In the spacious corner office on the 10th floor of the U.S. Postal Service headquarters in Washington, D.C. hangs a framed portrait of Benjamin Franklin, America’s first Postmaster General. His eyes appear to be fixed on the woman behind the desk, the first woman to occupy the office in 240 years.
Megan Brennan, 52, not only smashed the glass ceiling to become the 74th Postmaster General and CEO of the U. S. Postal Service (USPS), with one of the nation’s toughest assignments. She’s now also in charge of what you might call the family business. Brennan, her dad, and brothers have logged a combined 125 years in the Postal Service.
Straight out of college, Brennan spent a year as a letter carrier in Lancaster, Pa. Her journey took her through a host of managerial and operational positions, including seven relocations, until she was tapped last fall to lead the 600,000 men and women who sort, deliver and manage America’s mail and packages.
Brennan took the helm in February and paints her challenge this way: The Postal Service is an “unrivaled network” that faces “stiff head winds.” One key reason: First-class mail, long the leading revenue generator at the Postal Service, shrunk by 61 percent from 1995 to 2013.
Technology that took a huge bite out of first-class mail volume by letting people email for free might provide the way forward for the USPS.
“The reality is we’re delivering less mail to more addresses, nearly a million more delivery points last year alone,” Brennan says. Add to that what the Postmaster General describes as “the onerous burden unique to the Postal Service” — a 2006 Congressional mandate to prepay retiree health benefits to the tune of $5 billion annually (which the Postal Service has defaulted on for the last four years and is expected to again this year).
All this while the USPS is still required to provide universal mail service to every American home and business without a dime of taxpayer support.
Amid the gathering clouds, there are some bright spots. Operating revenue grew 1.3 percent and package volume was up 14.4 percent in the second quarter. But the Postal Service still finds itself in a $90 billion hole.
“It’s not sustainable,” Brennan said in her first extensive interview since becoming Postmaster General. “Any accountant knows that 35 cents in assets for every dollar in liabilities is just not sustainable,” a basic economics lesson she’s shared with the American Catalog Mailers and other key stakeholders in her first months on the job.
Thinking Outside the Mail Box
But if you think Brennan sees herself as captain of The Titanic, think again.
The Schuykill County, Pa. native is quite bullish on the future of the Postal Service. Returning home recently, Brennan pitched the local Chamber of Commerce on why it’s critical to use the Postal Service and why direct mail is still “the most direct pipeline to the consumer,” especially in an age when consumers are demanding more control by cutting their cable TV cords and fast-forwarding through TV ads.
County Commissioner George Halcovage Jr, a longtime Brennan family friend, says the Postmaster General’s work ethic, faith and fierce competitive spirit (she was on her high school’s state championship basketball team) will serve her well as she urges her colleagues to think “outside the box.” Outside the mailbox, that is.
“Our core competency is delivery,” Brennan says. But not just mail and packages. The Postal Service has begun leveraging its vast network, partnering with AmazonFresh, testing delivery of groceries in San Francisco, Calif., and of bottled water in various markets.
And there’s no shortage of suggestions to create new revenue streams — even one, pending regulatory approval, to allow post offices to cash checks and provide other banking services. But Brennan says any new businesses at the Postal Service must factor in costs to implement and whether they play to the strength of a brand known for its vast delivery network.
New Partners In “Coopetition”
There are also partnerships that may surprise you. Of the four billion packages delivered by the Postal Service last year, 470 million of them came from FedEx and UPS, which are competitors and business partners. In an unusual arrangement Brennan calls “coopetition,” the Postal Service delivers these parcels “the last mile” to their destination and FedEx and UPS transport Postal Service products on their planes.
As e-commerce continues to explode, Brennan says the same technology that took a huge bite out of first-class mail volume by letting people email for free might actually provide the way forward for the USPS.
Fredric Rolando, President of the National Association of Letter Carriers, agrees: “While the Internet took a lot away, the Internet is giving it right back. People are changing the way they shop,” Rolando says. “I envision brick and mortar stores at some point being just showrooms for people to go in and touch and feel. Young people especially are getting on their phones to order groceries. You’re going to see all kinds of products people will want delivered.”
Brennan, who says,”catalogs generate packages,” suggests there will be more “hyperpersonalized” efforts to reach the consumer.
An Experiential App to the Rescue
But catalogs and other old-fashioned forms of direct mail, she says, must be more compelling in the digital age.
Enter “Augmented Reality” or AR, which allows consumers to download the Postal Service AR app, point their smartphones toward a picture in a catalog or mailer and have it come to life. After a few false starts with her smartphone, the Postmaster General showed me a two-dimensional ice cream sundae transformed into a mouth-watering video with hot fudge poured over the ice cream followed by whipped cream, sprinkles and a cherry. (In fairness, after I downloaded the app and pointed my phone toward a picture of a roller coaster, it triggered a hair-raising coaster video on my first attempt.)
As the mail mix increasingly shifts to more package deliveries, Brennan says a new generation of neighborhood delivery vehicles will be introduced over the next three to five years with more cargo space for parcels.
Investing While Bleeding Red Ink
Making a huge investment in updating an aging fleet when the Postal Service is bleeding red ink and facing tough contract negotiations with its unions inevitably brings up talk of making difficult cuts, consolidations and challenging sacred postal traditions.
Cutting Saturday delivery has come up in the past and was quickly shot down. Brennan is loath to discuss five-day service because “it’s a very contentious issue and I’m trying to build consensus on other issues.”
The House Oversight and Government Reform Committee, which oversees the Postal Service, may have a middle ground that would help the Postal Service budget without dropping Saturday mail delivery altogether. “One idea Committee Chairman Jason Chaffetz (R- Utah) has discussed is ‘postal holidays,'” says committee press secretary M.J. Henshaw. “Potentially 10 or 20 days a year when delivery traffic isn’t as busy, you could get by without delivery, such as Saturdays in August.”
But don’t expect even occasional five-day delivery service to happen any time soon.
Innovation and Disruption
One clue about where Brennan plans to take the Postal Service comes in the number of times she used the word “innovate” in our conversation, a word that also punctuates her talks with key constituencies.
Innovation has not exactly been a trademark of the Postal Service in the past. But in Anaheim, Calif. last month, Brennan told the National Postal Forum: “We need to be the disruptors,” taking a page from companies such as Amazon that reinvented the retail space or Uber that put an app and taxi in the palm of the consumer’s hand.
Among the innovations Brennan’s Postal Service is testing are these three:
- Real Mail Notification, a digital preview sent to your inbox early in the morning showing what will be in your mailbox later in the day (yes, the USPS lawyers are looking at privacy concerns of people’s mailbox contents in cyberspace)
- Predictive Delivery, a message telling the consumer or business when, within an hour, the mail will be delivered
- An online hub (Myusps.com) where the consumer instructs the carrier where to leave the package.
“The consumer is dictating the marketplace,” Brennan says. “We have to consider everything, including whether we deliver the same day profitably.”
As she begins her fifth month in office, the Postmaster General is determined to put her stamp on one of the toughest jobs in Washington.
Ultimately, Brennan will be judged on what she is able to control and how agile and innovative the Postal Service is in adapting to a changing marketplace. She starts with a boast no other CEO can make to his or her troops: “Every American is our customer.”
This year, she confidently predicts, “We’ll be able to deliver 153 billion pieces of mail.”
And five years from now? By then, the Postmaster General says, “the mail will be part of Americans’ daily digital experience.”