, NALC, Mail  views on and
                        1992 to all         Handlers, and       participation in
                        bargaining and      Rural Carriers      improving workfloor
                        non-bargaining      --NAPS, NAPUS, and  environment.
                        employees and was   the League
                        designed to obtain  --Employees
                        employees'          represented by the
                        assessments of the  D.C. Nurses
                        Service's           Association and
                        strengths and       the Federation of
                        shortcomings as an  Postal Police
                        employer.           Officers
                                            --All other postal
                                            employees not
                                            represented by
                                            unions or
                                            management
                                            associations
    --------------------------------------------------------------------------------
    \a In its comments, NALC stated that we had erroneously listed it as
    a participant in ASP.  As shown in table 4, for each of the 10
    initiatives, we identified the organizations that were participants
    in or potential participants in specific initiatives.  According to
    postal officials responsible for implementing ASP, generally, all
    craft employees with at least 1 year of work experience in the
    Service are eligible to apply for ASP.  Thus, our inclusion of NALC
    as a participant in ASP was intended to show that NALC employees with
    a minimum of 1 year of postal work experience can apply for and, if
    accepted, participate in ASP.

    Source:  U.S.  Postal Service:  Labor-Management Problems Persist on
    the Workroom Floor (GAO/GGD-94-201A/B, Sept.  29, 1994) and various
    postal and union documents that described specific initiatives.

    As shown in table 4, all 10 initiatives required the participation of
    the Postal Service.  However, the participation of the other seven
    organizations--that is, the four major labor unions and the three
    management associations--varied depending on the extent to which
    employees represented by the unions and the associations were covered
    by each initiative.  For example, the initiative involving the
    mediation of grievances applied only to employees represented by
    APWU, because this initiative was established through the 1994
    collective bargaining process that occurred between the Service and
    APWU.  Similarly, the Delivery Redesign initiative applied only to
    employees represented by NALC, because this initiative focused on the
    work performed by city letter carriers.

    In his comments on a draft of this report, the president of the
    League of Postmasters believed that the list of 10 initiatives in our
    report could be construed to mean that the League had a stronger
    presence in the implementation of the initiatives than was actually
    the case.  The League mentioned that in most instances, the Service
    provided the League general information about the initiatives and a
    timetable of what was to occur in their implementation.

    During our discussions with Service, union, and management
    association officials on the 10 improvement initiatives, the
    officials generally agreed with the overall goals of some of the
    initiatives.  However, the results of our work indicated that in
    large part, fundamental disagreements among the eight organizations
    on strategies for implementing specific initiatives continued to
    hamper their efforts to achieve these goals and improve the overall
    working climate for postal employees.

    The purpose of some of these initiatives was generally to improve
    labor-management relations, thereby enhancing the Service's
    performance in providing postal products and services to its
    customers.  During our review, we found that various actions had been
    taken to implement all 10 initiatives that we reviewed.  However, we
    found it difficult to determine what results, if any, were achieved
    from 3 of the 10 initiatives primarily because the initiatives were
    only recently piloted or implemented.  Also, for 5 of the 10
    initiatives, disagreements among the involved participants on
    approaches for implementation generally prevented full implementation
    of these initiatives and full evaluation of their results.  In
    addition, although results were available for 2 of the 10
    initiatives, these initiatives were eventually discontinued,
    primarily because the Service and the other involved participants
    disagreed over how best to use the initiatives to help improve the
    postal workplace environment.

          ACTIONS HAVE BEEN TAKEN TO
          IMPLEMENT THREE INITIATIVES,
          BUT IT IS TOO EARLY TO
          DETERMINE RESULTS
    ---------------------------------------------------------- Letter :5.1

    For three initiatives, results were difficult to determine, primarily
    because they had only been recently piloted or implemented, which
    made it too early to fully assess their results.  The three
    initiatives included (1) the Associate Supervisor Program (ASP); (2)
    the new performance-based compensation system for executives,
    managers, and supervisors; and (3) CustomerPerfect!

          ASSOCIATE SUPERVISOR PROGRAM
    ---------------------------------------------------------- Letter :5.2

    In our 1994 report, we recommended that the Service select and train
    supervisors who could serve as facilitator/counselors and who would
    have the skills, experience, and interest to treat employees with
    respect and dignity, positively motivate employees, recognize and
    reward them for good work, promote teamwork, and deal effectively
    with poor performers.  In an attempt to address this recommendation,
    the Service established ASP, a 16-week supervisory training program
    designed to ensure that candidates for postal supervisory positions
    were sufficiently screened and trained so that after they were placed
    in supervisory positions, these supervisors would have a solid
    foundation that could help them work well with employees.  A test of
    ASP was completed in the St.  Louis district office in the fall of
    1994, after which the test was expanded to include a total of 10
    pilot sites.\12 According to a postal official, as of March 1997,
    about 254 candidates had completed ASP training.  Most of these
    candidates have already been assigned to supervisory positions in
    various postal locations.  The Service expects that by the end of
    fiscal year 1997, 70 of the Service's 85 postal district offices will
    have graduated ASP classes or will have classes ongoing.

    During our review, the Service was gathering data from the 10 pilot
    locations to evaluate ASP.  For example, in March 1997, according to
    an official from the Service's Office of Corporate Development and
    Training, that office conducted a 3-day ASP workshop to obtain
    feedback from the program participants, including the trainers,
    coaches, coordinators, and supervisory candidates who attended ASP
    training.  According to the postal official, all the participants in
    the workshop commented that ASP was an "incredible success." In
    addition, the official told us that a San Francisco post office went
    from having the worst scores in productivity and the Service's
    External First-Class (EXFC) Measurement System to being one of the
    top post offices in the San Francisco district.  The official
    attributed much of this improvement to the high-quality calibre of
    the ASP supervisors who had been assigned to the post office.

    As of March 1997, the Service was still completing the last ASP
    pilot.  Upon completion of the pilot, the Service plans to administer
    a written survey to all ASP participants to obtain their comments on
    the content of the ASP training course, including such matters as the
    extent to which they believe the course met its objectives and
    whether the ASP instructors were knowledgeable.  Also, the
    participants are to be asked to assess how they have been able to
    transfer their recently learned knowledge and skills to their current
    supervisory positions.

    In addition, the Service plans to distribute a separate written
    survey to the managers of the new ASP supervisors.  In this survey,
    managers are to be asked to compare the quality of the on-the-job
    performance of ASP supervisors to supervisors who had not received
    ASP training.  Also, managers are to be asked to evaluate ASP
    supervisors' communications and leadership skills as well as their
    ability to promote and maintain a safe working environment for
    employees.  Finally, the Service plans to collect overall performance
    data, such as EXFC and productivity scores, to compare a specific
    postal facility's performance before receiving ASP supervisors and
    after receiving such supervisors to try to determine to what extent
    ASP may have affected the performance of the facility.

    Various postal, union, and management association officials we
    interviewed at some of the ASP pilot locations told us that although
    they believed it was too soon to evaluate the results of the program,
    they believed it had the potential for providing the Service with
    more qualified and better trained supervisors.  Also, local union
    officials we spoke with said that they liked the additional training
    that is to be provided to current postal supervisors under ASP.\13

    --------------------
    \12 The 10 sites that participated in the ASP pilot included (1)
    Dallas, TX; (2) Detroit, MI; (3) Hartford, CT; (4) Los Angeles, CA;
    (5) Miami, FL; (6) Philadelphia, PA; (7) Providence, RI; (8) San
    Francisco, CA; (9) St.  Louis, MO; and (10) Washington, D.C.

    \13 According to a postal official responsible for managing ASP, the
    Service plans to make specific parts of ASP training available to
    current postal supervisors, such as conflict resolution and methods
    for dealing with problem employees.  The purpose of this effort is to
    provide current postal supervisors with training that is similar to
    the training that ASP candidates receive.

          NEW PERFORMANCE-BASED
          COMPENSATION SYSTEM FOR
          EXECUTIVES, MANAGERS, AND
          SUPERVISORS
    ---------------------------------------------------------- Letter :5.3

    In our 1994 report, we discussed past problems with the Service's
    performance-based incentive systems for managers and supervisors.
    The problems concerned a system that emphasized providing these
    employees with merit pay and promotions for achieving a variety of
    productivity and budget goals.  Examples of such goals included
    requiring supervisors to manage their assigned budgets and control
    unscheduled employee absences and overtime usage.  However, we found
    that some supervisors emphasized "making their numbers" over
    maintaining good employee relations.

    To help address these problems, we recommended in 1994 that the
    Service should provide incentives that would encourage all employees
    in work units to share in the tasks necessary for success and that
    would allow work units and employees to be recognized and rewarded
    primarily on the basis of corporate and unit performance.  To address
    this recommendation, the Service established a revised compensation
    system in 1995 for employees under the Postal and Career Executive
    Service (PCES).  Later, in 1996, the system was expanded to cover the
    Executive and Administrative Schedule (EAS), which includes
    executives, managers, and supervisors.\14 The purpose of this system
    was to establish a performance-based incentive system of pay
    increases and bonuses that would appropriately recognize and reward
    employees for good performance.  The amounts of such increases and
    bonuses would be based not only on the individual's performance
    rating but also on the performance of the individual's work unit, as
    well as the performance of the Service as an organization.

    A key aspect of the revised compensation system is called the
    Economic Value Added (EVA) variable pay program, which is a program
    intended to provide employees covered by the new compensation system
    with bonuses based on specific performance measurements, such as the
    financial performance of the Service and levels of customer
    satisfaction.  Under EVA, in fiscal year 1996, the Service
    distributed a total of $169 million in bonuses to a total of about
    63,000 postal executives, managers, supervisors, postmasters, and
    other higher level nonbargaining unit employees.  Nationally, the
    average bonus paid to an executive under PCES amounted to $12,500.
    Postmasters covered by the new compensation system and higher level
    professionals, administrative, and technical employees each received
    a bonus that averaged $3,900.\15

    Another important aspect of the new compensation system was the
    inclusion of work unit and corporate measurements in EAS employees'
    merit performance evaluations.  For fiscal year 1997, these
    evaluations are required to include objectives that are aligned with
    an individual employee's work unit goals.  The objectives must also
    align with and support the Service's corporate goals.  According to
    postal officials, this change is intended to (1) enhance EAS
    employees' active involvement in setting objectives to support their
    work units, (2) establish accountability for results, and (3) provide
    monetary acknowledgment of an individual employee's contribution to
    the success of the work unit.

    Although the leaders of the three management associations supported
    the concept of a performance-based incentive system, two of the three
    associations disagreed with the Service on how this system was to be
    implemented.  Specifically, NAPS agreed to endorse the new pay
    system.  However, in contrast, officials from NAPUS refused to
    endorse the new pay system because they believed "it offered
    virtually nothing to some of our members." Also, in its comments on a
    draft of this report, the League stated that it refused to endorse
    the new pay system because the means by which the Service implemented
    EVA precluded most of the Service's postmasters, including most of
    the League's members, from being eligible for bonuses.

    According to NAPUS and League officials, the Service determined that
    certain employees who were covered by the requirements of the Fair
    Labor Standards Act (FLSA), also known as nonexempt employees,\16
    should not be eligible to receive EVA bonuses.  NAPUS and League
    officials mentioned that the Service's decision eliminated about 60
    percent of the employees represented by their associations because
    they were nonexempt employees.  A postal official said that in large
    part, this determination was based on the results of a wage
    comparability study done recently for the Postal Service in which the
    wages of postal employees were compared to wages for employees doing
    similar work in the private sector.  The official said that the
    results of the study showed that nonexempt postal employees were paid
    from 30 to 60 percent higher wages compared to employees doing
    similar work in the private sector.  Also, the official said that
    nonexempt employees in private sector organizations with incentive
    pay programs are generally not eligible to participate in such
    programs.  Furthermore, the official said that since nonexempt
    employees are entitled to receive overtime pay for work they perform
    in excess of 40 hours per week, these employees are already
    sufficiently compensated for their "extra" work.

    NAPUS and League officials also stated that many of the Service's
    nonexempt employees are postmasters who are women and members of
    minority groups.  Furthermore, the presidents of NAPUS and the League
    told us that within recent months, their associations have filed
    class-action lawsuits charging that the new compensation system
    discriminates against women and minorities.  The lawsuits, which were
    filed in November 1996, are still pending as of January 1997,
    according to management association officials.

    In their comments on a draft of this report, three organizations--the
    Rural Carriers union, the League, and NAPS--provided us their
    insights into this initiative.  In his comments, the president of the
    Rural Carriers union stated that he supported the concept of EVA but
    had differences with the Postal Service in the application of EVA.
    He mentioned that at the national level, his union has met to try to
    determine how the rural carriers' current compensation system could
    be revised so that rural carriers could participate in EVA.  The
    president further stated that his union was awaiting an opportunity
    to participate in EVA, especially since rural carriers' individual
    performance goals have always been aligned with their postal units'
    goals, which were established under the Service's CustomerPerfect!
    system of management.  However, the president said that due to the
    enormous resources that the Service has devoted to the implementation
    of the Delivery Redesign initiative, it has been unable to provide
    much assistance to the Rural Carriers union in developing any type of
    performance pay system in addition to the one that the rural carriers
    already have.  The Rural Carriers president also stated that it is
    the individual employee who drives customer satisfaction, creates
    revenue, and increases productivity.  As such, he believes that the
    performance of rural carriers in these areas is already aligned with
    the concepts of EVA.

    As previously mentioned, in his comments, the president of the League
    expressed his concern that less than a majority of postmasters were
    included under EVA, which caused the League not to support the new
    pay system.  Also, he commented that (1) nonexempt postmasters who
    receive additional pay for working over 40 hours per week should not
    be excluded from eligibility for EVA bonuses, because such pay is due
    these postmasters for additional work and should not be considered a
    bonus; and (2) when trying to support new programs, such as EVA, the
    Postal Service has often used the private sector as a basis for
    comparing the work of postal employees to employees doing similar
    work in the private sector.  However, the League president stated
    that because the Postal Service is not a private business, the
    Service should recognize that many postal positions are unique and
    cannot be compared to positions in the private sector.  The president
    of NAPS told us that he believed some postmasters were overpaid for
    the work that they did, which included work that oftentimes was done
    by craft employees, particularly clerks, such as sorting mail and
    providing over-the-counter products and services to postal customers.

    --------------------
    \14 Employees covered by this system basically include (1) postal
    vice-presidents; (2) managers who work at Postal Service headquarters
    in Washington, D.C., and at postal field locations; (3) some
    supervisors at postal field locations, including district offices and
    plants; (4) some postmasters; and (5) other higher level postal
    professional, administrative, and technical personnel.  This system
    does not cover compensation for bargaining unit employees whose pay
    and benefits are specified in their unions' contracts.

    \15 Under the new compensation system, the payout percentage figure
    for postmasters, managers, supervisors, and higher level
    professional, administrative, and technical employees included under
    the EAS was one-half the amount of the payout percentage figure for
    postal PCES executives.

    \16 Under FLSA, nonexempt employees are required to receive overtime
    payments for work they accomplish in excess of 40 hours per week.

          CUSTOMERPERFECT!
    ---------------------------------------------------------- Letter :5.4

    In February 1995, the Service implemented CustomerPerfect!, which has
    been described by the Vice President for Quality as a "management
    system being constructed and operated by the Postal Service as a
    vehicle for constructive change." He told us that CustomerPerfect!
    is designed to assess and, where necessary, improve all aspects of
    Service operations so that it can better provide postal products and
    services to its customers in a competitive environment.

    Postal officials told us that in fiscal year 1995, two
    CustomerPerfect!  pilots were established in Washington, D.C., and
    Nashville, TN.  Later, in February 1996, eight additional pilot sites
    were added.\17 A postal official mentioned that these pilots
    consisted primarily of implementing what the Service called process
    management, which was described as a systematic approach to
    continuously assessing, evaluating, and improving the design and
    management of core work processes, including those that facilitate
    the processing and delivery of mail products and services to postal
    customers.  A key aspect of this approach involves the collection and
    use of various service and financial performance data, such as EXFC;
    EVA; and data on safety in the workplace, including postal vehicle
    accidents.  A postal official mentioned that the Service plans to
    expand the process management aspect of CustomerPerfect!  to all 85
    postal performance clusters in fiscal year 1997.\18

    According to postal officials, CustomerPerfect!  was not specifically
    designed to address labor-management relations problems.  However,
    they believe it provides an opportunity for management and craft
    employees to work together on problem-solving teams to improve how
    the Service accomplishes its overall mission.  Postal officials told
    us that they believed they had good representation from craft
    employees on several problem-solving teams that have been
    established.  They further stated that all improvement initiatives
    should be aligned with CustomerPerfect!

    According to a postal official, in 1995, the Service offered to
    provide a briefing on the goals of CustomerPerfect!  to the four
    unions and the three management associations.  According to a postal
    official, representatives from two of the four unions--APWU and Rural
    Carriers--attended the briefing.  The postal official told us that
    Mail Handlers and NALC representatives declined to attend the
    briefing.  Mail Handlers' officials told us that they had no interest
    in the briefing, mainly because the Service had already made the
    decision to implement CustomerPerfect!  and did not solicit the
    union's input into the development of CustomerPerfect!  NALC
    officials did not identify a specific reason for not attending the
    CustomerPerfect!  briefing.  However, they told us that the Service
    unilaterally terminated the joint Service-NALC improvement initiative
    called Employee Involvement (EI) and is now emphasizing
    CustomerPerfect!  Representatives from both Mail Handlers and NALC
    also told us that CustomerPerfect!  was forced on the unions with no
    attempt by the Service to solicit their input into the development of
    CustomerPerfect!

    In their comments on a draft of this report, the Rural Carriers union
    and the League of Postmasters provided us their insights on
    CustomerPerfect!  The president of the Rural Carriers union mentioned
    that he supported this initiative in concept and that many of his
    union members have been involved in CustomerPerfect!  process
    management activities.  Furthermore, he stated that individual
    performance goals for rural carriers had always been aligned with a
    postal unit's corporate goals under CustomerPerfect!  However, his
    main concern dealt with how rural carriers could participate in EVA.
    The League commented that because Service goals have been established
    for each performance cluster, a postal installation that achieves or
    exceeds its goals will more than likely not receive any recognition
    for such performance if it is included in a cluster with other
    installations that have not achieved their goals.  According to the
    League, this situation is not a good one for providing employees
    incentives nor is it good for morale, customer service, or the Postal
    Service.

    --------------------
    \17 The locations of the 10 CustomerPerfect!  pilots included the
    following district offices:  (1) the Capital District, Washington,
    D.C.; (2) the Central Plains District, Omaha, NE; (3) the Connecticut
    District, Hartford, CT; (4) the Greater Indiana District,
    Indianapolis, IN; (5) the Harrisburg District, Harrisburg, PA; (6)
    the Louisiana District, New Orleans, LA; (7) the New York District,
    New York, NY; (8) the Sacramento District, Sacramento, CA; (9) the
    Seattle District, Seattle, WA; and (10) the Tennessee District,
    Nashville, TN.

    \18 A performance cluster is an organizational mechanism used by the
    Service to help track performance data.  For each of the Service's 85
    districts, a cluster usually consists of (1) a district office, which
    is responsible for customer service functions mainly through its post
    offices, stations, and branches; and (2) a large mail processing and
    distribution center/facility, which is responsible for processing and
    distributing mail mainly through other such centers/facilities, bulk
    mail centers, and airport mail centers/facilities.

          ACTIONS HAVE BEEN TAKEN TO
          IMPLEMENT FIVE INITIATIVES,
          ALTHOUGH DISAGREEMENTS EXIST
          OVER APPROACHES
    ---------------------------------------------------------- Letter :5.5

    For five initiatives, the Service and some of the organizations,
    especially APWU and NALC, fundamentally disagreed on how specific
    improvement initiatives should be implemented.  As a result, progress
    in implementing these initiatives was difficult to determine.
    Furthermore, during our discussions with Service, union, and
    management association officials on the five improvement initiatives,
    the officials generally agreed with the overall goals of some of the
    initiatives.  However, in large part, fundamental disagreements among
    the Service and some of the organizations on strategies for
    implementing specific initiatives continued to hamper their efforts
    to achieve these goals and improve the overall working climate for
    postal employees.  The five initiatives included (1) the
    labor-management relations summit meeting, (2) Delivery Redesign, (3)
    the labor-management cooperation memorandum of understanding, (4) the
    mediation of employee grievances, and (5) the crew chief program.

             SUMMIT MEETING
    -------------------------------------------------------- Letter :5.5.1

    As discussed earlier in this report, the first initiative--the PMG's
    proposed summit meeting--has not yet taken place, mainly because
    negotiations on three of the four unions' most recent contracts
    caused these unions to decline to attend such a summit until the
    negotiations were completed.  Negotiations for all four unions were
    not completed until April 1996.  Yet, as of May 1997 when we
    completed our review, the PMG's proposed summit with all eight
    organizations had not occurred, nor had it been scheduled.  However,
    preliminary efforts to convene such a summit have occurred.  They
    included presummit meetings in November and December 1996 with APWU
    and NALC, an additional meeting with APWU and NALC in January 1997,
    and plans for presummit meetings with the other remaining five
    organizations.

    As mentioned previously, we received comments on the summit meeting
    from five organizations, including FMCS, APWU, NALC, Rural Carriers,
    and the League.  A discussion of their comments, which begins on page
    20, has been included at the end of the section of the report
    entitled "Little Progress Has Been Made in Improving Labor-Management
    Relations Problems."

             DELIVERY REDESIGN
    -------------------------------------------------------- Letter :5.5.2

    One of our 1994 recommendations was for the Service and the unions to
    jointly identify pilot sites where postal and union officials would
    be willing to test revised approaches for improving working
    relations, operations, and service quality.  Specifically, we
    recommended that for city letter carriers, a system should be
    established that incorporated known positive attributes of the rural
    letter carrier system, including greater independence for employees
    in sorting and delivering mail, incentives for early completion of
    work, and a system of accountability for meeting delivery schedules.
    In our 1994 report, we said that problems experienced by city
    carriers were often related to (1) the close supervision imposed on
    city carriers, which often engendered conflicts between supervisors
    and carriers, mainly on the amount of time it took for carriers to do
    their work; and (2) the existence of performance standards for city
    carriers that tended to discourage carriers from doing their best and
    completing work quickly.  Postal, union, and management association
    officials we interviewed generally agreed that such problems called
    for a revision of the city letter carrier system.

    As discussed in our 1994 report, both the Service and NALC have
    studied the city letter carrier system to determine how best to
    revise it.  For instance, in 1987, the Service and NALC established a
    joint task force to study possible changes and improvements in how
    carrier assignments were designed, evaluated, and compensated.  The
    study was to identify and examine those elements of the rural carrier
    system that helped avert many of the conflicts common between postal
    supervisors and city carriers.  However, the Service and NALC were
    unable to reach any agreement on how to change the city carrier
    assignments.

    Consequently, in March 1994, the Service and NALC established similar
    but independent efforts to study possible changes to the city letter
    carrier system.  A national NALC task force reviewed how city routes
    could be restructured to better serve carriers, customers, and the
    Service.  Under consideration was a suggestion made by the NALC Vice
    President that NALC consider a route design similar to that used by
    rural carriers to better deal with changes in office functions and
    procedures that could threaten city carrier job opportunities.  At
    the same time, the Service had also set up teams to study and propose
    alternate approaches to the city carrier system, including examining
    the possibility of adopting the rural carrier approach.  However, we
    found no effort between the Service and NALC to coordinate and
    consolidate these two studies for addressing the common concerns.

    According to postal officials, in 1997, after numerous discussions
    with NALC and with no ultimate agreement on an approach, the Service
    decided to test some revised processes for the delivery of mail by
    city letter carriers.  These processes are collectively known as
    Delivery Redesign.  The Service's plan was to use these revised
    processes as a basis for helping to develop a city carrier delivery
    system that could enhance mail delivery by (1) reducing friction
    between supervisors and carriers, (2) providing increased
    compensation for superior performance, and (3) removing existing
    disincentives for doing the job well.

    In addition to the current delivery process, the Service is testing 3
    revised delivery processes at 14 selected sites.\19 For example, some
    sites are to test the separate case and delivery processes under
    which some carriers would do only casing\20 while others would do
    only delivery.  Also, one of the revised processes is to involve the
    Service's implementation of performance standards, also known as
    standard time allowances, to structure and monitor city carrier
    performance at these 14 sites.  However, the Service is not testing
    any compensation alternatives for these employees, because it needs
    agreement from NALC.  According to an NALC official, NALC has not
    agreed to such alternatives, because it considers compensation for
    city carriers an issue that is most appropriately discussed in the
    collective bargaining process.

    A postal official told us that the testing of the revised city
    carrier delivery processes began in Louisville, KY, in March 1997 and
    will have started in the other 13 test sites by May 1997.  He also
    told us that although NALC officials were briefed several times (May,
    July, and September 1996) on Delivery Redesign, they have not
    endorsed the testing of the revised processes.  At the national
    level, NALC officials declined to comment on the testing; they told
    us that they believe the issue of delivery redesign is a subject to
    be decided through the collective bargaining process.  However, the
    officials added that they do not believe that the city letter carrier
    delivery system should be structured similarly to the evaluated route
    system used by rural carriers.  As we reported in 1994, rural
    carriers work in environments substantially different from city
    carriers.  As a result, rural carriers generally have more
    independence in doing their work.  Also, the compensation systems for
    rural and city carriers are different.  Rural carriers are salaried
    workers who do not have to negotiate daily for overtime.  City
    carriers are hourly workers whose daily pay can vary depending on the
    amount of overtime hours they would be required to work to process
    and deliver mail on their assigned routes.

    Two organizations--NALC and NAPS--provided us their comments on the
    Delivery Redesign initiative.  NALC objected to the Service's
    implementation of Delivery Redesign, stating that by implementing
    this initiative, the Service has violated the requirements of NALC's
    contract agreement regarding time and work standards for city letter
    carriers.  Also, NALC mentioned that the Service has repeatedly
    rejected NALC's invitations to study the city letter carrier system
    in a cooperative manner.  In addition, the president of NAPS told us
    that he believed that the Delivery Redesign initiative could help
    improve the city carrier system partly because one purpose of this
    initiative was to collect enough information to allow the city
    carrier routes to be evaluated daily instead of annually, which is
    how rural carrier routes are currently evaluated.

    --------------------
    \19 The locations of the 14 test sites included Baton Rouge, LA;
    Carson City, NV; Columbus, OH; Enid, OK; Ft.  Myers, FL; Grand
    Rapids, MI; Houston, TX; Lewistown, ID; Los Angeles, CA; Louisville,
    KY; New York, NY; Rochester, MN; St.  Augustine, FL; and Syracuse,
    NY.

    \20 The process of casing involves manually putting the mail into
    delivery order.

             JOINT LABOR-MANAGEMENT
             COOPERATION MEMORANDUM
    -------------------------------------------------------- Letter :5.5.3

    In November 1993, the Service and APWU signed a joint memorandum of
    understanding on labor-management cooperation.  The memorandum
    included various principles that were intended to help the Service
    and APWU (1) establish a relationship built on mutual trust and (2)
    jointly explore and resolve issues of mutual interest.  An example of
    one of the principles involved the parties' commitment to and support
    of labor-management cooperation at all levels throughout the Service
    to ensure a productive labor relations climate, a better employee
    working environment, and the continued success of the Service.
    Another principle was a statement about the willingness of both
    parties to jointly pursue strategies that emphasized improving
    employee working conditions and satisfying the customer in terms of
    both service and cost.  The memorandum did not include any
    information as to how the Service and APWU planned to measure the
    results of its implementation.

    The cooperation memorandum was a "quid pro quo"\21 for another joint
    agreement signed at the same time, known as the Remote Barcoding
    System (RBCS) Memorandum of Understanding.  Under this agreement, the
    Service agreed that it would no longer pursue contracting out for
    certain clerical services (i.e., keying address data) associated with
    the automated mail processing, or RBCS, functions.  Instead, the
    Service agreed to keep this work in-house, which would primarily be
    performed at remote encoding centers (RECs).

    During our visits to various RECs located in the field, most postal
    officials and union representatives told us that the cooperation
    memorandum did not generally make any significant difference in their
    ability to work well together.  Rather, they told us that they
    believed their ability to work cooperatively was attributable
    primarily to the differences in the nature of the work at RECs, which
    had clean, office-like atmospheres, instead of in facilities such as
    plants, which were similar to manufacturing facilities.  Also,
    employees at RECs perform similar types of work (i.e., data entry
    functions); at other types of postal locations, the work involves a
    wide range of tasks performed by different employees, including
    sorting mail, loading and unloading mail trucks, and serving
    customers.  Also, REC managers we interviewed told us that because
    REC employees had not previously worked in the postal environment,
    they had no preconceived notions about labor-management relations.

    Both Service officials and APWU leaders agreed that the
    labor-management relations memorandum had not accomplished its intent
    of improving cooperation between the Service and APWU.  They told us
    that the memorandum had generally not lived up to their expectations.
    Postal officials told us that although they and APWU officials
    continue to work together, they do not believe that the "far-reaching
    anticipated effect" of the memorandum has been achieved.

    Also, although the president of APWU stated that he considered the
    cooperation memorandum to be a "framework agreement" between the
    union and the Service, he told us that he believed the Service was
    not sincere when it signed the memorandum, because the Service
    continuously violates the spirit of the memorandum.  He mentioned
    that a recent example of this type of violation was that the Service
    tried to annul both the cooperation memorandum and the RBCS
    memorandum in 1995.  However, an interest arbitrator refused the
    Service's request for annulment.

    In its comments on a draft of this report, APWU agreed that the
    memorandum had not lived up to its expectations.  However, the union
    stated that cooperation between APWU and the Service exists, as
    exemplified by the recent establishment of three additional
    agreements with the Service.  These agreements, which were signed by
    the Postal Service and APWU during the period May through July 1997,
    were intended to (1) try to significantly reduce or eliminate
    grievance backlogs; (2) establish a National Labor Relations Board
    alternative dispute resolution procedure concerning information
    requests; and (3) provide for the implementation of an administrative
    dispute resolution procedure to help resolve employee complaints
    about specific issues, such as pay.  APWU included copies of the
    three agreements as enclosures to its written comments, all of which
    are included in appendix III.  APWU believed that any assessment of
    the status of postal labor-management relations should include an
    evaluation of the impact of these agreements, despite the fact that
    the agreements had only recently been signed by Service and APWU
    officials.  Because these agreements were not available during the
    period of our review, we could not evaluate their implementation.

    --------------------
    \21 The term "quid pro quo" refers to the exchange between two
    parties of something for something.  Specifically, one of the parties
    provides or agrees to provide the other party with a good or a
    service in exchange for the other party's agreement to provide a good
    or service in return.

             MEDIATION OF GRIEVANCES
    -------------------------------------------------------- Letter :5.5.4

    As a result of the 1994 contract negotiations, APWU and the Service
    agreed to include in the union's contract a program of mediation in
    which parties at local installations could request assistance to help
    facilitate the grievance/arbitration process and improve the
    labor-management relationship.  The purpose of this mediation program
    was to address the problem of too many grievances not being settled
    on the workroom floor.

    According to a postal official, the Service initially planned to use
    the mediation program on a test basis as a means of reducing the
    large backlog of grievances awaiting arbitration.  To begin this
    test, the official told us that as of October 1996, the Service had
    trained a total of 113 individuals to serve as mediators who could
    assist in settling grievances awaiting arbitration at pilot sites
    that were to be selected.  However, APWU officials told us that they
    disagreed with the Service's plans to test the use of mediators in
    this manner.  They believed that a massive arbitration effort was the
    best means of reducing the large backlog of grievances awaiting
    arbitration.  According to APWU officials, whenever a large backlog
    of grievances awaiting arbitration occurs, such an effort should
    involve sending an arbitrator to that installation to hear all the
    backlogged grievances.

    Both postal and APWU officials told us that the details of how the
    mediation program will be implemented are still under discussion.
    However, none of the postal or APWU officials we interviewed provided
    any information on when these discussions were scheduled for
    completion.

    In its comments on a draft of this report, APWU stated that after the
    first joint agreement on mediation was included in the 1994 contract,
    the Service tried to move ahead and implement its own type of
    mediation program instead of trying to reach a joint understanding
    with APWU on how the program should be implemented.  Nevertheless, as
    previously mentioned in our discussion on the Joint Labor-Management
    Cooperation Memorandum, in May 1997, APWU and the Service established
    another agreement that includes provisions for using various types of
    mediation processes to help (1) eliminate the current grievance
    backlog, (2) prevent future reoccurrences of such backlogs through
    the improvement of labor-management relations, and (3) address the
    root causes that generate grievances.  A copy of this agreement is
    included in appendix III.

             CREW CHIEF
    -------------------------------------------------------- Letter :5.5.5

    In our 1994 report, we discussed the Service's testing of the crew
    chief program, a program that was designed to allow craft employees
    to take greater responsibility for moving the mail.  The purpose of
    this program was to address craft employees' concerns that they had
    only limited involvement in the daily decisions affecting their work
    because management generally did not value their input on how to
    organize and accomplish the work.

    During 1990 interest arbitration proceedings, APWU proposed the crew
    chief concept because it believed the organization of postal work was
    outdated and inefficient and created an unnecessarily adversarial and
    bureaucratic work environment.  The Service was not opposed to the
    concept but felt there were too many questions, such as how crew
    chiefs would be selected, that needed to be addressed before any
    agreement could be considered.  As a result of these proceedings, the
    Service and APWU entered into a June 1991 Memorandum of Understanding
    to pilot test the crew chief program with clerk craft employees.

    Beginning in July 1992, a pilot of the program was conducted in a
    total of 12 postal locations, including 7 mail processing and
    distribution plants and various post offices in 5 postal
    districts.\22 These sites were jointly selected by the Service and
    APWU from a list of sites that were willing to participate in the
    program.  At the pilot sites, crew chiefs were chosen on the basis of
    seniority or selected by a joint committee of union and postal
    employees and were given 40 hours of on-site training.  Each of the
    sites had the option of adopting an "unelection" process whereby
    employees could vote every 90 days to replace their crew chief.
    Postal supervisors were prohibited by the APWU collective bargaining
    agreement from doing craft work, but as a craft employee, the crew
    chief could work with unit employees.  However, unlike supervisors,
    crew chiefs could not approve leave for employees or take
    disciplinary actions against them.

    In 1994, we reported that the pilot of the crew chief program was
    completed in March 1994.  However, according to program participants,
    including managers and supervisors as well as crew chiefs whom we
    interviewed at specific postal sites, the results of the pilot were
    mixed.  On the one hand, some program participants told us that they
    believed craft employees were generally more comfortable taking
    instructions from, and expressing their concerns to, crew chiefs
    rather than to supervisors.  Participants also told us that crew
    chief positions alleviated some of the increased pressure on
    supervisors that resulted from the Service's 1992 reduction in
    supervisory staffing.  However, on the other hand, we found that the
    crew chief program did not address some important issues that caused
    workfloor tensions between supervisors and employees.  Specifically,
    the crew chief program did not give all employees more control over
    their work processes; it empowered only the crew chief.  Also, this
    program did not provide any new incentives for team performance or
    procedures for holding employees and supervisors accountable for poor
    performance.

    As discussed in our 1994 report, supervisors and crew chiefs often
    did not fully understand their respective roles and responsibilities.
    They said that the duties that supervisors allowed crew chiefs to
    perform varied significantly among the postal pilot sites and also
    among the work tours at specific sites.  Supervisors and crew chiefs
    also said that selecting the crew chief on the basis of seniority did
    not ensure that the best- qualified person was selected for the
    position.  Some supervisors perceived crew chiefs as a threat to
    their job security, so they bypassed them and dealt directly with
    employees.  Also, NAPS did not support the crew chief program, mainly
    because its president considered crew chiefs to be another layer of
    management.  The existing supervisors at the crew chief test sites
    were left in place, and the Service did not redefine their roles in a
    self-managed work environment.

    In recent interviews, a postal official said that although the
    Service believed that crew chiefs in post offices generally had a
    positive effect on postal operations, it did not believe that similar
    positive outcomes were evident in the plant locations that used crew
    chiefs.  Furthermore, this official told us that after the completion
    of the pilot, the topic of crew chiefs was set aside because of the
    1994 contract negotiations with APWU.  He also told us that after the
    negotiations were completed, discussions began again on the results
    of the crew chief pilot.  However, according to postal and APWU
    officials, they were still evaluating these results as of February
    1997.

    Two employee organizations--APWU and NAPS--provided us their comments
    on the crew chief program.  According to APWU, a study of the program
    by an individual at Wayne State University revealed that morale and
    job satisfaction had improved at virtually all the sites that used
    crew chiefs and that such improvements were more evident at postal
    installations that provided retail services than at mail processing
    installations.  Also, APWU mentioned that the Service still resists
    the crew chief program because APWU believes that the Service is
    intent on retaining what APWU termed ".  .  .  the same bureaucracy
    and administrative hierarchy that has existed since [the 1992]
    reorganization with all its consequent ramifications for continued
    'contentiousness'." APWU stated that it considered the crew chief
    program to be successful and expressed considerable concern that the
    Service still resisted it.  Moreover, APWU commented that we ignored
    the fact that crew chiefs--also referred to by APWU as negotiated
    group leaders--were being successfully used at RECs, and the overall
    performance of the RECs has exceeded expectations.  However, our
    purpose for including RECs in our review was to determine the extent
    to which the joint labor-management cooperation memorandum had been
    implemented, not to review the overall operations of RECs.  Thus, we
    did not review the use of crew chiefs or negotiated group leaders at
    RECs or the overall performance of RECs.

    The president of NAPS also commented on the crew chief program,
    stating that his organization generally did not favor the program,
    mainly because it empowered only one person on the mail processing
    team--the crew chief, who often functioned as a second supervisor in
    addition to the team's primary supervisor.  The president believed
    that all employees on a mail processing team should be empowered to
    work together to do whatever it takes to process and distribute the
    mail efficiently and that only one team supervisor was needed to
    coordinate mail processing and distribution activities.  By
    empowering all the team's employees in this manner, the NAPS
    president believed that a crew chief was not needed.

    --------------------
    \22 The locations of the seven pilot plants included (1) Birmingham,
    AL; (2) Lehigh Valley, PA; (3) Louisville, KY; (4) Rochester, NY; (5)
    Royal Oak, MI; (6) Sacramento, CA; and (7) St.  Paul, MN.  The 5
    pilot district offices included (1) Las Vegas, NV; (2) Louisiana, LA;
    (3) South Jersey, NJ; (4) Sun Coast, FL; and (5) Western New York,
    NY.

          DISCONTINUED INITIATIVES
    ---------------------------------------------------------- Letter :5.6

    For two initiatives, efforts to continue implementing them were
    hampered primarily by disagreements among the Service and the other
    involved participants over how best to use the initiatives to help
    improve the postal workplace environment.  Also, according to postal
    officials, a lack of union participation in one of the two
    initiatives generally caused the Service to discontinue its use.  The
    two initiatives included (1) the employee opinion survey (EOS) and
    (2) the Employee Involvement (EI) program.

             EMPLOYEE OPINION SURVEY
             (EOS)
    -------------------------------------------------------- Letter :5.6.1

    The nationwide annual employee opinion survey (EOS), which began in
    1992 and continued through 1995, was a voluntary survey that was
    designed to gather the opinions of all postal employees on the Postal
    Service's strengths and shortcomings as an employer.  Postal
    officials told us that such opinions have been useful in helping the
    Service determine the extent of labor-management problems throughout
    the organization and make efforts to address such problems.

    According to postal officials, problems with the EOS arose during
    negotiations on some of the 1994 union contracts.  Both postal and
    union officials stated that during those negotiations, the Service
    used our 1994 report, which included the results of the 1992 and 1993
    EOS, in its discussion of various contract issues with three unions
    (APWU, Mail Handlers, and NALC).  In our 1994 report we found that
    past EOS results have indicated that many mail processing and
    distribution employees who had responded to the survey said that they
    (1) were generally satisfied with their pay and benefits, (2) liked
    the work they did, and (3) were proud to work for the Postal Service.
    However, a postal official stated that the Service's use of our
    findings, which were partially based on the EOS results, caused
    problems with some union officials.  He told us that NALC boycotted
    the 1995 EOS because it believed EOS was inappropriately used during
    the 1994 contract negotiations.

    According to postal officials, NALC and APWU encouraged their members
    not to complete future surveys.  Also, the officials told us that
    although the Mail Handlers and Rural Carriers unions did not urge
    their members to boycott future surveys, the resistance by APWU and
    NALC members was enough to skew the results of the EOS and render it
    almost useless.  This action by the unions led to the discontinuance
    of the EOS in 1996.  Also, officials from a management association
    told us that they did not believe the results of employee surveys
    should be used in determining management pay levels, because they
    believed craft employees have manipulated, and would continue to
    manipulate, surveys to discredit their supervisors.

    In their comments on a draft of this report, four
    organizations--APWU, NALC, Mail Handlers, and the League--provided us
    their insights on EOS.  Three of the four organizations--APWU, NALC,
    and Mail Handlers--did not support the implementation of EOS nor the
    use of its results.  Specifically, these three organizations objected
    to what they believed was the Service's inappropriate use of EOS
    results as a basis for justifying its position in collective
    bargaining.

    APWU stated that it generally does not object to employee surveys and
    did not object to EOS until postal officials began using the survey's
    results in the 1994 contract negotiations to justify their bargaining
    positions, which in part led to the APWU boycott of the 1995 EOS.
    NALC stated that although surveys such as EOS can be useful tools,
    they can produce (1) data that can be manipulated, (2) results that
    can be misinterpreted, and (3) conclusions that may be
    inappropriately used.  Although NALC stated that it was willing to
    work with the Service in developing and implementing an employee
    survey, it believed that the Service's unilateral implementation of
    EOS and its inappropriate use of results during contract negotiations
    undermined the credibility of EOS.

    Also, Mail Handlers stated that during 1994 contract negotiations,
    the Service used EOS results to support its position that union
    members did not need increased wages and benefits.  As a result, in
    July 1995, the Mail Handlers union stated that it adopted a
    resolution, which included its reasons for objecting to EOS.
    According to the Mail Handlers union, the resolution stated that Mail
    Handlers did not support EOS and requested that those of its members
    who chose to complete the 1995 EOS should do so in a manner that
    would render it useless.  In addition, the League commented that
    although the Service implied that EOS was discontinued because of a
    lack of union participation, the League understood that it was
    because both the Service and the unions had used EOS data to support
    their positions on various issues such as pay and benefits.

             EMPLOYEE INVOLVEMENT
    -------------------------------------------------------- Letter :5.6.2

    As discussed in our 1994 report, the Employee Involvement (EI)
    initiative began in 1982 and was designed to end or alleviate the
    adversarial relationship in the workplace climate.  Through the
    implementation of EI, the Service and NALC intended to (1) redirect
    postal management away from the traditional authoritarian practices
    toward a style that would encourage employee involvement and (2)
    enhance the dignity of postal employees by providing them with a
    chance for self-fulfillment in their work.

    According to a postal official, EI was discontinued, primarily
    because it no longer contributed significantly to the goals of the
    Service and was unable to address the root causes of conflict in the
    workplace or foster the empowerment of city letter carriers.  The
    postal official told us that when EI was first established in 1981,
    it accomplished some positive results in the workplace.  However, in
    recent years, EI has not helped to improve the postal workplace as
    much as it once did.  The official told us that a key reason was that
    for the past 3 years, all joint EI meetings between Service and NALC
    officials were cancelled due to negotiations over NALC's most recent
    contract.  The official also told us that during 1994 contract
    negotiations, the Service and NALC disagreed over various aspects of
    EI, including what type of work the 400 trained EI facilitators
    should perform.  According to the official, these facilitators were
    working in various postal field locations as full-time EI
    facilitators, which prevented them from performing functions directly
    related to mail processing and delivery.

    NALC disagreed with the Service's reasons for discontinuing EI.  An
    NALC official characterized EI as a remarkable achievement in
    labor-management cooperation.  He mentioned that EI represented one
    of the Service's and NALC's earliest efforts to replace the
    traditional authoritarian and hierarchical work processes in the
    postal workplace climate with a system of increased cooperation and
    enhanced worker empowerment.  Although the Service decided to
    discontinue its support of EI, the NALC official told us that the
    union intends to continue working to reinstate the EI program.

    In its comments on a draft of this report, NALC reiterated its
    concern about the Service's April 1996 termination of EI, which NALC
    termed ".  .  .  an extraordinarily regressive act." Shortly after EI
    was terminated, the president of NALC mentioned that he had written
    to the Vice President of Labor Relations for the Postal Service to
    protest the action.  Also, the NALC president stated that he believed
    the timing of EI's termination, which coincided with the time that
    the Delivery Redesign initiative was begun, indicated that in its
    approach to dealing with NALC, the Service had moved from a position
    of jointness and cooperation to one of domination and confrontation.
    The president stated further that he believed the Service's revised
    approach should be an issue of greater concern to us than any of the
    initiatives we had selected to review.  As noted in the Objectives,
    Scope, and Methodology section, we selected the initiatives included
    in this review based primarily on (1) discussions with the Postal
    Service and its unions and management associations and (2) the extent
    to which the initiatives had the potential to address our previous
    recommendations.  EI was not included in our review.

       CONTINUED NEED TO IMPROVE
       LABOR-MANAGEMENT RELATIONS
    ------------------------------------------------------------ Letter :6

    Improving labor-management relations at the Postal Service has been
    and continues to be an enormous challenge and a major concern for the
    Postal Service and its unions and management associations.  With the
    significant future challenges it faces to compete in a fast-moving
    communications marketplace, the Service can ill afford to be burdened
    with long-standing labor-management relations problems.  We continue
    to believe that in order for any improvement efforts to be sustained,
    it is important for the Service, the four unions, and the three
    management associations to agree on common approaches for addressing
    labor-management relations problems so that positive working
    principles and values can be recognized and encouraged in postal
    locations throughout the nation, especially in locations where
    labor-management relations are particularly adversarial.  Our work
    has shown that there is no clear or easy solution to improving these
    problems.  However, continued adversarial relations could lead to
    escalating workplace difficulties and hamper the Service's efforts to
    achieve its intended improvements.

    The limited experience the Postal Service and its unions and
    management associations have had with FMCS in an attempt to convene a
    postal summit meeting, although not fully successful to date,
    nonetheless has suggested that the option of using a third-party
    facilitator to help the parties reach agreement on common goals and
    approaches has merit.  The use of FMCS, as recommended in our 1994
    report, was requested by the PMG in early 1996 and encouraged by the
    Chairman of the House Subcommittee on the Postal Service in March
    1996.  Although efforts to arrange a summit continue, the window of
    opportunity for developing such an agreement may be short-lived
    because of contract negotiations involving three of the four unions
    whose bargaining agreements are due to expire in November 1998.\23 As
    previously mentioned, in 1994, after formal contract negotiations had
    begun for APWU, Mail Handlers, and NALC, these unions were generally
    reluctant to engage in discussions outside the contract negotiations
    until they were completed.

    A second approach to improving labor-management relations was
    included in the postal reform legislation introduced by the Chairman
    of the House Subcommittee on the Postal Service in June 1996 and
    reintroduced in January 1997.  Under this proposed legislation, a
    temporary, presidentially appointed seven-member Postal
    Employee-Management Commission would be established.  The proposed
    Commission would be responsible for evaluating and recommending
    solutions to the workplace difficulties confronting the Service and
    would prepare its first set of reports within 18 months and terminate
    after preparing its second and third sets of reports.\24 The
    Commission would include two members representing the views of large
    nonpostal labor organizations; two members from the management ranks
    of similarly sized private corporations; and three members well-known
    in the field of employee-management relations, labor mediation, and
    collective bargaining, one of whom would not represent the interests
    of either employees or management and would serve as the chair.  Some
    concerns have been raised that the proposed Commission would not
    include representatives of the Postal Service or its unions or
    management associations, and thus the results of its work may not be
    acceptable to some or all of those parties.  In July 1996,
    representatives of each of the four major unions testified before the
    House Subcommittee on the Postal Service that the Commission was not
    needed to solve labor-management relations problems at the Postal
    Service.  They said that the affected parties should be responsible
    for resolving the problems.

    Finally, the Government Performance and Results Act provides an
    opportunity for Congress; the Postal Service, its unions, and its
    management associations; and other stakeholders with an interest in
    postal activities, such as firms that use or support the use of
    third-class mail for advertising purposes and firms that sell
    products by mail order, to collectively focus on and jointly engage
    in discussions about the mission and proposed goals for the Postal
    Service and the strategies to be used to achieve desired results.
    Such discussions can provide Congress and the other stakeholders with
    opportunities not only to better understand the Service's mission and
    goals but also to work together to develop and reach consensus on
    strategies to be used in attaining such goals, especially those that
    relate to the long-standing labor-management relations problems that
    challenge the Service.

    The Postal Service is currently developing its strategic plan as
    required by the Results Act for submission to Congress by September
    30, 1997.  The plan is intended to provide a foundation for defining
    what the Service seeks to accomplish, identify the strategies the
    Service will use to achieve desired results, and provide performance
    measures to determine how well it succeeds in reaching
    result-oriented goals and achieving objectives.  Also, as part of
    this process, the Results Act requires that the Service solicit the
    views of its stakeholders on the development of its strategic plan
    and keep Congress advised of the plan's contents.  The Service
    published notices in the Federal Register asking the public for input
    on its proposed plan no later than June 15, 1997.  This comment
    period provided an opportunity for those who might be affected by
    decisions relating to the future of the Postal Service to voice their
    views on the strategies to be used by the Postal Service.
    Furthermore, the strategic plan is intended to be part of a dynamic
    and inclusive process that fosters communication between the Service
    and its stakeholders--including the unions and management
    associations--and that can help clarify organizational priorities and
    unify postal employees in the pursuit of shared goals.

    --------------------
    \23 The collective bargaining agreements for APWU, NALC, and Mail
    Handlers are due to expire in November 1998.  The agreement for Rural
    Carriers is due to expire in November 1999.

    \24 Under this proposed legislation, the Commission would submit its
    recommendations in the form of a written report to the President and
    Congress to the extent that such recommendations involved any
    legislation and to the Postal Service to the extent that the
    recommendations did not involve legislation.

       COMMENTS FROM THE POSTAL
       SERVICE, LABOR UNIONS,
       MANAGEMENT ASSOCIATIONS, AND
       FMCS AND OUR EVALUATION
    ------------------------------------------------------------ Letter :7

    We provided a draft of our report to nine organizations for their
    review and comment.  The nine organizations included

      -- the Postal Service;

      -- the four labor unions, including APWU, NALC, Mail Handlers, and
         Rural Carriers;

      -- the three management associations, including NAPS, NAPUS, and
         the League of Postmasters; and

      -- FMCS.

    We received written comments from the Postal Service, the four major
    labor unions, and one of the three management associations--the
    League of Postmasters.  We also obtained oral comments from the
    Director of FMCS and the presidents of NAPS and NAPUS.

    The comments we received from the 9 organizations included diverse
    opinions on the 3 sections of the report that dealt with (1) the
    report's basic message that little progress had been made in
    improving labor-management relations problems; (2) the implementation
    of and the results associated with the 10 improvement initiatives;
    and (3) the opportunities that are available to help the Service, the
    4 unions, and the 3 management associations reach agreement on how to
    address labor-management relations problems.  Regarding the report's
    basic message, although the nine organizations generally agreed that
    little progress had been made and labor-management relations problems
    have persisted, some of them expressed different opinions on the
    reasons why such problems continued to exist.  With respect to the 10
    improvement initiatives, many of the organizations expressed
    different opinions about such matters as how some of the initiatives
    were implemented, including what role the organizations played in
    their implementation, and what results were associated with specific
    initiatives.  Concerning the opportunities that could be used to help
    the Service, the four unions, and the three management associations
    agree on how to address persistent labor-management relations
    problems, the organizations expressed various opinions about the
    potential of these opportunities for helping the organizations
    resolve such problems.  Also, some of the organizations believed that
    entities outside the Postal Service, including Congress, should not
    be involved in discussions about postal labor-management relations
    problems.  Some of these organizations believed that the parties
    directly affected by such problems, namely the Service, the four
    unions, and the three management associations, should be the ones to
    decide how best to address the problems.

    We understand that the nine organizations had different perspectives
    on these matters.  However, we believe that the diversity of their
    opinions reinforces the overall message of this report and provides
    additional insight as to why little progress in improving persistent
    labor-management relations problems has been made since the issuance
    of our September 1994 report.  We continue to believe that the
    establishment of a framework agreement, as recommended in our 1994
    report, is needed to help the Service, the unions, and the management
    associations agree on the appropriate goals and approaches for
    dealing with persistent labor-management relations problems.  Also,
    we believe that opportunities such as the ones discussed in this
    report, including the use of a third-party facilitator, the proposed
    labor-management relations commission, and the requirements of the
    Government Performance and Results Act, can provide the Service, the
    unions, and the management associations alternatives to explore in
    trying to determine how best to reach agreement on dealing with such
    problems, so that the Service's work environment can be improved and
    its competitive position in a dynamic communications marketplace can
    be maintained.

    We incorporated comments where appropriate from all nine
    organizations, including the Service, the four unions, the three
    management associations, and FMCS, as their comments pertained to the
    three major sections of the report in which we discussed our
    findings.  We have included copies of the written comments we
    received from the Postal Service, APWU, NALC, Mail Handlers, Rural
    Carriers, and the League of Postmasters, along with our additional
    comments, as appendixes II through VII, respectively.

          COMMENTS RELATED TO THE
          REPORT'S MESSAGE
    ---------------------------------------------------------- Letter :7.1

    In the section of the report entitled "Little Progress Has Been Made
    in Improving Labor-Management Relations Problems," which begins on
    page 10, we discussed the report's basic message that these problems,
    which were identified in our 1994 report, still persisted.
    Representatives from the nine organizations generally agreed that
    labor-management relations problems continued to exist in the Postal
    Service and that little progress had been made in addressing them.
    In their written comments, some organizations discussed in more
    detail the reasons why they believed such problems still existed.
    Among other things, these reasons included concerns about the Postal
    Service's contracting out of some postal functions, the lack of trust
    between employees and managers, and the importance of permitting the
    Postal Service and its unions and management associations to operate
    without interference from outside parties.

    In addition to these written comments, the president of NAPS told us
    that he believed the reason for the continued problems was that most
    employee organizations were more concerned with trying to preserve
    their own existence rather than trying to help ensure the future
    security of the Postal Service as an organization.  He believed that
    it was time for the unions and the management associations to begin
    educating their members about the need for these organizations to
    focus on maintaining the existence of the Service because, without
    the Service, the employee organizations would have no reason to
    exist.

          COMMENTS RELATED TO SPECIFIC
          IMPROVEMENT INITIATIVES
    ---------------------------------------------------------- Letter :7.2

    In the section of the report entitled "Status and Results of
    Initiatives to Improve Labor-Management Relations," which begins on
    page 21, we presented information on the efforts that the Service,
    the 4 labor unions, and the 3 management associations have made to
    implement 10 improvement initiatives.  In this section, we included
    the comments that we received from some of these organizations, such
    as APWU, NALC, and NAPS, which provided us their insights about
    specific improvement initiatives, including the crew chief program,
    the postal employee opinion survey, and EI.  The organizations that
    commented on specific initiatives provided information that generally
    (1) discussed the extent to which they participated in helping to
    develop and implement specific initiatives, (2) described the
    outcomes that they believed resulted from specific initiatives, and
    (3) identified the reasons why they believed specific initiatives had
    not achieved their intended outcomes.

          COMMENTS RELATED TO
          OPPORTUNITIES FOR IMPROVING
          LABOR-MANAGEMENT RELATIONS
    ---------------------------------------------------------- Letter :7.3

    In the section of the report entitled "Continued Need to Improve
    Labor-Management Relations," which begins on page 44, we discussed
    opportunities that are currently available for the Service, the 4
    unions, and the 3 management associations to use in attempting to
    reach agreement on strategies for improving labor-management
    relations problems.  The opportunities we discussed in our report
    included (1) the continued use of a third-party facilitator, such as
    FMCS, to help these eight organizations agree on common goals and
    approaches; (2) the establishment of a presidentially appointed
    commission of outside experts to evaluate and recommend solutions to
    labor-management relations problems; and (3) the inclusion of the
    eight organizations, Congress, and other parties interested in postal
    activities in a dialogue as part of the Government Performance and
    Results Act that can help all postal stakeholders focus on defining
    the Service's mission and goals and the means to achieve such goals.

    Some of the organizations provided us their comments on one or more
    of these three issues.  Concerning the first issue about the use of a
    third-party facilitator to help the eight postal parties reach
    agreement, we received comments from five organizations.  However,
    instead of the third-party facilitator, their comments generally
    focused more on the PMG's proposed summit meeting for which the
    Director of FMCS has been performing the facilitator role in
    attempting to convene the meeting.  We received comments on the
    meeting from FMCS, APWU, NALC, Rural Carriers, and the League, all of
    which provided different perspectives on the anticipated merits of
    the proposed summit meeting.  The information we obtained about the
    meeting is included in the section of the report entitled "Little
    Progress Has Been Made in Improving Labor-Management Relations
    Problems." This section includes information on the summit meeting,
    which begins on page 19, and the comments on the meeting that we
    received from the five organizations.

    The second issue involved the establishment of the seven-member
    labor-management relations commission that was included in proposed
    legislation by the House Subcommittee on the Postal Service.  We
    received comments on this issue from the Postal Service and one of
    the three management associations--the League of Postmasters.

    In its comments, the Service endorsed the proposal by the House
    Subcommittee on the Postal Service that a commission be established
    to evaluate and recommend solutions to labor-management relations
    problems.  The Service believed that it would prefer to support the
    work of such a commission rather than engage in continued
    recriminations and finger-pointing with the unions on why so little
    progress in addressing such problems had been made, which has often
    occurred in the past.  The Service had two suggestions for the
    Subcommittee's consideration in the establishment of the commission.
    First, the Service suggested that a shorter time period (i.e., 1 year
    instead of 3-1/2 years) be established for the commission to complete
    its work.  The Service stated that 3-1/2 years was too long a period
    of time for the commission to evaluate and recommend solutions to
    persistent labor-management relations problems, mainly because a
    significant amount of work by us and others has already been done to
    identify that such problems continue to exist and that this work
    should not have to be repeated.  Second, the Service suggested that
    the commission be established under the auspices of an independent
    academic organization to help ensure that (1) the commission's work
    could be started as quickly as possible without having discussions
    about its establishment tied to discussions about the postal reform
    legislation and (2) the chances that the commission's recommendations
    would be accepted could be increased.

    In its comments on a draft of this report, the League mentioned that
    as described in the proposed legislation, the proposed commission
    would not include representatives of postal employees or customers.
    The League also expressed concern about the fact that the members of
    the commission would be making decisions about how to resolve
    labor-management relations problems without being responsible for
    ensuring that such problems were resolved.

    Recent discussions we held with the presidents of the four unions and
    the remaining two of the three management associations (i.e., NAPS
    and NAPUS) confirmed that they are also concerned about the
    composition of the commission as well as the need for it.  Given
    these opinions, the Service expressed a concern that without the
    involvement of an independent body, implementation of the
    commission's recommendations may be difficult to accomplish.

    Concerning the third issue--the opportunity for parties interested in
    postal activities to engage in a dialogue as part of Results Act
    requirements--only APWU provided comments.  According to the
    president of APWU, he received a copy of the Postal Service's draft
    strategic plan around June 16, 1997, which he considered rather late.
    The Results Act required that the final plan be submitted to Congress
    no later than September 30, 1997.  Accordingly, the APWU president
    believed that such lateness reduced the value of his input on the
    draft plan and led him to question whether the Service's attempt to
    seek input was sincere.

    ---------------------------------------------------------- Letter :7.4

    As arranged with you, unless you publicly announce its contents
    earlier, we plan no further distribution of this report until 30 days
    from its issue date.  At that time, we will send copies of this
    report to the Ranking Minority Member of your Subcommittee, the
    Chairmen and Ranking Minority Members of the House and Senate
    oversight committees, the Postmaster General, and to other interested
    parties.  Copies will also be made available to others upon request.

    If you or your staff have any questions about this report, please
    contact me on (202) 512-4232; or Teresa Anderson, Assistant Director,
    on (202) 512-7658.  Major contributors to this report are included in
    appendix VIII.

    Sincerely yours,

    Bernard L.  Ungar
    Director, Government Business
     Operations Issues

    DESCRIPTION OF
    GRIEVANCE/ARBITRATION PROCESS
    =========================================================== Appendix I

    As defined in postal labor agreements, a "grievance" is "a dispute,
    difference, disagreement, or complaint between the parties related to
    wages, hours, and conditions of employment." The Postal Service's
    process for resolving grievances is similar to that used in the
    private sector and other public organizations.

    Depending on the type of grievance, the process may involve up to 4
    or 5 steps, and each step generally requires the involvement of
    specific postal and union officials.  For instance, at each of the
    first 3 steps in the process, the parties that become involved
    include lower to higher union and postal management level officials
    in their respective organizations, such as post offices, mail
    processing and distribution centers, and area offices.  Step 4 in the
    grievance process occurs only if either the Service or the union
    believes that an interpretation of the union's collective bargaining
    agreement is needed, in which case national level postal and union
    officials would become involved.  The fifth and final step in the
    grievance process involves outside binding arbitration by a neutral
    third party.  Both employees and the four unions that represent them
    can initiate grievances.  The 5 steps of the process are described
    below.

             STEP 1:  ORAL GRIEVANCE
    ----------------------------------------------------- Appendix I:0.0.1

      -- The employee or union steward discusses the grievance with the
         supervisor within 14 days of the action giving rise to the
         grievance.

      -- The supervisor renders an oral decision within 5 days.

      -- The union has 10 days to appeal the supervisor's decision.

             STEP 2:  WRITTEN
             GRIEVANCE
    ----------------------------------------------------- Appendix I:0.0.2

      -- The grievance is filed in writing on a standard grievance form
         with the installation head or designee.

      -- The installation head and the union steward or representative
         meet within 7 days.

      -- The installation head's decision is furnished to the union
         representative within 10 days.

      -- The union has 15 days to appeal the installation head's
         decision.

             STEP 3:  WRITTEN APPEAL
             OF GRIEVANCE
    ----------------------------------------------------- Appendix I:0.0.3

      -- The union files a written appeal with the Area Office's director
         of human resources.

      -- The union's Area representative meets with the representative
         designated by the Postal Service within 15 days.

      -- The Postal Service's step 3 decision is provided to the union
         representative within 15 days.

      -- The union has 21 days to appeal the decision to arbitration
         (step 5).

             STEP 4:  NATIONAL LEVEL
             REVIEW OF GRIEVANCES
             INVOLVING AN
             INTERPRETATION OF THE
             UNION'S NATIONAL
             AGREEMENT
    ----------------------------------------------------- Appendix I:0.0.4

      -- If either party maintains that the grievance involves a matter
         concerning the interpretation of the National Agreement, the
         union has 21 days to refer the matter to the national level of
         the union and the Postal Service.

      -- Representatives of the national union and the postal
         headquarters meet within 30 days.

      -- The Postal Service issues a written decision within 15 days.

      -- The union has 30 days to appeal the Postal Service's decision to
         arbitration.

             STEP 5:  ARBITRATION
    ----------------------------------------------------- Appendix I:0.0.5

      -- An arbitrator is selected and a hearing is scheduled under the
         terms of the National Agreement, depending on the type of
         grievance.

      -- The arbitrator's decision is final and binding.

    (See figure in printed edition.)Appendix II
    COMMENTS FROM THE POSTAL SERVICE
    =========================================================== Appendix I

    (See figure in printed edition.)

    (See figure in printed edition.)Appendix III
    COMMENTS FROM THE AMERICAN POSTAL
    WORKERS UNION
    =========================================================== Appendix I

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    Also see comment 3.

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    The following are GAO's comments on specific issues included in the
    letter dated July 21, 1997, from the American Postal Workers Union
    (APWU).  Other issues that were discussed in the letter have been
    included in the report text.

    GAO COMMENTS

    1.  We do not agree with APWU's assessment that the basic premise of
    the report--that labor-management relations problems have generally
    contributed to a sometimes contentious work environment and lower
    productivity--was misleading.  In discussing these issues, we did not
    suggest, as APWU stated, that such an environment resulted from some
    top down directive from the unions.  Rather, as discussed in our 1994
    report, such an environment appeared to have resulted from various
    problems, including autocratic management styles, adversarial
    employee and union attitudes, and inappropriate and inadequate
    performance management systems.  We identified these problems mainly
    through the results of the 1992 and 1993 postal employee opinion
    surveys and our interviews with postal, union, and management
    association officials.

    Also, we did not suggest that such problems as the high level of
    grievance activity and poor relations between postal craft employees
    and supervisors were the result of union propaganda or internal union
    politics.  Instead, as discussed in our 1994 report, we determined
    that various data, including (1) increased grievance rates, (2)
    repeated uses of arbitration to settle contract negotiations, and (3)
    responses to the 1992 and 1993 postal employee opinion surveys
    indicated that postal, union, and management association officials
    needed to change their relationships and work together to help
    improve the Service's corporate culture, so that the Postal Service
    can become more competitive and a better place to work.

    2.  In its comments, APWU stated that it believed the report's
    premise--that the Service has experienced lower productivity or
    insufficient productivity improvements compared to the private
    sector--was flawed.  APWU also cited various problems with our
    discussion of TFP in the report and believed that we had implied that
    TFP was retarded by labor.  In addition, APWU expressed concern about
    our characterization that the Service's economic performance was
    causing it to lose market share to its competitors.  Furthermore,
    APWU included in its comments specific data on such topics as (1)
    comparisons of Service and APWU labor productivity to that of the
    non-farm labor sector and (2) the Service's share of the advertising
    revenue that has been generated by major communications participants,
    such as newspapers, radio, and television.

    The discussion on TFP in our report was intended to provide
    additional information and perspective on the Service's overall
    productivity and performance compared to other performance indicators
    such as net income and delivery scores for specific classes of mail.
    We did not verify the accuracy of the TFP information that we
    obtained from the Service nor did we verify the data that APWU
    included with its comments related to such topics as labor
    productivity and advertising revenue.  Also, we did not suggest as
    APWU stated that the behavior of TFP was retarded by labor.  In
    addition, we stated in our report that the Service was concerned
    about the fact that customers were increasingly turning to
    competitors or alternative communications methods.  This information
    was not our characterization, as asserted by APWU, but it was
    information that we obtained from Service officials.

    3.  In discussing the crew chief program, APWU commented that we
    ignored the fact that negotiated group leaders--employees whose
    responsibilities are similar to those of crew chiefs--were being
    successfully used at RECs, and the overall performance of the RECs
    has exceeded expectations.  Our primary purpose for including RECs in
    our review was to determine the extent to which the joint
    APWU-Service labor-management cooperation memorandum had been
    implemented, not to review the overall operations of RECs.  Thus, we
    did not review the use of negotiated group leaders at RECs or the
    overall performance of RECs.

    (See figure in printed edition.)Appendix IV
    COMMENTS FROM THE NATIONAL
    ASSOCIATION OF LETTER CARRIERS
    =========================================================== Appendix I

    (See figure in printed edition.)

    (See figure in printed edition.)

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    (See figure in printed edition.)

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    The following are GAO's comments on specific issues included in the
    letter dated July 17, 1997, from the National Association of Letter
    Carriers (NALC).  Other issues discussed in the letter have been
    included in the report text.

    GAO COMMENTS

    1.  We do not agree with NALC's opinion that our methodology in
    reviewing improvement initiatives was fundamentally flawed.  The
    methodology we used for our 1994 report laid the groundwork for
    concluding that problems in labor-management relations persisted on
    the workroom floor of various postal facilities.  The methodology
    that supported the work for this review involved a similar approach,
    which generally included (1) interviews with responsible postal,
    union, and management association officials both in headquarters and
    at selected postal field locations and (2) reviews of relevant
    documents.  As discussed in the section of the report entitled
    "Objectives, Scope, and Methodology," which begins on page 7, this
    work was intended to help us determine the extent to which progress
    in improving such problems had been made, including whether the
    results of specific improvement initiatives had contributed to such
    progress.

    As we mentioned in the methodology section, the 32 initiatives we
    originally identified for our review covered a wide range of postal
    improvement activities.  We recognize that such initiatives offered
    opportunities for the Service and NALC, as well as the other three
    unions and the three management associations, to try to improve the
    postal work environment.  However, we determined that because we were
    faced with a limited amount of time and resources, we were unable to
    review all 32 initiatives.  We determined that our efforts could best
    be spent by reviewing those initiatives that we believed had
    significant potential to address the recommendations in the 1994
    report, and that, of the 32 initiatives, 10 appeared to fit this
    criterion.  As described in our methodology, our work included (1)
    discussions with various headquarters and field postal officials
    responsible for implementing and monitoring the 10 initiatives, (2)
    discussions with national and field union and management association
    representatives who were involved with or affected by the
    implementation of the 10 initiatives we reviewed, and (3) reviews of
    relevant documents associated with the implementation of the 10
    initiatives.  We believe that by using this approach, we were able to
    obtain sufficient information that enabled us to determine the
    overall extent to which progress had been made in improving various
    labor-management relations problems that were identified in our 1994
    report.

    2.  In its comments, NALC stated that it believed it was
    inappropriate to compare the rural letter carrier system to the city
    carrier system.  Thus, NALC believed that we should not cite the
    rural carrier system as a model for the Service and NALC to use in
    their attempts to revise the city letter carrier system.  As
    discussed in our 1994 report, both the Service and NALC agreed that
    the city letter carrier system had problems and needed to be changed.
    We identified various positive attributes of the rural carrier
    system, such as greater independence for employees in sorting and
    delivering mail, that we believed the Service and NALC could consider
    in attempting to revise the city carrier system.  However, we did not
    advocate that city carriers merely adopt the rural carrier system.
    Rather, we recommended that working together, the Service and NALC
    should test revised approaches that incorporate known positive
    attributes of the rural carrier system to determine how such
    attributes might be used in the city carrier system.  We continue to
    believe that the implementation of this recommendation may help
    address some of the problems that we found were associated with the
    city letter carrier system.

    3.  In its comments, NALC expressed concern about the fact that we
    did not discuss two initiatives in our report.  The two initiatives
    included (1) the 1992 Joint Statement on Violence and Behavior in the
    Work Place and (2) the Union-Management Pairs (UMPS) program.

    Concerning the joint statement on violence, NALC believed that it was
    curious that although this initiative was included in the original
    list of 32 initiatives, we did not include it in our report.  Also,
    NALC stated that it believed the statement might have been ".  .  .
    an instructive area of inquiry, since it portrays the best and worst
    of union-management joint efforts to address labor-management
    cultural issues." According to NALC, the signing of the statement by
    the Service and the unions was the best aspect of this initiative,
    but the worst part was the Service's refusal to recognize the
    statement as an enforceable agreement against postal supervisors.

    As explained previously in comment 1, time and resource limitations
    prevented us from reviewing all 32 initiatives.  We believed that the
    10 initiatives we selected were those that had significant potential
    for addressing the recommendations included in our 1994 report.
    Since we did not review the joint statement on violence, we cannot
    comment on NALC's statements about this initiative.  However, we
    believe that such a statement provides the Service, its unions, and
    management associations an opportunity to work together to solve
    problems, which may help these organizations improve cooperation
    between employees and supervisors and reduce workfloor tensions.

    Concerning the Union-Management Pairs (UMPS) program, NALC stated
    that it was a joint, cooperative program, one in which postal
    management and union officials worked together to try to resolve
    disputes between employees and supervisors without lengthy delays or
    arbitration.  NALC believed that UMPS was a successful program that
    helped bring about a drastic reduction in grievances and arbitrations
    and that in its 10 years of existence, it generated a positive
    labor-management ambiance.  Although NALC stated that it wanted to
    expand the use of UMPS, the Service has refused to do so.

    Like the joint statement on violence, UMPS had been included in the
    original list of 32 initiatives, and, as mentioned previously, time
    and resource limitations precluded us from reviewing all 32
    initiatives.  However, as discussed in our 1994 report, UMPS provided
    the Service and NALC an opportunity to try to jointly resolve
    disputes between employees and supervisors before such disputes
    escalated into formal grievances.  We believe that such an effort can
    help these organizations improve communications and reduce conflicts
    between employees and supervisors.

    (See figure in printed edition.)Appendix V
    COMMENTS FROM THE NATIONAL POSTAL
    MAIL HANDLERS UNION
    =========================================================== Appendix I

    (See figure in printed edition.)

    The following is GAO's comment on a specific issue included in the
    letter dated July 22, 1997, from the National Postal Mail Handlers
    Union (Mail Handlers).  Other issues that were discussed in the
    letter have been included in the report text.

    GAO COMMENT

    1.  In its letter, the Mail Handlers union disagreed with our
    statement that about 80 percent of employees represented by the four
    major postal unions have joined and paid dues.  According to Mail
    Handlers, this figure should be higher than 80 percent.  Also, Mail
    Handlers mentioned in its letter the union security provisions of the
    National Labor Relations Act (NLRA) and its desire to see such
    provisions applied to the Postal Service, which, if enacted by
    Congress, would mean that postal employees represented by a labor
    organization must join and pay dues to that organization.

    According to PRA, employees have the right, but are not required, to
    join a labor organization.  The overall percentage figure that we
    included in the report on the number of union members was intended to
    provide a general perspective on the extent to which those employees
    represented by unions were actual members of the union.

    We obtained information on the total number of employees represented
    by the four labor unions from the Postal Service's On-Rolls and Paid
    Employees Statistics National Summary.  Also, we recently contacted
    union officials in the four major postal labor unions to obtain
    estimated figures on employees who had joined the unions and paid
    dues.  As shown in the report text on page 5, union officials
    estimated the following percentages of union members who had paid
    dues as of September 1996:  81 percent for APWU, 83 percent for Rural
    Carriers, 85 percent for Mail Handlers, and 92 percent for NALC.

    We did not verify the accuracy of the data in the Service's summary
    nor did we verify the accuracy of the data provided by the four
    unions.  In addition, since we did not address the union security
    provisions of NLRA as they might apply to the Postal Service, we
    could not comment on this issue.

    (See figure in printed edition.)Appendix VI
    COMMENTS FROM THE NATIONAL RURAL
    LETTER CARRIERS' ASSOCIATION
    =========================================================== Appendix I

    and 19.

    (See figure in printed edition.)

    and 32.

    The following is GAO's comment on a specific issue included in the
    letter dated June 11, 1997, from the National Rural Letter Carriers"
    Association (Rural Carriers).  Other issues that were discussed in
    the letter have been included in the report text.

    GAO COMMENT

    1.  In its letter, the Rural Carriers union discussed its continued
    involvement in the Quality of Work Life/Employee Involvement (QWL/EI)
    initiative.  Rural Carriers stated that this initiative has been
    ongoing since 1982 and QWL/EI participants have addressed various
    substantive work-related issues, such as the implementation and
    monitoring of automation, new rural carrier training and safety
    issues.  Rural Carriers also mentioned that no permanent QWL/EI
    structure exists mainly because rural carriers who participate are
    not expected to devote their full time to QWL/EI activities and also,
    participants rotate through the QWL/EI program.

    The QWL/EI initiative was included in the original list of 32
    initiatives that we had identified at the onset of our review.
    However, as discussed in the section of this report entitled
    "Objectives, Scope, and Methodology," which begins on page 7, time
    and resource limitations precluded us from reviewing all 32
    initiatives.  Thus, from the list of 32 initiatives, we selected 10
    that we determined had significant potential to address the
    recommendations in our 1994 report.  Although we did not review the
    QWL/EI initiative in this report, as discussed in our September 1994
    report, we found that when local postal management, unions, and
    employees were committed to improvement initiatives such as QWL/EI,
    the results were often positive and had the potential for helping to
    (1) develop mutual trust and cooperation, (2) change management
    styles, and (3) increase an awareness that quality of worklife is
    just as important as the "bottom line."

    (See figure in printed edition.)Appendix VII
    COMMENTS FROM THE NATIONAL LEAGUE
    OF POSTMASTERS OF THE UNITED
    STATES
    =========================================================== Appendix I

    (See figure in printed edition.)

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    The following are GAO's comments on specific issues included in the
    letter dated July 22, 1997, from the National League of Postmasters
    of the United States (the League).  Other issues that were discussed
    in the letter have been included in the report text.

    GAO COMMENTS

    1.  In its letter, the League commented on a statement we made in the
    report, which indicated that since 1970, the distinction between
    NAPUS and the League had become blurred and their memberships
    overlapped (i.e., many postmasters belonged to both organizations).
    According to the League, this statement was unclear.  Thus, we
    revised the text to indicate that many postmasters belong to both
    NAPUS and the League and that both organizations address issues of
    interest to all postmasters.

    2.  In its letter, the League mentioned that it asked the Service to
    implement a specific project known as the Special Services
    Implementation Task Force.  However, the League stated that the
    Service did not consult or work with the League during the planning
    stages of the project, and the League was consulted only near the end
    of the project.  Also, the League mentioned that the Service asked
    the League to participate in the development of training courses.
    Although the results have not yet been determined, the League stated
    that the results of this work on training look promising.  Since we
    did not review these initiatives, we cannot comment on the
    information that the League provided on them.

    3.  In its comments, the League mentioned the Management by
    Participation (MBP) initiative, which provided the Service and the
    three management associations an opportunity to help eliminate
    authoritarian management styles.  The League indicated that although
    MBP was viewed as a worthwhile initiative and helped make various
    improvements, it was discontinued during or shortly after the PMG's
    1992 postal reorganization.

    At the beginning of our work, MBP was included in the list of 32
    initiatives.  However, as discussed in the section entitled
    "Objectives, Scope, and Methodology," which begins on page 7, time
    and resource limitations precluded us from reviewing all 32
    initiatives.  Thus, we focused our efforts on 10 initiatives that we
    determined had significant potential for addressing our 1994
    recommendations.  Since we did not review MBP in this report, we
    cannot comment on the information that the League provided on MBP.
    However, in chapter 6 and appendix II of volume II of our 1994
    report, we included information on MBP, which was a process for
    disseminating participative management concepts to postal
    supervisors, managers, and postmasters so that a more participative
    work environment could be fostered and realistic solutions to
    business problems could be developed.

    4.  In its letter, the League commented on the new compensation
    system for managers and supervisors, including the EVA program.  The
    League stated that our report implied that most postmasters were
    included in EVA; but, according to the League, most postmasters were
    excluded from EVA.  In our report, we stated that League and NAPUS
    officials told us that based on the Service's decision that nonexempt
    employees should not be eligible to receive EVA bonuses, about 60
    percent of employees represented by these associations were
    eliminated because they were nonexempt employees.  We believe that by
    including this statement in the report, we had already indicated the
    League's concern that a majority of the employees it represented was
    excluded from EVA.

    The League also commented that it refused to endorse the new pay
    system because it excluded most of the Service's postmasters,
    including most of the League's members.  As suggested by the League,
    we included this information in the text of the report where the new
    compensation system was discussed.

    5.  In its letter, the League suggested that separate meetings
    between each of the seven employee organizations and the Postal
    Service might help develop cooperation and trust between the parties.
    According to the League, after such meetings had taken place, all
    eight parties could come together for what would hopefully prove to
    be a more productive and successful meeting.  As discussed in this
    report, in November 1994, the PMG invited the four labor unions and
    the three management associations to meet with the Service in trying
    to determine, among other things, how best to implement the
    recommendations included in our September 1994 report.  A key
    recommendation in our report was the establishment by these eight
    parties of a framework agreement to outline overall objectives and
    approaches for demonstrating improvements in the workroom climate of
    both mail processing and delivery functions.  However, we did not
    specify the means by which the eight organizations should establish
    such an agreement.

    MAJOR CONTRIBUTORS TO THIS REPORT
    ======================================================== Appendix VIII

    GENERAL GOVERNMENT DIVISION,
    WASHINGTON, D.C.

    Michael E.  Motley, Associate Director
    Teresa L.  Anderson, Assistant Director
    James T.  Campbell, Assistant Director (Retired)
    Anne M.  Hilleary, Evaluator-in-Charge
    Tammy R.  Conquest, Senior Evaluator
    Melvin J.  Horne, Senior Evaluator
    Chau Vu Walters, Senior Evaluator
    Arnel P.  Cortez, Evaluator

    DALLAS REGIONAL OFFICE

    Billy W.  Scott, Senior Evaluator
    Hugh F.  Reynolds, Evaluator

    DENVER REGIONAL OFFICE

    Robert E.  Kigerl, Evaluator
    Robert W.  Stewart, Evaluator

    *** End of document. ***