Legal considerations and historical precedent wouldn't stop a major and rapid shift to franchising local postal service privately. What would stop it is politics and implicit social theory. We have more than 10 million unemployed workers now, and no one wants to add to that number with rash moves. Postal employment is a major road into the middle class for minority workers.
Don't these considerations make Commissioner Crutcher just one more Don Quixote? I am not so sure. Conditions are changing faster than ever in the business of delivering mail. Eighty percent of first-class-mail volume involves business, which is a lot less patient with waste these days in its own operation. Why should it let its hard-won savings be wasted elsewhere?
First of all, is Commissioner Crutcher on target about the feasibility and attractiveness of franchising? Bernard Browning, president of General Business Services Inc., of Rockville, Md., a well-regarded franchising enterprise with about 1,000 small business counselors, thinks that Crutcher is right.
"Would I bid on postal franchises?" Browning the new chairman of the National Small Business Association, muses. "Would our people recommend that other qualified people bid? I can't see why not, if the business conditions made sense. The employees? Well, I suppose in time there might be fewer of them, but I think they'd be better off. They'd share in profits or productivity incentives instead of having to make it all in this political imitation of collective bargaining. The customers would get more and better service, probably for less cost. And [business would] pay taxes."
But how can you expect that employees who are alleged to be overpaid won't fight tooth and nail to protect their status quo? Isn't there some way around their fear that this proposal all adds up to savings for everybody else at their expense?
Maybe the answer lies in that magic American phrase "a piece of the action." Certainly, minority groups and their leaders want more opportunity for entrepreneurship, beginning with equity ownership. Is there some way that could be worked into a business that was franchised for public service?
A good, working example of a usually public service -- fire protection -- provided by private business is Rural/Metro Fire Department of Scottsdale, Ariz. It provides service under contracts to municipalities to about 100,000 people in Scottsdale and 400,000 in other communities. It is cited in the Grace Commission studies -- which suggests ways to save government money by making some services private -- as saving Scottsdale taxpayers $2 million a year. Jim Bolin, Rural/Metro's vice-president for finance, thinks that may be an old figure; now it is closer to $2.5 million.
The founder of Rural/Metro, Lou Witzeman (see INC., August 1981, page 65) owned all of the company's stock when he was ready to retire. Witzeman groomed Ron Butler, a former fire captain from nearby Glendale, Ariz., to succeed him. A management team, made up of Butler and nine others, was in place by 1979, when Witzeman was ready to ease himself out.
About two-thirds of Rural/Metro's stock went into an Employee Stock Ownership Plan. By 1984, the ESOP's trust will have paid Witzeman for the stock out of earnings. In less-profitable companies with less-patient founders, a similar trust borrows money to buy the stock from the exiting owners. Witzeman sold 37% of the stock to the 10 key management people; he sold 63% to the ESOP for the 450 eligible employees.
If Rural/Metro continues to grow and prosper (its present growth rate is 30% compounded annually), the stock will become even more valuable. When an employee leaves, he or she can either have the stock or its independently appraised cash value. If the employee chooses to stay to retirement, the stock is part of a three-part benefits package consisting of Social Security, the stock or its value in cash, plus a share of a definedcontribution pension plan to which the company has contributed 80% and the employees 20%.
Suppose Congress ordered the U.S. Postal Service to select a sample of 50 processing centers and offices. And suppose an operating franchisee company was set up for each one, with two-thirds of the stock in trust for the employees at a price set by independent appraisal. And then bids were taken for the other third of the stock and a five-year management contract from people with franchise experience. Suppose, further, that the employees paid for their stock on the installment plan -- by working for really comparable wages, probably a third less than what they now earn.
A plan like this could wind up with several hundred or several thousand hard-driving small companies in place of the present setup. Would the employees be happy? Would the taxpayers? Could we find a way to make even the union leaders buy it?
Personally, I am with Commissioner Crutcher. If we don't try it, we will never know. At a minimum, we would have 50 yardsticks by which to judge the rest of the system, a good form of competition in itself.
But what about those massive unions and the politics? They may just be ready to learn something new. And if they aren't, there are at least as many members in the organized small business community as there are employees in the U.S. Postal Service. By now they, too, know a little about politics. TBut what about those massive unions and the politics? They may just be ready to learn something new. And if they aren't, there are at least as many members in the organized small business community as there are employees in the U.S. Postal Service. By now they, too, know a little about politics.
