OPINION: The Good, the Bad, and the Downright Terrible: The Rapid Unscheduled Disassembly of the USPS

By Dean J. Granholm
President and CEO
Insightful Visions

With Quarter 3 Fiscal Year (FY) 2025’s results now posting, the Postal Service yet again has incurred another multibillion-dollar loss alongside a degradation in service performance. This, coupled with the additional above-CPI rates hitting in July, raises questions about what has transpired to sink the “most liked government agency” into a turmoiled state of reduced volume and revenue, prompting talks of privatization. While a newly appointed Postmaster General (David Steiner, from Waste Management fame) is certainly welcomed news, it is crucial to understand the journey that led to today’s malaise of mail catastrophe.

Historical Perspective

The United States Postal Service, like many institutions, has a long and storied history. Preceding the Declaration of Independence, the US Post Office was conceived in 1775 as part of the Continental Congress, with Benjamin Franklin appointed as the first Postmaster General. As the sole means of long-distance communication, the Post Office was an essential service for the fledgeling American nation.

The Post Office began selling adhesive stamps for senders to use as payment in 1847. Prior to this, the receiver would pay for mail receipt at pick up. In 1872, the institution transitioned into an executive branch department, led by a presidential nominee Postmaster General.

Throughout its history, the US Post Office has employed a diverse range of unique and challenging methods to deliver mail. Transport has occurred via horseback, trolley cars, three-wheeled trucks, snowmobiles, mules, ferry boats, pneumatic tubes, and barefoot beach walkers—to name only a few— in order to deliver mail for the public. And despite an ever-growing population with increasing potential for delivery and mail volume, the US Post Office Department remained relatively unchanged for over a century.

In March 1970, over 200,000 postal workers went on strike—the first and largest walkout against the federal government in history. This unprecedented strike brought with it nationwide service disruptions, including a delay of the 1970 census, thus prompting President Nixon to summon the National Guard in an attempt to process the mountain of backlogged mail. The formation of the quasi-governmental United States Postal Service was the result: a historic change that created a corporate-structured agency led by a Board of Governors, giving unions the ability of bargaining power, and removing it from the Executive Branch. It was enacted into law on August 12th, 1970.

The transformation gave the Postal Service a clear mandate: to provide the nation with reliable, affordable, universal mail service, and do so as a self-sustaining agency without the benefit of tax dollars. For the most part, the Postal Service held true to this mission until 1992, until internal reorganization and a Reduction in Force order led by then-Postmaster General Marvin Runyon disrupted service dramatically. Multiple Congressional hearings and negative press for the Postal Service accompanied the change.

The major flaw in the 1992 approach was a separation of leadership focus between Delivery/Retail and Processing/Transportation, leading to mail handling squabbles that escalated into outright internal battles of responsibilities. Consequently, service declined rapidly, and agenda infighting became a recurring issue.

The Good

Another internal reorganization of leadership in 1994 righted the ship while placing keen focus on cost cutting and service improvement. A successful campaign for “Efficient Service” alongside a leadership reorganization cultivated a revitalized Postal Service. Automation improvements were implemented while product offerings expanded, including Priority Mail, Bulk Business Mail, and the use of Originating Package Consolidator Rates. Service improvement initiatives pushed First Class overnight service performance increasingly higher, with recognition for those Districts achieving 95% on time.

The former Dakotas District eventually led the nation with a remarkable 98% on time overnight performance. These renewed efforts led to higher customer satisfaction, and combined with the nation’s profitable late 1990’s, rapid growth in volume.

In December of 2002, as online bill pay and electronic messaging increased in regularity, President George W. Bush formed a commission to address the declining volume of first class mail, the Postal Service’s most profitable source of revenue. It was an important task, as the committee and Postal Service found that rapid rate increases would be detrimental to revenue due to the elasticity of the market.

Still, from 1994 to 2006, the nation’s mail service was healthy, well run, and self sustaining. The Postal Service was repeatedly rated as the best government agency by the American public, and although first class volume was beginning to decline, package and business advertising mail were growing; the agency certainly was living up to the charter it was given in the 1970 reorganization.

Led by Postmasters General Marvin Runyon, Bill Henderson and John E. (Jack) Potter, the Postal Service innovated at a remarkable pace with new products, automation and transportation in order to reduce costs and match the growing volume of advertising mail and packages. Amidst the market transformation, “efficient service” worked to increase service while reducing staffing and costs. That is, until 2006—when Congress mandated another governmental reform of the Postal Service.

The Bad

That reform—the “Postal Accountability and Enhancement Act,” or PAEA—was completed during the 2006 December “lame duck” session, with little to no Postal Leadership input. Delivering a stunning blow, the act required the Postal Service to pre-fund retirement healthcare for employees 75 years out within a 15 year timeframe, equating to prepayment of over 5 billion dollars each year. No company, public or private, had ever been saddled with such a burden.

The bottom line shrank further as the Postal Service experienced increased volume decline from the Great Recession. However, due to internet-motivated revenue diversion, the Postal Service was already reducing career employees as a cost saving measure; by the end of fiscal year 2006, the drop in employment exceeded 12% since 2001 (891,000 employees to 784,000 employees). Leadership in turn led an astonishing effort to reduce overhead and excess capacity without layoffs while still maintaining high levels of service.

Over the next decade, amidst mounting deficits caused by PAEA and volume loss in its highest profitability product (bill pay with business reply), package volume rapidly increased. And once again, the Postal Service innovated: it increased delivery service for packages to 7 days a week; introduced “If It Fits, It Ships” with flat rate priority mail; and created “Forever Stamps” which reduced the cost of printing one- or two-cent stamps with every rate increase.

Additionally, the Postal Service reduced hours or closed over 15,000 retail outlets that were over-served and grossly unprofitable, consolidated over 3,000 delivery units, and reduced over 20,000 delivery routes. It also eliminated over 150 processing locations, froze executive and officer pay, and reduced 40% of management positions while scaling chain of command.

By 2015, with a major onset of new package volume due to online shipping and excellent product offerings, the Postal Service invested in additional automated high speed package sorters, transforming workroom operations to automation across all product lines. Staffing levels remarkably dropped to just 490,000 career employees and a total workforce of 620,000 employees—a reduction of an additional 21% of staffing in just 10 years, with, yet again, improved or stable service and increased productivity.

Throughout this time, Postal leaders continued to implore Congress to reverse PAEA as it crippled the bottom line, but as bills moved nowhere, the general public perceived the Postal Service as a failing organization hemorrhaging billions annually. News agencies largely overlooked a story worthy of the Harvard Business Review: the remarkable efforts of Postal leaders like Pat Donahoe, Megan Brennan, and many others who innovated massive complement change, reduced controllable costs without layoffs, and maintained or improved overall service performance for the nation’s customers.

By the time Megan Brennan assumed the role of Postmaster General, cracks in the structure of the Postal Service were becoming evident. Vehicle breakdowns surged due to a “longer than life” fleet, and facility maintenance suffered as new technology advancements such as robotics or self-driving PIT equipment were investigated but couldn’t be purchased due to cost constraints. In an attempt to expedite cheaper surface reach over expensive air transport, the Postal Service eliminated overnight local delivery, in turn allowing the USPS to reduce additional processing locations–until Congress halted the reductions.

The rhetoric of the “failing Postal Service” intensified with the 2016 election of Donald Trump, and critics condemned the Postal Service’s work with Amazon as a failure. The increase of package volume necessitated hiring and constant replacement of its high-turnover temporary non-career employment.

Due to ineffective governmental oversight and politics, the Postal Service’s Board of Governors shrunk from 11 (including the Postmaster General and Deputy Postmaster General) to a Board of just the aforementioned two. Decimated, the Board now lacked the political influence to push back on false charges or assist Congress in fixing the Postal Service.

Finally, new Governors were named in 2017-2019; in 2020-2021 Congress attempted to resolve the PAEA mandate with the Postal Service Fairness Act, passing the House but failing in the Senate. Postmaster General Brennan was out by May 2020, and Postmaster General DeJoy, backed by the President and the Board, took office amidst the COVID-19 pandemic.

Postmaster General DeJoy, the former lead executive of XPO logistics, moved at a breakneck pace in an attempt to provide service to the public by delivering Covid test kits and managing record political volume for the 2020 presidential election—all while staffing suffered excessive absenteeism due to the pandemic. As an attempt to counter these staffing issues, the Postal Service converted nearly 10% of their temporary workforce to career status.

DeJoy also made structural changes to leadership, stovepiping functional support management staff away from District and Area leadership and directing it to headquarters. He eliminated the role of COO and separated HQ run field responsibilities between Delivery/Retail and Processing/Transportation functions, much like Postmaster General Marvin Runyon had done in 1992 to disastrous results.

With a second attempt to rectify PAEA’s errors, Congress successfully granted a financial reform of $57 billion dollars through the Postal Service Reform Act in FY 2022. Soon after, Postmaster General DeJoy announced his “Delivering for America Plan” (DFA) which intended to guide the Postal Service from “an organization in financial and operational crisis to one that is self-sustaining and high performing.” This plan established a clear goal: to deliver the nation’s mail at an on-time rate of 95%.

To accomplish this, the Postal Service would need to retool service standards by adding an additional day to cross country service, restructuring the mail flow network by eliminating package consolidator discounts, consolidating national surface hub locations, and, bolstered by more Congressional funds, investing in a new vehicle fleet to ramp up an electric vehicle network and consolidate delivery hubs.

Promising to achieve break-even performance by FY 2023, DeJoy rapidly implemented his plan to reorganize and restructure the massive postal network through all phases of mail flow. Choosing to take to task the Postal Regulatory Commission’s lawful responsibility, the OIG’s role, and even Congressional oversight, DeJoy publicly spoke negatively about the Postal Service’s past leadership and challenged all data indicating his DFA plan was not successful and damaging service and the brand itself.

With COVID-19 impacts waning by the end of FY 2022, the DFA was christened in July 2023 with opening of the first Regional Processing and Distribution Center (RPDC) in Richmond, Virginia, followed by the new state of the art facility in Palmetto, Georgia, along with the promise to improve service and reduce costs. Other facilities were likewise converted into Sorting and Delivery Centers and Local Processing Centers.

Delivery units were consolidated into large delivery centers, and with additional funds provided by Congress, a plan to replace some of the aging vehicle fleet with EV delivery vehicles. However, this meant that letter carriers would need to travel longer distances to and from their routes, which would add time to each route. Again to address the ongoing staffing turnover, additional non-career workforce was converted to full-time and full-benefits status, resulting in a higher cost for wages and benefits. In addition, due to the finalization of a Postal Regulatory ruling, giving USPS more authority over product pricing, postage rapidly increased above CPI caps, which had historically held postage rates at inflationary controls.

The Downright Terrible

The changes implemented under the DFA has had immediate and continued detrimental impact on a wide range of areas. The implementation of the RPDC and S&DC facilities were an absolute disaster, tanking service scores to the lowest level ever recorded both locally and nationally. Processing failed multiple OIG investigations with witnessed accounts of weeks of delayed mail and 18-wheelers backed up miles attempting to enter the facilities due to poor implementation, coordination, and control. Nothing seemed to remedy the free fall in service, particularly at key areas where new facilities were implemented.

Delivery performance suffered as well, as the new consolidated facilities far underperformed the prior structure, leading to enormous cost overruns and overtime. The infrastructure for new EV delivery vehicles simply did not exist, and the selected manufacturer fell behind implementation times as each facility needed to be retrofitted for EV charging.

At the same time, the “schedule over readiness” mandate was forced from the stovepiped HQ leadership, and Postmaster General DeJoy publicly ramped up his blame of Government oversight, the prior postal leadership, his own workforce, the mailing industry, and the OIG and and Regulatory commission for bringing issues to the forefront. He chastised any field leadership that attempted contribution; it was put up or shut up time.

He also mandated rapid rate increases and cut out consolidator induction at the destination, both which, coupled with historically poor service, created a price to service inequity at historic levels. The elasticity talked about in the Bush administration was turbocharged into rapidly decreasing volume due to excessive cost increases and marked service failures, and therefore slashing into revenue expectations even with rapid rate increases.

In Fiscal Year 2024, with the Postal Service chronically underdelivering to service standards, DeJoy, rather than work aggressively to improve overall service, instead dramatically lowered the service standards themselves (2 day from 93% to 87% and 3-5 day from 90% to 80% on time) for fiscal year 2025. Then, to make matters worse, he and his communications team proudly stated service “within one day of service standards”, touting that mail that was one day late was seemingly alright to brag about.

To add insult to near catastrophic death, he aggressively planned to cut service standards an additional time, eliminating same day collection from any post office outside 50 miles of an RPDC, meaning any mail inducted and collected at these sites would sit overnight in the home post office before moving to a processing center. If mail was inducted on Saturday, it wouldn’t depart to the originating facility until Monday.

In February of 2025, Postmaster General DeJoy announced that he was leaving the Postal Service in April. Instead, he abruptly left the agency on March 24th. He had recently testified during a House Oversight and Accountability Committee hearing in December, where he covered his ears and refused to answer questions from a Republican lawmaker. His embarrassing actions put a final stain on the Postal Service that will most likely take years to heal.

The Final Score

Looking back, the Postal Service’s current condition, and the Delivering For America Plan, cannot be listed as anything but an absolute disaster of an historic proportion. Losses from DeJoy’s 2023 break even mark have been historic; FY 2023 loss was 6.5 billion dollars, and FY 2024 loss was 9.5 billion dollars, one of the largest in history. Unfortunately, FY 2025 appears to be headed for another historic loss, somewhere between 8 and 10 billion dollars.

Prices have skyrocketed through the use of unreliable and ill-conceived pricing models. First class postage has ballooned from 55 cents to 78 cents just during the last 4 years, a staggering 40% increase. Marketing mail has increased even more, with a 7.7% increase this year alone.

The service has been intentionally downgraded, yet even with manipulation of the standards themselves, the Postal Service cannot meet the expected performance levels. States like Missouri, Georgia, Virginia, and Ohio have struggled to achieve 60-70% on time service. Continued reviews by the Office of Inspector General point out multiple days’ late mail unprocessed in facilities.

It is no wonder that with such actions and results that the Postal Service is bleeding product and revenue. The flawed strategy to institute “price over volume” has had a lasting detrimental impact on the sustainability of the Postal Service.

The DFA’s charter has been an absolute failure on all of its stated goals. The final verdict from all major stakeholders is the following:

1. The DFA failed to improve Service performance
2. The DFA failed to achieve financial stability
3. The DFA’s mission of network modernization has been a complete failure

Next Steps

Postmaster General David Steiner has quite the task in front of him, but all hope is that he will attack it with thoughtful analysis COUPLED with fervor and strength. He must take an honest view and actively gather input from key stakeholders to lead a comeback. With that, suggested key initiatives to change the course of current performance are as follows:

1. Change the leadership separation of delivery/retail and network/processing throughout the organization to create a common one mission focus.
2. Reinstitute the COO role and end the positional stovepipe of functions to Headquarters, and allow field leadership to drive performance based on expected metrics.
3. Stop the overpricing of products causing the rapid loss of volume. Look at pricing metrics to ensure they are built to slow decline, and better yet, use new product freedoms to grow new sources of revenue. Freeze the biannual price increases until a new credible and independent analysis can be performed to identify the metrics to halt elasticity caused by revenue over volume.
4. Pause the Delivering for America Plan until network issues can be corrected in key service areas. The Plan has not delivered on its core promises.
5. Stop the implementation of the 50 mile from RPDC service change. It is not good for America’s suburban and rural communities and will continue to drive out volume and revenue.
6. Fix the service expectations to be relative to what the public expects. 95% on time should not be out of reach. This will restore public trust, which is essential to long term success.
7. Use the USPS’s unique universal last mile delivery network to explore new sources of revenue and create opportunities for growth.
8. Embrace transparency and oversight and bring the Regulatory Commission and the OIG together as partners as critical agents to success.
9. Explore public/private partnerships and once again allow low cost consolidators to move product to last mile destinations.

Change cannot come soon enough, but thoughtful, honest, open and strategic change is a must. Stakeholders haven’t been listened to for a half a decade. It’s time the USPS starts listening.

(Dean Granholm served in multiple roles for the United States Postal Service over his 35 year career, including Vice President, Network Operations (A); Vice President, Delivery and Post Office Operations; and Vice President, Pacific Area Operations. He is currently President and CEO of Insightful Visions, a consulting firm in Florida).