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FIRST P E R S O N • When a Turnaround Stalls

When a Turnaround Stalls

by Robert A.F. Reisner

laat:I t I t

ReprintR0202B

HARVARD BUSINESS REVIEW


H arvard B usiness R ev
February 2002

HBR CASE STUDY R0202A


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FIRST PERSON

When a

STALLS
The ponderous United States Postal Service transformed itself
into a competitive business-for a while. Its story holds lessons for
any company trying to keep a change initiative from faltering.

o clouds marred the horizon on that sunny July

N
afternoon as a genuine American hero pedaled his
bike down the Champs Elysees, arms spread wide.
Lance Armstrong, a recent cancer survivor, had just
cruised to victory in the 1999 Tour de France. The
improbability of the triumph made
b y R o b e r t A . F . R e i s n e r it all the sweeter for Armstrong and his team-and for
his sponsor, the U.S. Postal Service.
The agency's investment in the athlete had been
an act of faith. Men Arm-strong discovered he had
testicular cancer in 1996, doctors told him that he
would never be a world-class competitor again. The
French team he had raced with dropped him. "I was
ompanies-applauded four years without a postage rate increase. The bottom given oneline
offer;"
was Armstrong
healthylater
for recalled. "Only
the first time thein years: The
U.S. Postal Service team believed in me. I had a lot
to prove:' So did the Postal Service.
ng was halted. Performance and morale were slipping. In April, the head Byof1999,
the both
Gen- had succeeded. In the preceding few
years, America's 225 year-old postal service had
transformed itself from the butt of sitcom jokes into a
profitable and efficient enterprise. Carriers were
delivering locally mailed letters within 24 hours
93% of the time, up from a low of 79% in the mid-
19905. The
Copyright © 2002 by Harvard Business School Publishing Corporation. All rights reserved.
When a Turnaround Stalls • FIRST PERSON
era Accounting Office said the strate- enterprise with more than 800,000 and management associations that rep-
gic transformation of the Postal Service employees serving 130 million delivery resent postal workers. And the agency
had a high risk of failing. The terrorist points six days a week. It was also clear is overseen by a dizzying may of offi-
attacks of September n, 2001, and the that neither operational nor strategic cials and bodies: nine presidentially ap-
subsequent spread of anthrax through change would be easy. Ttvo of the Postal pointed postal governors, an inspector
the mail only aggravated a situation Service's defining characteristics-its general, several oversight committees
from which few people foresaw a quick legislative mandate to provide service in Congress, the General Accounting
recovery. to all citizens and its status as one of Office, and the Postal Rate Commission,
How had such an optimistic scenario the last regulated monopolies - created among others.
turned sour so quickly? Why had the barriers to change that most businesses
don't face. The 1970 statute that created Having worked for 15 years as a man-
Postal Service's efforts-seizing the po- agement consultant specializing in
tential of e-commerce, setting and meet- the modern Postal Service stated that
the new agency's mission was to 'bind regulated industries, I was well aware
ambitious performance goals, crafting a new that the particular characteristics of
strategy- come up short? the nation together?' This reflected the
agency's traditional democratic the Postal Service created serious
This story explores what it felt like to impediments to launching bold,
function, which as Alexis de
see those efforts stall-and attempts to innovative
Tocquevifie noted in the 183os-enables
make sense of why they did. In some tiatives. That's why the initial success of
the backwoodsmen of Kentucky to be
ways, the experience of the Postal Ser- the agency's turnaround efforts was so
as well informed as the most
vice, as a regulated monopoly with a exhilarating.
enlightened city dweller. And if
legally mandated mission, is unique.
universal mail service seems an outdated
But I believe our story will resonate Turbocharging the Snail
tool for achieving this aim in an era of
with any organization trying to keep its
mass media and e-mail, profound feel- In 1993, it was clear to me that digital
own change initiatives from faltering.
ings about the Postal Service's nation- technology posed a serious threat to the
defining role endure. On the afternoon Postal Service. It wasn't just e-mail's
A Double Whammy
of September n, 2001, Brooklyn resi- challenge to snail mail. Businesses and
dents reported that the sight of postal individuals alike would soon be able to
I witnessed the Postal Service's turn- carriers making their rounds reassured receive and settle bills electronically,
around effort from a privileged vantage them that the country was still func- and digital signatures and electronic
point. In 1993, I was recruited as vice tioning. The problem with this mandate postmarks would enable the secure elec-
president for technology applications, to provide what is essentially a social ser- tronic transfer of sensitive documents.
charged with creating electronic busi- vice is that it often conflicts with the de-
mands of running a business-one that, Over time, these new technologies
nesses for the Postal Service at a time of
also by legislative mandate, is supposed could divert significant volume from
growing concern that the agency could
to be self-supporting. Twenty-six thou- the Postal Service. Worse, the three
be rendered obsolete by the emerging
sand of the Postal Service's 40,000 post types of mail particularly vulnerable
information superhighway. In 1996, I
offices lose money, but federal law makes to diversion-direct marketing, bills,
became the vice president for strategic
it extremely difficult to close them. and bill payments-together accounted
planning. In this position, I was to help
for nearly half of the Postal Service's
the agency respond not only to techno-
sales. A shift of as little as 5% of this vol-
logical changes but also to competitors
ume to other forms of delivery would
such as FedEx and United Parcel Service,
threaten the agency's financial ability
which were offering services beyond
The other barrier to change is the to maintain the enormous infrastruc-
simple delivery. These services-pack-
Postal Service's monopoly position, ture needed for the delivery of conven-
age tracking, for example - were eroding
which it is granted because of its obli- tional mail. Raising prices to offset the
the Postal Service's traditional franchise
gation to provide a public service. Com- losses, as required by the Postal Service's
and undermining its status as the low-
panies like UPS and FedEx can deliver charter, would only encourage the com-
cost delivery provider by offering value
parcels and premium-priced "express" petition. Clearly, if these new technolo-
to customers that more than justified
letters to individual households, but gies took off, the agency might have
premium prices.Robert A. F Reisner is
the former vice president for strategic only the Postal Service can deliver let- to adopt some of them itself in order to
planning at the U.S. Postal Service. He is ters to mailboxes. With monopoly sta- avoid financial collapse. Meanwhile,
now an executive managing director of tus, however, come the formidable con- the agency's conventional service was
DRI-WEFA,an economic forecasting straints of regulation. The agency can't deteriorating, as were its finances.
company based in Waltham, raise rates or offer new products or ser- Staffing cutbacks ordered
Massachusetts. It was clear from the vices without extensive hearings. It has
start that any strategic transformation limited control over labor costs, which
would need to be accompanied by comprise roughly 80% of its total costs,
greater operational efficiency at the because a federal arbiter often must ap-
sprawling agency, a nearly $70 billion prove its contracts with the nine unions
FEBRUARY 2002
FIRST P E R S O N • When a Turnaround Stalls

We also got lucky. A stamp


prices, and products:' price in-crease in a
strengthening economy was
Turnaround Truths Certainly, the financial crisis
had made clear the need for accompanied by a favorable
strategic transformation as labor settlement, which gave
well as operational change. us nearly unheard-of surplus
in 1992 and 1993 by postmaster As revenue. By the end of 1995,
vice president of
the Postal Service enjoyed
general Marvin Runyon-a tough technology applications, I was
short-term financial security -
former Ford executive who'd charged with creating
and an opportunity to map a
earned the nickname "Carvin' products for the Postal Service
strategic course that would let
Marvin" - had thrown local that would contribute to this
the specif?ic answers are open to debate, some general insights emerged into how usan organization-any
meet longer-term
organization-can kee
postal districts into turmoil and transformation, making us, in
challenges.
resulted insignificant
f you fail to cap?italize delivery
on fleeting market the parlance
opportunities when of morale
the era,isan on-
high.
delays. Then a federal ramp to the information
A Galvanizing Success
personnel oversight board superhighway. The effort got
romising innova?tions can wither if there is no path to integration with mainstream operations.
ruled that proper procedures off to an encouraging start. At a meeting of nearly 1,000
hadn't been followed in We launched one of the early Postal Service executives near
egic transforma?tion.
reducing head Operational
count andsuccess
or- can
Webblind sites,
you to the need to reinventOklahoma
www.usps.gov, the busi?ness
Citystrategically.
in October
dered the agency to reinstate which allowed customers to 1996, Runyon, Henderson, and
the workers and go through access the leadership team could
hat can't be met, at least at the moment, can undermine changes that are achievable.
the process again. The Postal justifiably celebrate the
Service was also facing a rev- beginning of a turnaround.
use- information such as
enue shortfall of nearly $2 The agency's finances and
mailing tips, zip codes, and
billion for fiscal 1994, a billion customer service continued to
postal rates. We experimented
dollars worse than had been improve. In his speech to the
with Internet kiosks in post of-
projected. managers, Runyon signaled
fices, which built on the Postal
his intent to further improve
Service's democratic tradition
operational performance,
In response, Runyon by offering Web service to declaring that together we
reorganized the agency's top those who didn't own com- would create "a better
management team and puters. We worked with Time version" of the Postal Service.
charged it with improving Warner to develop an
financial performance, not overnight shipping pro-gram
through cutting costs this time for consumers ordering
but through setting aggressive products through the Robert Galvin, the retired
operational goals designed to company's pilot interactive chairman of Motorola, was the
improve efficiency and service. cable service. And we created keynote speaker at the
He promoted Bill Henderson, a a system for issuing electronic meeting. He, too, emphasized
career agency employee postmarks and verifying digital operational and process
viewed as an innovative signatures and began dis- enhancements - such as
maverick, to chief operating cussions with Microsoft about those achieved by Motorola
officer and leader of the a partnership to speed up with its famous Six Sigma
service turnaround. In a high- deployment. process-but said that they
profile speech, Runyon also were best pursued in the
called on Congress to reform furtherance of disciplined
the Postal Service, giving the strategic goals. This was a
agency the freedom to manage heartening message for me,
"people, as I had been named vice
president for strategic
planning in June. Galvin's
comments also reinforced the
main theme of the strategy
blueprint that we presented
at the meeting, the
centerpiece of which was to
become a "twenty-first-
century growth company" by

HARVARD BUSINESS REVIEW


When a Turnaround Stalls • FIRST PERSON
offering competitive products
and services. Such growth was
designed to offset an
anticipated rise in costs and a
decline in traditional sources of
revenue. The presentations in
Oklahoma were eye-opening
for some longtime Postal
Service managers. The agency
had never positioned itself as a
competitor, and growth was
always something accepted
rather than sought. The new
approach was disorienting to
many and generated
uncertainty as well as
excitement. In one ominous
response, the then CFO bluntly
labeled the growth objective
"impossible" to meet and
reported his view to our board
of governors.

FEBRUARY 2002
FIRST P E R S O N • When a Turnaround Stalls

Fortunately, a string of for the larger transformation competitive threats facing the
operational successes of our business model. Postal Service and focused on
continued to invigorate the But still I worried. Our high- developing a strategy to
Postal Service and gave us the profile success threatened to address them. The goal would
chance to challenge such obscure the fact that it be to capitalize on the
cautious attitudes. Improve- represented incremental agency's advantageous
ments in efficiency had helped rather than fundamental position as "gateway to the
generate a net income of change. Learning to become household" and its ownership
almost $1.8 billion in 1995 and superefficient letter carriers of the "mail moment" -when
nearly $1.6 billion in 1996. And didn't address the basic mail arrives at a house or
the Postal Service had strategic challenges posed by office. Such a strategy would
launched an agency-wide new technologies such as e- link our legislatively mandated
performance management mail or by competitors that mission and our greatest
system called CustomerPerfect, were using technology to competitive advantage: the
a key element of which was to enhance traditional delivery. fact that we are required to go
focus attention on improving You needed only to look at the to virtually every business
delivery times. By 1997, the success of UPS's and FedEx's and household in the United
agency had exceeded customer-tracking systems to States. Instead of being
Runyon's ambitious goal to see where we were losing viewed as a costly burden,
accurately deliver first class ground. Furthermore, this obligation would become
local mail within 24 hours 90% improving operational a jumping-off point for
of the time. performance wasn't likely to revenue growth.
reduce costs on a scale that
Meeting this goal had a would offset increased labor For example, opinion polls
galvanizing effect on the costs. As one supplier showed that one of the Postal
Postal Service's many con- commented about the drive Service's most appealing
stituencies, from customers to for op erational attributes was its corps of
Congress to the media to improvements: "I just hope letter carriers, who were
employees. The institution you guys have a Plan B." generally viewed with
Net loss:
began to think of itself
Net loss: not as affection and trust. Yet over
a lumbering bureaucracy
Net loss: but Leveraging the Mail the years we had done little to
as a high-performing
$536 million make their daily interaction
enterprise capable of dramatic
$1.77 billion Moment with people in homes and of-
change. This cultural transfor-
$913 million fices more satisfying to
Bill Henderson, named
mation
1992 created, in my • M amind,
1993 rv in R u n y o n postmaster
1994 1995 customers and more lucrative
1996
general in May
both the foundation and cutbacks
• Staffing the for us. Now, with our role
1998, acknowledged the
momentum needed • Fe d era l o ve rsig h t
becomes post- Net income: $1.57 billion
reach 48,000; E E Electronic
Net postmark
income: $1.77isbillion
created
board rules staffing E E Stamp prices increase and favor-able labor settle?ment is approved
An Uneven masterRoute
general
service deteriorates
The past decade
cutbacks illegalwitnessed the
beginning of a financial turnaroundE EPostal andService announces strategic goal to become "twenty-first-
strategic transformation atbecomes E EPost office Internet kiosks are developed
the United
• Bill Henderson chief operating officer
States
and Postal
ordersService-one
process E ERunyon gives
that faltered
and now faces an uncertain future.
• Postal Service Web speech calling
site is launched for postal reform
redone •Launch of
Cus
to
me
rPe
rfe
ct
per
for
HARVARD BUSINESS REVIEW
When a Turnaround Stalls • FIRST PERSON

ma
nce
management
system

FEBRUARY 2002
FIRST P E R S O N • When a Turnaround Stalls

as primary gateway to the of our delivery network -desti- chase car during one of the
household under fierce attack nation facilities, long-distance Tour de France's stages
from alternative de-livery transportation routes, through the Alps. He
carriers, Internet service processing and sorting witnessed firsthand - and later
providers, and centers-would need to be described to a spell-bound
telecommunications reinvented. In many cases, gathering of top Postal Service
companies, we needed to these functions would be managers -the danger and
seize that opportunity. Our outsourced to or shared with drama Arm-strong faced in the
strategy included such other organizations that could 2000 race. There were the hair-
proposals as al-lowing carriers run them more efficiently and raising plummets down steep
to become suppliers for the that were prepared to make mountain roads at speeds ap-
home or small office and critical technology proaching 70 miles an hour
providing them with the investments. The Postal and the in-tense climbing
technology-along the lines of Service would focus primarily duels at 6,000 feet. As a fitting
the wandlike transmitter used on the "first milenast mile" of climax to the drama,
at rental car agencies-to sell mail pickup and delivery. Armstrong ultimately
services and place orders for triumphed in the marathon
delivery the next day. Under Needless to say, the idea three-week event.
such a scheme, those same that we might have to
homes or small offices could dismantle or outsource parts
even be given software that of our delivery network wasn't But as Armstrong once again
would alert them through their universally well received cruised to victory, challenges
PCs when the carrier was within the agency. But doing to our transformation effort
coming down the street. so would merely continue a were emerging. There was
trend that already saw growing indifference, if not
intermediaries such as Pitney outright resistance, to our
This gateway-to-the- Bowes or even big customers efforts among top agency
household vision had a hidden themselves handling many managers. Some argued that
benefit. Because it merely traditional Postal Service tasks electronic services such as
extended something we and would allow us instead to Web-based financial
already did-in fact, something capitalize on our unique transactions weren't likely to
we were required to do by law- delivery role. erode the Postal Service's
the strategy seemed less basic business any time soon.
likely to arouse the usual In July 1999, Just as we were Efforts to address these
concerns among competitors refining a strategic focus that threats - for example, our
and legislators that we were seemed a solid bet to ensure initiative to let people pay
making unfair use of our the Postal Service's bright fu- their bills electronically
monopoly position. But ture, our own Lance Armstrong through the Postal Service -
although such a vision may won his first Tour de France. were, in the words of one
have seemed incremental, and influential senior executive,
Momentum Busters
thus more acceptable to a"distraction" that diverted us
public policy makers, it A year later, Bill Henderson-in from our task of managing the
represented a radically new an al-most literal effort to growth in first class mail
management proposition that maintain the Postal Service's volume. Indeed, a survey of
could trans-form the Postal momentum-went to France senior managers had found
Service. The middle portions that most
to ride in Lance Armstrong's

1997 letters within 1998 •Postal 1999


24 hours 9 0 % Service plans
Net income: Net income: Net income:
$1.26 of the time strategic
$550 million $363 million
billion transformatio
•Bill n to leverage • Lance
• Carriers Henderson Armstrong
deliver the "mail
becomes moment" wins the Tour
locally post-master de France
mailed general
HARVARD BUSINESS REVIEW
When a Turnaround Stalls • FIRST PERSON

• Postal eliminated postal workers;


Net loss: Net loss: crisis
Service $199 Estimated $ 1 . 7 •Weakening
forms economy introduces
million billion greater mail
strategic slows short-
•Electronic •Business volume uncer-
alliance term volume
bill-paying alliance is tainty and
with growth
service is forged with boosts security
Amazon.co
introduced FedEx •hack Potter costs
m
•Long-term •Congressional becomes
decline in sub-committee postmaster
conventional dealing with general
mail volume postal reform is •Anthrax kills
is forecast

2000 2001

FEBRUARY 2002
FIRST P E R S O N • When a Turnaround Stalls

of them believed the Postal Service formed a strategic alliance with service as a linchpin of the new econ-
wouldn't be "impacted by electronic Amazon to explore cooperative omy. While the ad campaign touted
commerce" for another ten to 15 ventures. Our advertising campaign the Postal Service as an Internet
years. The same survey revealed that fall featured Ama zon and shipper and undoubtedly generated
skepticism about other competitive positioned our Priority Mail business for us, UPS reaped the real
threats. delivery benefits of Amazon's
subsequent success. Our competitor
The de facto resistance of the man- helped finance Amazon's sales and
agement team was echoed in the coordinated operations with the
explicit resistance among labor bookseller by building a warehouse
leaders. As we were developing our
first formal five-year strategic plan, I
had sought input from the top
executives of the agency's two
biggest unions. The leader of the let-
ter carriers union characterized my ini- We quickly formed
tial draft as"antediluvian"because it did
not sufficiently acknowledge the impor- a strategic alliance with
tance of unions and the legacy of the
American labor movement. The leader Amazon, but our competitor
of the other large union, which repre-
sents postal clerks, demanded to see reaped the real delivery
our "secret" plan. "I'm not going to
support your strategic plan unless you benefits of Amazon's
listen to mine," he shouted at me when
we met by chance in the House of subsequent success.
Representatives office building one
day. I knew I couldn't treat such tirades
across the street from Amazon's
lightly. When I once asked a senior
head-quarters. To make similar
Clinton administration official about
moves, we would have had to seek
the President's support for postal
approval in a full blown hearing
reform, she acknowledged candidly:
process before the Postal Rate
"Well, we would have to ask our
Commission.

Grinding to a Halt
One bright spot did emerge in early
on friends. You know they are critical 2001. After years of courtship and
to the coming campaign." months of secret negotiations, the
A subtler but more troubling problem Postal Service and FedEx announced a
was our inability to nail down funding business alliance in which FedEx would
and sustained support for our gateway- deliver the agency's expedited mail.
to-the-household and e-commerce ini- The $6 billion agreement was in line
tiatives. The budget process with our strategy of seeking partners
continued to favor programs aimed at for those parts of our delivery
operational network where they could help us
gain competitive advantage. The
alliance built on our complementary
improvementsovernewgrowth initia
tives.Onehalfof schedules: We process at night and
transport during the day; FedEx does
our$3billioncapital- the opposite. We also hoped it would
allow us to bypass some of the
spending budget continued to be ear- internal logjams that had prevented
marked for the construction of plants us from entering the digital age and
and post offices, while the other half give us an opportunity to learn from
was invested in automation and other a nimble company that was an
initiatives largely designed to make acknowledged master of using
mail handling more efficient. technology in innovative ways.

Finally, the constraints imposed on us


by our status as a regulated monopoly
were becoming painfully obvious. In But soon thereafter, things began to
the summer of 1999, BM Henderson met fall apart. Our second five year
Amazon.com's Jeff Bezos, and they strategic plan, published in September
immediately hit it off. We quickly 2000, had envisioned a positive short-

HARVARD BUSINESS REVIEW


When a Turnaround Stalls • FIRST PERSON
term financial picture but predicted problems as e-mail and on-line financial agreeing with
longer-term transactions became more
widespread. Although the e-commerce
collapse deferred for the moment that
competitive threat, the weakening
economy slowed even short-term
volume growth. That, combined with
an unfavorable labor settlement and
the granting of only a modest increase
in our prices by the rate commission,
led to a sudden economic crisis. In the
fiscal year ending September 2001,
our healthy surpluses of the late 1990s
were transformed into a shortfall of
$1.6 billion-less than the $3 billion
projected earlier in the year but hardly
a cause for rejoicing. The immediate
economic pressures stripped away
some of our earlier optimism and laid
bare our underlying structural
weaknesses in confronting the threats of
new technology and new competitors.
But in this environment, a major- and
risky-strategic transformation would
be far more difficult than it would have
been only a year or two earlier.

The hope of Congress passing any


kind of significant postal reform, which
would have freed us to attempt such a
transformation, also faded. Six years
after Marvin Runyon issued his call for
the freedom to manage our people,
prices, and products- a call that resulted
in seemingly endless debates by our
competitors and customers before
Congress-proposed legislation had yet
to emerge. The main Congressional
advocate of postal reform,
Representative John McHugh of New
York, gave up his chairmanship of the
Subcommittee on Postal Affairs, and
the panel was eliminated for the first
time since the founding of the modern
Postal Service in 1970. The best idea
that anyone had to spur reform
seemed to be the "burning platform"
approach, in which we would use the
incipient financial crisis to get people's
attention-which was little different
than having no ideas at all.

In April, the comptroller general, in


testimony before the House Oversight
Committee, issued his warning that the
strategic transformation of the Postal
Service was at risk. To be sure, some
re-views remained favorable:
Government Executive magazine, while

FEBRUARY 2002
FIRST P E R S O N • When a Turnaround Stalls

the comptroller general, granted the threatens to significantly increase costs crease revenue (because of public
Postal Service's performance manage- (because of security demands) and wariness about mail service),
ment process an "A-:" The National Per- de- exacerbating what was already a
formance Review of the Clinton Ad- projected operating loss of $1.35
ministration had declared the Postal billion in FY02. Still, while Congress
Service a model of government strat- has granted the Postal Service some
egy. But the most accurate and short-term financial relief, few ex-
succinct assessment came from the perienced observers expect it to
then chair-man of the Senate approve a broad overhaul of the
Government Affairs Committee, agency in the near future.
Senator Fred Thompson of Tennessee, Privatization, the route taken by some
who, upon surveying the postal European postal services, seems like a
service's prospects, declared: "The ox distant option, particularly given the
is clearly in the ditch. Big time:' more positive public attitude toward
government that the crisis following
September n has engendered.
In June, Jack Potter, an aggressive and
pragmatic Postal Service insider who
as chief operating officer had made But if I can't pull crisp and definitive
the FedEx alliance a reality, was named lessons from our experience, I can
post-master general. In the fall, the offer some observations on what we
Postal Service and postal workers might have done differently before
became the victims of a terrorist and after Lance Armstrong crossed
assault, with several postal workers the finish line on that glorious day in
dying of anthrax poisoning. In July 1999. While it's always tempting to
December 2001, after eight years with place the blame
the agency, I left to take a new job - in
the private sector.

Our success in improving


Four Hard Lessons delivery times blinded us
As I have tried to distill some lessons
from my roller-coaster experience at to the need for strategic
the Postal Service, it has become clear
that there are no pat answers to the change. We slipped into
question of why our turnaround
faltered. While hindsight brings some complacency, declaring
clarity, my vision is still far from 20/20.
ourselves the winner
For one thing, the complexity of the
Postal Service's situation defies neat
in a race with ourselves.
solutions. In addition, the agency's
immediate crisis was caused at least in
part by the recent economic on individuals or particular groups-
downturn, which has delivered a blow imperfect leaders, recalcitrant
to many compa Hies. Certainly, the managers, implacable customers,
weakening economy and the bursting overweening regulators, meddlesome
of the e-commerce bubble have made board members-my thoughts really
some of the ambitious initiatives that I apply to the organization as a whole.
championed in the heyday of the And while I can't claim that following
Internet revolution seem quaint if not these suggestions would have
quixotic. maintained the momentum of our
turnaround, ignoring them certainly
contributed to its stall. Despite the
unique nature of the Postal Service, I
would argue that these suggestions
apply to any organization
Furthermore, any analysis of our ex-
undertaking a major change
periences is inevitably colored by the
initiative.
re-cent terrorist assault on America's
postal system and postal workers.
These events have produced a genuine
crisis that, unlike an orchestrated
"burning platform;" may lead to Don't miss your moment. Turn-
meaningful postal reform out of around efforts require sensitivity to
necessity. Certainly, the crisis both external and internal clocks. We

HARVARD BUSINESS REVIEW


When a Turnaround Stalls • FIRST PERSON
missed numerous market opportunities chances to capitalize on high morale have been smarter or bolder in
that competitors such as UPS seized. and momentum within the Postal Ser- turning
Furthermore, we let pass at least two vice, moments that provided the best
opportunity to overcome organizational
resistance to change. Unless you act
when you are strong and energized,
change will come primarily as a re-
sponse to external events. Reacting to
these events will consume precious or-
ganizational resources that might have
been used in the pursuit of your own
strategic initiatives.

Connect change initiatives to your


core business. Most of the innovative
programs we launched to boost revenue
existed at the fringes of our business.
And we never established a path for
them to migrate to the heart of our op-
erations. In retrospect, I can see that
many of my own e-commerce initiatives,
while they generated great media
cover-age, had relatively modest
revenue potential and were tangential
to existing operations. Some
technology initiatives that were
relevant to our core letter-delivery
business-for example, our de-
velopment of innovative bar code
applications that allowed commercial
mailers to track and manage mail they
sent-weren't aggressively integrated
into our operations. In fact, the most
promising pathway for the application
of technology to our core business may
result from our recent alliance with
FedEx.

Don't mistake incremental im-


provements for strategic transfor-
mation. Although we dramatically
improved our operational performance -
indeed becoming, in Marvin Runyon's
words, a "better version" of the Postal
Service as we knew it-we simultane-
ously needed to reinvent ourselves with
a strategy that capitalized on our com-
petitive advantage. But our tremendous
success in improving delivery times,
which we enthusiastically celebrated,
blinded us to the need for strategic
change. For a time, we slipped into
complacency, ignoring our competition
and challenges and declaring
ourselves the winner in a race with
ourselves.

Be realistic about your limits and


the pace of change. I have spent count-
less hours thinking about how we might

FEBRUARY 2002
FIRST P E R S O N • When a Turnaround Stalls

around the Postal Service. But in a organization has limits of one kind or complex, and tradition bound of
change initiative, it is important to another. It may seem heretical to say organizations is achievable. Indeed,
identify which obstacles are in your so in the can-do environment of Amer- despite the unknown long-term impact
control and which aren't. Some of ican business, but sometimes you of recent events, I continue to believe
what we wanted to do may simply not need to accept those limits. A failure such change can be achieved at the
have been possible, at least at the to ac-knowledge that you sometimes U.S. Postal Service. My hope is that
time. For example, unless the political can't do certain things can breed managers in other businesses,
climate changes and Congress grants discouragement and cynicism, determined to leverage the "Lance
the Postal Service greater operational ultimately under-mining those change Armstrong moments" in their own
flexibility, even contemplating the initiatives that are achievable. organizations, will find useful this story
creation of certain new products and of our efforts so far.
services is premature. While some of
our constraints - our regulatory
framework, if not our very size and
complexity - are specific to us, every Despite the inherent limits to any
Reprint R0202B
trans-
formation effort, accomplishing mean- To place an order, call 1-804988-0886.
change in even the largest, most

HARVARD BUSINESS REVIEW