United States Postal Service
The US Postal Service, through new congressional legislation, was given an unprecedented challenge to begin funding itself through earnings from operations instead of multi-billion-dollar annual federal grants.

Management faced a daunting task for two reasons. First, USPS was moving from a fully subsidized, non-profit to a profit-centered, competitive organization after over two hundred years of operation. Secondly, the sheer size of the Postal Service - almost 900,000 employees - challenged management to devise ways to turn around the "battleship" in a very short period of time.

After much deliberation, USPS embarked on a plan of employing Stern Stewart's Economic Value Added, or EVA, as the basis for identifying and measuring operating excellence. Simply put, EVA makes managers accountable for the capital employed in their business units, which must now achieve a return on that capital greater than the cost of bringing it in.

This core financial strategy had significant operating implications. First, managers were challenged to make a profit. Secondly, all requests for capital allocation were tied to expected returns. In addition, operational assets were reviewed for their usefulness in terms of how they tied in to the generation of profits. In summary, achieving a return on capital greater than its actual cost was the paramount objective.

In order to help its top operating managers cope with this monumental change, USPS conducted a multi-year series of seminars and educational efforts focused on vision and strategy formation, financial and operational planning, and the role of EVA in the overall process. Edgeworth was asked to contribute its resources to help USPS define and operationalize EVA for this higher-level operating group.

The US Postal Service has since become a competitive organization, generating returns that, in some years, have exceeded their cost of capital. In the next century USPS will continue to hone that developing edge.

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