• on Nov 30th, 2009 in Ideas Worth Exploring | 32 comments

    From public transportation to sports stadiums, venues use their prime real estate to sell space to advertisers and generate extra revenue. Take for example the Washington Metro transit system. Ad space is for sale everywhere — on buses and trains (inside and out) and even on train tunnel walls and floors.

    In these times of doing what it takes to maintain fiscal solvency, what if the Postal Service started selling its prime advertising real estate to generate revenue? Major advertisers might welcome the opportunity to place their ad on hundreds of thousand Postal Service trucks all over the country. Or smaller advertisers could take advantage of purchasing wall-space in a post office. The Postal Service actually explored selling advertising space around 2001 in a program called the Postal Ad Network, but it was discontinued after it raised much less money than initially expected. However, a major advertising slump hit right at the time the Postal Ad Network was rolling out.

    There are some major ‘what ifs.’ Who would manage the program and what would be charged for advertising? More importantly, what would the limitations be? When Major League Baseball proposed placing ads on bases, there was a major league backlash. How would the public react to advertising on Postal Service property? Would certain types of advertising be out of bounds? The Postal Accountability and Enhancement Act does not permit the Postal Service to undertake new nonpostal products. Would selling advertising on Postal Service property violate the law? And how would selling advertising space affect the Postal Service’s brand?

    Putting aside those issues, would it be worth it? And what kind of increased revenue would an advertising program like this bring?

    This topic is hosted by the OIG's Risk Analysis Research Center (RARC).

  • on Nov 23rd, 2009 in Strategy & Public Policy | 14 comments
    We all know the Postal Service is going through rough times right now. Sometimes, when a situation is difficult, it’s useful to look to the past for perspective. Forty years ago today, there was no Postal Service (and no Office of Inspector General). The Post Office Department was 5 months away from an unprecedented strike, and 15 percent of the Postal Service’s FY 1969 revenues came from appropriations. Mail volume was 82 billion pieces. There were 739,002 employees and 43,220 post offices (including stations and branches).

    Three years earlier, mail operations at the Chicago Post Office had broken down for three weeks leading to a backlog of 10 million pieces. Sixteen months earlier, the President’s Commission on Postal Operations, known as the Kappel Commission, had released its report (Click here for the first part of the report). The first line read “The United States Post Office faces a crisis.” The report described several problems:

    • Customers were dissatisfied with inconsistent mail service following a period of rapid volume growth. Moreover, the Post Office Department had little knowledge of what products its customers wanted.
    • Employees experienced antiquated personnel practices, poor working conditions in many facilities, and limited opportunities for training or advancement. More than 80 percent of employees started and ended their careers at the same grade level. Some opportunities required political connections. historical carrier
    • The system of supervision was inadequate with supervisors isolated from management decisions, and relations between labor and management were poor.
    • The Post Office operated at substantial deficits financed by the government, and there was a chronic shortage of funds for capital investment.
    • Productivity was low as “[in] most offices men and women lift[ed], haul[ed] and push[ed] mail sacks and boxes with little more mechanical assistance than the handcart available centuries ago.”
    • Pricing was based on inaccurate cost systems, and the rates were set by Congress.
    historical workers

    The Kappel Commission diagnosed all of these problems as manifestations of a single root trouble: Management had no authority to manage. Their proposed solution was a government corporation.

    The Postal Reorganization Act of 1970 (PRA) became law the August following the strike. The PRA did not include all the Kappel Commission’s recommendations, but they were highly influential. The Post Office emerged as a new, much more independent Postal Service.

     

    historical mailroom

    Are there any lessons for today in the problems of 40 years ago? Postal operations were losing more money in 1969, but volume was growing. Are prospects better or worse today? What will future commentators say about the Postal Service 40 years from now?

    This topic is hosted by the OIG's Risk Analysis Research Center (RARC)

  • on Nov 16th, 2009 in Strategy & Public Policy | 19 comments
    How can companies harness hidden knowledge located throughout the enterprise? Supporters of prediction markets claim they offer a way. Prediction markets resemble financial trading sites, but instead of buying and selling stocks, traders buy and sell predictions. A company that wants to operate a prediction market can provide their employees virtual cash to trade and give those who do well over time small prizes.

    So how do prediction markets work? Let’s say a shoe company with an active prediction market is rolling out a new style of boots. Employees at the shoe company could buy a prediction that the boots will hit stores on time. If the project succeeds and meets its schedule, the prediction pays $1. If there are delays, the prediction will pay nothing. Conversely, skeptical employees could bet against the boots arriving on time. They would receive $1 only if the boots fail to arrive on time. The price of the prediction signals how likely the entire market thinks the event will happen. If everyone believes the boots are on schedule, the price of predicting the project will be on time might be high — 80 cents or so. However, if fears grow that the boots will be late — perhaps a key supplier is having production problems — the price of the on-time prediction will start falling. The falling price is a sign that all is not well on the project.

    A prominent example of a political prediction market is the Iowa Electronic Market run by the University of Iowa, which allows participant to predict the outcomes of various elections. You can check it out at www.biz.uiowa.edu/iem/.

    The advantage of prediction markets is that they add up the opinions and estimates of a wide range of employees. Thus, they are more likely to pick up on potential problems that management may not be aware of. Furthermore, the betting component forces people to “put their (virtual) money where their mouth is.”

    If this sounds farfetched, it is not. Corporations like GE, Best Buy, and Hewlett-Packard are already using prediction markets to increase innovation and improve forecasting and decision making. Many more are testing the feasibility of this idea in pilot projects.

    The Postal Service has a large, widely dispersed workforce that knows a lot about how things are going on the ground. A prediction market might help uncover this hidden knowledge. For example, if the Postal Service wanted to find out more about whether bulk mail volume would pick up, it could run a prediction market for BMEU employees who might know about customers’ plans. Or if the Postal Service were rolling out a new piece of equipment, it could run a prediction market on how successful the equipment would be. There is one thing, however, that could limit the use of prediction markets at the Postal Service: many employees do not have access to the Internet at work.

    What do you think? Could prediction markets be a potentially useful tool for the Postal Service? Would lack of Internet access limit its use? If the Postal Service did implement prediction markets, what sorts of questions should it ask?

    This topic is hosted by the OIG's Risk Analysis Research Center (RARC).

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