USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM
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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• In 1996, the United States Postal Service
  introduced a group incentive plan funded by a new
  measure of financial performance.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• The Economic Value Added (EVA) Variable Pay
  Program provides an incentive to achieve positive
  national indexed EVA results and CustomerPerfect!
  goals for different organizational units within
  the USPS.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• What is Economic Value Added?
• New financial performance management system used
  by worlds leading companies.
  
• Results maximizing long term growth and
  profitability.
  
• Based on how a business increases its revenues
  and manages its resources, including capital.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• What is Economic Value Added? (contd)
• The dollar amount derived by taking net operating
  income (revenue less expenses) and subtracting a
  charge for the capital used to generate that
  income is the economic value added - EVA

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• What is CustomerPerfect!?
• CustomerPerfect! is a
• systematic approach to
• getting the best business
• results for the Postal Service

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• What is CustomerPerfect!? (cont)
• Establishes processes to monitor market trends,
  create business plans, conduct work, monitor
  results, initiate improvements, and acknowledge
  employee contributions

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• What is CustomerPerfect!? (cont)
• CustomerPerfect! establishes three
• goals for success based on
• the three voices that
• drive our management
• system.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• Voice of the Customer (VOC)-
• To improve customer satisfaction
• Voice of the Employee (VOE)-
• To strengthen employee and Postal
• service effectiveness
• Voice of the Business (VOB)-
• To improve financial performance

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• Subgoals and targets based on specific indicators
  are established in each voice to help players
  focus on behaviors that support the achievement
  of the three goals

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• Specific indicators and targets may change as the
  marketplace changes or as better measurements are
  developed. However, the common focus will
  continue to be the achievement of the three major
  goals.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• What is the EVA Variable Pay Program?
• Group incentive plan that rewards employees for
  achieving CustomerPerfect! goals and for creating
  positive indexed EVA.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• It is called a variable pay program because the
  lump sum cash payouts may vary from one year to
  the next based on organizational
  performance.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• The program establishes a reserve Account in
  which to credit positive or negative EVA results
  from each fiscal years performance.
  Participants than develop a stronger personal
  stake in the long-term success of the Postal
  Service

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• How are awards calculated under the EVA Variable
  Pay Program?
  

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• Step 1
• A percentage of the national indexed EVA is set
  aside for a potential credit to Reserve Accounts

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• Step 2
• The potential credit is adjusted according to
  whether your organization unit meets its
  CustomerPerfect! goals. The credit is reduced
  for each goal not achieved.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• Step 3
• The resulting dollar amount is credited to the
  Reserve Account, which contains a balance from
  previous tears participation.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• Step 4
• A percentage of the Reserve Account is paid out
  after the end of the fiscal year, and the balance
  is carried forward to the next year.

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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM
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USPS ECONOMIC VALUE ADDED VARIABLE PAY PROGRAM

• This presentation was prepared by
• Michael Schrader, Postmaster, Wallingford , CT
  Special thanks to Peter Sgroi, Director Finance,
  USPS CT District for his assistance