1 EAS Pay-For-Performance (PFP) Mid Level Manager Module U.S. Postal Service

2 “ We achieved record levels of service… by increasing efficiencies, we were able to hit our stride, eliminating costs and driving up total factor productivity for an unprecedented eighth straight year… …” Annual Report What’s Up With The US Postal Service? USPS Pay-For-Performance

3 “ A few agencies have pioneered results- oriented performance management. … The real leader is the U.S. Postal Service. … The results of the Postal Service’s variable pay plan have been dramatic.” What’s Up With The US Postal Service? USPS Pay-For-Performance

4  What have we achieved?  PFP overview  NPA: driving success through metrics  PES: driving success through evaluation  PES: Administration  Compensation strategies Presentation Agenda USPS Pay-For-Performance

5  What have we achieved?  PFP overview  NPA: driving success through metrics  PES: driving success through evaluation  PES: Administration  Compensation strategies Presentation Agenda USPS Pay-For-Performance

6 On-Time Delivery of First Class Mail WHAT HAVE WE ACHIEVED? EVAPFP Overnight Commitment Start of new pay-for-performance systems

7 On-Time Delivery of First Class Mail WHAT HAVE WE ACHIEVED? EVAPFP Two-Day Commitment Start of new pay-for-performance systems

8 On-Time Delivery of First Class Mail WHAT HAVE WE ACHIEVED? EVAPFP Three-Day Commitment Start of new pay-for-performance systems

9 Safety Indictors WHAT HAVE WE ACHIEVED? OSHA I&I Start of new pay-for-performance systems Note: Methodology for calculating workplace injuries changed in Lost Workday Injuries

10 Voice of Employee Survey WHAT HAVE WE ACHIEVED? EVAPFP Positive Response

11 Total Factor Productivity (Cumulative) WHAT HAVE WE ACHIEVED? EVAPFP Cumulative % Change Start of pay-for-performance systems

12 Ask yourself…. What can I do as a Manager to contribute to the organization’s success, my unit’s success and my employees’ success?  Answer: Be an informed leader--- –on NPA –on Performance Evaluation –on Pay Policies

13  What have we achieved?  PFP overview  NPA: driving success through metrics  PES: driving success through evaluation  PES: Administration  Compensation strategies Presentation Agenda USPS Pay-For-Performance

14 Three systems manage the Pay-For-Performance process: National Performance Assessment (NPA) Performance Evaluation System (PES) Manages corporate and unit indicators Manages individual objectives (“core requirements”) & review/approval process Hum Cap Enterprise System (HCES) Applies pay rules Use information to improve NPA in your location. No need for employee input. Use to select core requirements & provide feedback to evaluator. PFP OVERVIEW

15 PAY One Target and Performance Pay FINISH LINE Those far below target, have motivation to lower the bar for the future. Those far above target, have motivation to lower the bar for the future. Target only motivates those close to the target. Old Thinking on Design PFP Overview

16 PLAN.. PAY NON CONTR CONTRIBUTOR HIGH CONTR STRETCH BREAKTHROUGH EXCEPTIONAL CONTRIBUTOR New Thinking on Design Multi-level Targets and Performance Pay PFP Overview

17 15-Point Evaluation System NCCHCEC PFP OVERVIEW

18 Pay Actions NCCHCEC 3 0% 6 3.5% 9 6.5% % % 2 0% 5 3.0% % % % 1 0% 4 2.5% 7 5.0% % % Paid as salary increase up to grade maximum; balance as lump sum. PFP OVERVIEW

19  What have we achieved?  PFP overview  NPA: driving success through metrics  PES: driving success through evaluation  PES: Administration  Compensation strategies Presentation Agenda USPS Pay-For-Performance

20  Starting point is extensive balanced scorecard of metrics (NPA)  NPA metrics must be objective, measurable & independently verifiable  Program must drive continuous improvement year-to-year  Success is linked from corporate to unit to individual objectives Basic Assumptions NPA: Success Through Metrics

21 Officers Postmasters/ Supervisors Executives Goal Alignment & Line-of-Sight Corporate Indicators 75% 25% 50% Unit / Individual 80% 20% Corporate/District 100% 0% 100% NPA: Success Through Metrics

22 PFP Model = Overall PFP Evaluation (100%) Area/Field PCES/EAS 70% - 90% 10% - 30% + Corporate and Unit Indicators (NPA) Individual Indicators (Core Requirements) Pay Action EAS PM 80% 20% + 100% HQ PCES/EAS NPA: Success Through Metrics

23 NPA CORPORATE INDICATORS Measured at National/District Level Improve ServiceEnhance Customer- Focused Culture Generate Revenue; Increase Efficiency  Priority Surface w/in 2 Days  Priority Air w/in 2 Days  Express Mail  First Class Overnight  First Class 2 Day  First Class 3 Day  OSHA Illness & Injury Rate  VOE Survey Score  EEO Formal Complaints  National Total Revenue  Total Factor Productivity  Net Income

24 NPA UNIT INDICATORS Measured at Unit Level Improve Service Enhance Customer-Focused Culture Generate Revenue; Increase Efficiency  Priority Surface w/in 2 Days  First Enroute Scan to Delivery  International Service  Safety Programs  Grievance Rates  Total Operating Expense  BPI F1  Deliveries per Hour

25 Indicators, Weights & Targets Indi- cators Wgt Non-CContributorHigh CExcep C #110% #25% #35% #410% Etc. Plan NPA UNIT INDICATORS

26  Know the different NPA metrics/targets for your position  Use NPA for monitoring performance  Use NPA for ideas on improving performance  Show your employees how to use NPA Be An Informed Leader NPA: Success Through Metrics

27 NPA – HOME PAGE Home Page NATIONAL PERF. ASSESSMENT

28 Page 1/1 Status Reports on Corporate Results NPA: Success Through Metrics

29 Page 1/1 Status Report on Unit Results NPA: Success Through Metrics

30 NPA – IMPROVE YOUR SCORE Improve Your Score NATIONAL PERF. ASSESSMENT

31 NPA – IMPROVE YOUR SCORE Improve Your Score NATIONAL PERF. ASSESSMENT

32 Improve Your Score Quick Link (MVA) NPA: Success Through Metrics

33 Contacts NATIONAL PERF. ASSESSMENT

34  What have we achieved?  PFP overview  NPA: driving success through metrics  PES: driving success through evaluation  PES: Administration  Compensation strategies Presentation Agenda USPS Pay-For-Performance

35  Know how individual contributions can lead to improved overall performance  Know the different measurements of individual performance (core requirements) for different employees Be An Informed Leader PES: Success Through Evaluation

36 PFP Model = Overall PFP Evaluation (100%) Area/Field PCES/EAS 70% - 90% 10% - 30% + Corporate and Unit Indicators (NPA) Individual Indicators (Core Requirements) Pay Action EAS PM 80% 20% + 100% HQ PCES/EAS PFP DETAILS

37 Overall PFP Evaluation = Overall PFP Evaluation (100%) Field EAS (non-PMs and Non-Managers) 70% 30% + Corporate and Unit Indicators (National Performance Assessment) Individual Indicators (Core Requirements) PFP DETAILS Pay Action

38  Measurable and trackable through an identified data source  Established at the beginning of the year by HQ and made available to employees/evaluators for review during the objective-setting process  Three are selected from a drop-down menu in on web according to function and job title Field EAS Core Requirements CORE REQUIREMENTS

39 Sample Field EAS Core Requirements CORE REQUIREMENTS OperationsMarketingFinance Increase – Operational Productivity Reduce – Overtime % Plan Reduce – Workhours % to Plan Increase Carriers in by 1700 Wait Time in Line > 5 Minutes BMEU Proficiency MERLIN Utilization Customer Satisfaction Measurement (CSM-B) Performance-Based Verification Customer Adoption of Electronic Documentation Workhour Performance to Plan Non-Personnel Expenses to Plan FLASH Non-Payroll Data Entry Salary & Benefit Performance to Plan Overtime Percentage

40 CORE REQUIREMENTS Field EAS Pull Down Menu on Web

41 CORE REQUIREMENTS Field EAS – Oral Communications

42 CORE REQUIREMENTS Field EAS – Oral Communications  Oral Communications –No target should ever be set for this Behavioral Objective –Employees write Narrative describing the action they plan to take to achieve objectives –This objective should NOT be used as a means to add additional core requirements

43 = Overall PFP Evaluation (100%) Postmasters 80% 20% + Corporate and Unit Indicators (National Performance Assessment) Individual Indicators (Core Requirements) Pay Action PFP DETAILS Overall PFP Evaluation

44 Postmasters describe the behaviors and actions they intend to demonstrate during the year that support the performance levels for the two pre-determined behavioral objectives. No targets are set for the performance levels. EAS PM – Leadership & Communication CORE REQUIREMENTS

45 Postmasters describe the behaviors and actions they intend to demonstrate during the year that support the performance levels for the two pre-determined behavioral objectives. No targets are set for the performance levels. EAS PM – Fiscal Management CORE REQUIREMENTS

46  Objective Setting  Mid-Year Accomplishments/Review  End-of-Year Accomplishments/Review  Rating Process Process Overview PES: Success Through Evaluation

47  Objective Setting  Mid-Year Accomplishments/Review  End-of-Year Accomplishments/Review  Rating Process Process Overview PES: Success Through Evaluation

48 Objective Setting  Interactive Process between Evaluator and Employee  Evaluator – must first know the focus for the year for his/her team  Interactive discussion with employee as to explain focus and to discuss core requirements  Clarify expectations and come to a mutual understanding of the cores selected PES: Success Through Evaluation

49 PLAN.. PAY NON CONTR CONTRIBUTOR HIGH CONTR STRETCH BREAKTHROUGH EXCEPTIONAL CONTRIBUTOR Multi-level Targets and Performance Pay PES: Success Through Evaluation Objective Setting – Setting Targets

50 Objective Setting  Contributor – Achievement to Plan. Think in terms of beating the same score for last year. Set targets at this level to beat the prior year’s performance  High Contributor – Stretch. Set the target at this performance level to be a challenging jump, more challenging than plan but possible to achieve.  Exceptional Contributor – Breakthrough. This may seem almost unattainable but bears exceptional rewards. Breakthrough performance is the most challenging – it has a direct impact on unit and corporate performance. PES: Success Through Evaluation

51  Objective Setting  Mid-Year Accomplishments/Review  End-of-Year Accomplishments/Review  Rating Process Process Overview PES: Success Through Evaluation

52  On-going opportunity for feedback –Where are we –Where do we need to go –How do we get there  Recommendations for continuous improvement Mid-Year Accomplishments/Review PES: Success Through Evaluation

53  Objective Setting  Mid-Year Accomplishments/Review  End-of-Year Accomplishments/Review  Rating Process Process Overview PES: Success Through Evaluation

54  Pulls together contributions to corporate and unit performance and individual core requirements  End of Year – Core Requirements – NPA Report Card End-of-Year Accomplishments/Review PES: Success Through Evaluation

55  Objective Setting  Mid-Year Accomplishments/Review  End-of-Year Accomplishments/Evaluation  Rating Process Process Overview PES: Success Through Evaluation

56  Assigns individual core requirement ratings  Based on targets set  Rated on a 1 through 15 scale  Allows for flexibility in distinguishing differences in performance  Potential for more precise feedback/ratings of performance PES: Success Through Evaluation End-of-Year Rating

57 Sample – Based on Pay Package  Field EAS – Individual Core Requirements30 % – NPA70 % Sample End-of-Year Rating Calculation PES: Success Through Evaluation  Postmasters – Individual Core Requirements20 % – NPA80 %

58 End-of-Year Rating PES: Success Through Evaluation IndicatorWeightRatingScore NPA Composite Summary – 70% 70% Core Requirements – 30% 8% % % %60.36 Overall PFP Rating 5.92 Rounded to nearest whole number = 6

59  What have we achieved?  PFP overview  NPA: driving success through metrics  PES: driving success through evaluation  PES: Administration  Compensation Strategies Presentation Agenda USPS Pay-For-Performance

60 Objective Setting Employee logs in to PES and accesses the Objective Setting screen. Employee enters core requirements and submits them to his evaluator for review. Evaluator logs in to PES, reviews the employee’s objectives, and either approves them or returns them for additional work. Employee Action Evaluator Action Legend: End Objectives approved by evaluator alerts employee that objectives were returned for additional work Start Employee and evaluator have a one-on-one meeting to discuss core requirements. ADMINISTRATION

61 Mid-Year Accomplishments/Review Employee logs in to PES; accesses the Mid-Year Accomplishments screen. Employee enters accomplishments; submits them to his evaluator for review. Evaluator logs in to PES; reviews employee accomplishments. End alerts employee that accomps. were returned for additional work Employee Action Evaluator Action Legend: Higher-Level Evaluator Action Evaluator holds one-on-one meeting with the employee. Evaluator logs back in to PES, records final comments, and records the date of the discussion. Optional: Higher- level evaluator can record comments. Accomps. do not require additional work Start ADMINISTRATION

62 EOY Accomplishments/Evaluation Employee logs in to PES; accesses the End-of-Year Accomplishments screen. Employee enters accomplishments; submits them to his evaluator for review. Evaluator logs in to PES; reviews employee accomplishments. End alerts employee that accomps. were returned for additional work Employee Action Evaluator Action Legend: Higher-Level Evaluator Action Evaluator holds one-on-one meeting with the employee. Evaluator logs back in to PES, records final comments, and records the date of the discussion. Optional: Higher- level evaluator can record comments. Accomps. do not require additional work Start ADMINISTRATION

63 Rating Process End Start Evaluator logs in to PES; accesses Rating screen. Evaluator Action Legend: Higher-Level Evaluator Action Higher-level evaluator logs in to PES; accesses Rating screen. Higher-level evaluator reviews and either approves or changes each rating that requires his review. Evaluator submits recommended ratings to higher-level evaluators. Evaluator enters a recommended rating. Evaluator assigns appropriate “no rating” code. Evaluator excludes employee; provides comments. Evaluator accesses an employee’s record. Employee should get no rating Employee should be ratedEmployee should be excluded ADMINISTRATION

64  What have we achieved?  PFP overview  NPA: driving success through metrics  PES: driving success through evaluation  PES: Administration  Compensation Strategies Presentation Agenda USPS Pay-For-Performance

65  Understand postal compensation strategies  Know how success on PFP impacts your pay  Know how success on PFP impacts your subordinate employees’ pay  Use PFP calculators for illustrating how PFP is calculated within EAS grades  Know the different pay rules for LWOP, partial year participation, and job changes occurring before the payment Be An Informed Leader Compensation Strategies

Postal Reorganization Act  Mandatory Compensation Levels –Pay comparability to the private sector –Salary cap to cabinet level –Provide Federal retirement, unemployment, and injury compensation systems  Other Mandates –Attraction & retention of qualified management –Adequate & reasonable differential –Well motivated workforce Compensation Strategies

67  Collective bargaining –625,000 blue collar employees –Binding arbitration  Pay consultations –75,000 supervisors & postmasters –USPS has final say Compensation Strategies 1970 Postal Reorganization Act

68 About 2.5% Employment Cost Index (ECI) If Under Market If Over Market If At Market % INCREASE Compensation Strategies

69 EAS Grade Maximum Changes Compensation Strategies EAS Grds FY 2001 Merit 12/29/01 FY 2002 Merit 12/28/02 FY 2003 Merit 12/27/03 FY 2004 PFP 1/8/05 FY 2005 PFP 1/7/06 FY 2006 PFP 1/6/ % 4.0%3.5%3.75%2.25% % 3.5%3.25%3.5%2.25% % 3.0% 2.25% % 1.5% 1.0% A-E$.50 $.25$.50$.25

70 15-Point Evaluation System PAY ACTIONS NCCHCEC

71 EAS PFP Pay Matrix PAY ACTIONS NCCHCEC 3 0% 6 3.5% 9 6.5% % % 2 0% 5 3.0% % % % 1 0% 4 2.5% 7 5.0% % % Paid as salary increase up to grade maximum; balance as lump sum.

72 EAS PFP Calculator Compensation Strategies

73 Compensation Strategies