Human Resource Management: Best Practices at FedEx Corporation

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HROB/034

IBS Center for Management Research

Human Resource Management: Best Practices at FedEx

Corporation

This case was written by K. Prashanth, under the direction of Vivek Gupta, IBS Center for Management Research. It was

compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either

effective or ineffective handling of a management situation.

2003, IBS Center for Management Research. All rights reserved.

To order copies, call +91-08417-236667/68 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: [email protected]

www.icmrindia.org

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HROB/034

Human Resource Management:

Best Practices at FedEx Corporation

“Unlike a factory which churns out goods, FedEx as a service company has only people - couriers to pick up and deliver goods and document, customer representatives and sales executives. If we hire the right people, train them, equip them and manage them properly, they will provide service that will satisfy customers and in turn those customers will reward us with business after business that generates profits.”

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- Malcolm Sullivan, Managing Director, FedEx (South Pacific).

INTRODUCTION

In 2003, Fortune magazine featured FedEx Corporation (FedEx),2 a leading global logistics

solutions provider, among the list of 100 „best companies to work for‟ in the US. This was the fifth

consecutive year in which FedEx‟s name had figured in the list. The company had received a high

rating in areas like compensation, employee turnover, morale and work diversity. The companies

in the list were ranked on the basis of an employee survey that evaluated employees‟ trust in

management, pride in doing work at the company, and sense of camaraderie. Apart from the

survey, a general evaluation of the company‟s philosophy and its HR practices was also conducted.

FedEx was among the first few companies in the world to develop a formal HR policy which

viewed employees as a means for achieving long-term growth and profitability. Framed and valued

since FedEx‟s inception in 1973, the people-service-profit (PSP) philosophy (Refer Exhibit I)

viewed employees as the key contributors to the company‟s profitability.

During its three decades in the business, FedEx had introduced several innovative HR practices.

The company devised a corporate communication program, known as the „Survey Feedback

Action‟ program, to encourage employees to give feedback on management policies. FedEx‟s

„Guaranteed Fair Treatment Procedure‟ ensured that all types of employee grievances were

addressed. The company had also devised employee development programs such as „Job Change

Application Tracking System‟ to provide temporary employees the opportunity to gain regular

employment at FedEx. The company‟s „Leadership Evaluation and Awareness Process‟ gave

FedEx‟s non-managerial employees the opportunity to seek managerial positions at FedEx. FedEx

had also devised a succession planning mechanism – Succession Planning Executive Education –

to groom its senior management employees for top management positions. FedEx also conducted

internal employee training programs, which were designed along the lines of executive education

programs offered by management institutes.

1 As quoted in the article, “FedEx Strategy to Stay Ahead of Competition,” by Jimmy Yeow, Business

Times, July 21, 1999. 2 FedEx is one of the world‟s largest express transportation companies, providing information and logistics

solutions services. For the financial year ending May 2003, the company generated revenues of $22.5 bn

and a net income of $1.47 bn.

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Human Resource Management: Best Practices …

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FedEx was considered one of the most employee-friendly companies in the world because its

innovative HR initiatives aimed at achieving maximum employee satisfaction. Complimenting

FedEx for its HR policies, Work Force magazine wrote, “FedEx is an example of an organization

that has created an effective HR strategy that supports productivity and profitability. The

corporation‟s philosophy is that employees should be doing the kind of work they want to do.”3

BACKGROUND NOTE

The history of FedEx dates back to 1971, when Frederick W. Smith (Smith)4 realized the need for

an airfreight system which could deliver documents overnight. He decided to setup his own

company to effectively serve this need. The company was incorporated as „Federal Express

Corporation‟ in June 1971 at Little Rock, Arkansas, US, with an initial investment of $84 mn.

In March 1973, FedEx shifted its airline operations to Memphis, Tennessee, US. In April 1973,

FedEx commenced full-fledged operations with its network spread across 25 cities in the US. This

marked the beginning of the air/ground express industry. FedEx had suffered losses during the

initial years of operations, but by 1976 it had started generating profits. In the same year, FedEx

built a massive hub at Memphis, which eventually became the base of FedEx‟s operations across

the world. FedEx‟s net income of $3.5 mn in fiscal 1976 increased to $8.1 mn in 1977.

By the early 1980s, FedEx had emerged as one of the leading air cargo carriers in the US. In fiscal

1983, FedEx‟s revenues crossed the $1 billion (bn) mark and the company reported a net income

of $88.93 million (mn). With this, FedEx became the first company to earn more than $1 bn in

revenues within 10 years of its inception, without going in for mergers and acquisitions.

Over the next decade, FedEx continued to register significant growth in revenues. By fiscal 1994 it

earned $10 bn in revenues. Among the most significant developments in the 1990s for FedEx was

the launch of its website www.fedex.com (in 1994). This website allowed customers to perform a

host of business transactions online. In 1998, the „Federal Express Corporation‟ was renamed the

FDX Corporation following the $2.4 bn acquisition of Caliber Systems5 and its subsidiaries.

In 2001, all of FedEx‟s subsidiaries6 were regrouped on the basis of their operations to form

individual companies, under the FedEx brand umbrella. For the financial year ending May 2003,

the company reported a net income of $830 mn on revenues of $22.5 bn. Analysts felt that FedEx

was able to achieve this phenomenal success largely due to its innovative HR practices and its

commitment towards the development of its employees.

FEDEX‟S HR PRACTICES

Since its inception, FedEx‟s management focused on providing a suitable work environment that

encouraged employees to come up with innovative solutions. Employees responded positively to

the faith reposed in them and displayed exemplary commitment towards their work. The extent of

the commitment of the employees could be gauged from the fact that during the first couple of

years, when the company was going through severe financial difficulties, the employees were

3 As quoted in the article, “HR‟s Push For Productivity,” posted on www.workforce.com, September 3, 2002.

4 A Vietnam War veteran, Smith created the overnight air and ground express delivery industry when he setup

FedEx in 1973. He led FedEx through its initial phases of turmoil, to become a market leader in the industry. 5 A US-based trucking company that specialized in non-express shipments. Its subsidiaries included

Caliber Logistics, Viking Freight, and RPS, the second-largest provider of B2B small-package ground

delivery services in the US. 6 FedEx‟s subsidiaries included FedEx Express, FedEx Ground, FedEx Freight, FedEx Custom Critical and

FedEx Trade Networks. The subsidiaries operated independently but competed collectively under the

FedEx‟s brand worldwide

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prepared to sell their personal belongings and use their own credit cards to purchase fuel to deliver

the packages to the customers. Even when the employees didn‟t receive their salary on time, they

continued working with FedEx.

Smith believed that since FedEx was a service organization, its success depended heavily on its

employees. Hence, in 1973, he developed and implemented FedEx‟s „People-Service-Profit‟ (PSP)

philosophy. According to this philosophy, if FedEx took proper care of its employees, they would

provide efficient service to the customers, which would in turn benefit the company by generating

more profits. This philosophy formed the basis of all management decisions taken at FedEx.

In 1979, FedEx introduced the „Survey-Feedback-Action‟ (SFA) program to improve employee

management relations. The employees of FedEx were divided into work groups, and the

representatives of these work groups were asked to respond to a questionnaire which sought their

opinions on management in general and their superiors in particular.

During the same period, FedEx also started automating its HR systems. This led to the creation of

an online database called „Personnel Records Information System‟ (PRISM), which formed the

human resource information system of FedEx. By the 1990s, PRISM had evolved into a fully

automated, comprehensive database of employee records. It also gathered key employee related

data on recruitment and selection, training and development, and performance appraisal.

In line with the PSP philosophy, FedEx developed several employee friendly policies regarding

recruitment and selection, training and development, performance appraisal, and corporate

communication. The company constantly upgraded its HR systems to speed up existing employee related

procedures and help the HR department develop new personnel policies. FedEx also periodically

reviewed its HR policies to ensure that they were in tune with the prevailing trends in the industry.

RECRUITMENT AND SELECTION

FedEx always recruited people who were willing to take risks, who were entrepreneurial by nature,

and were willing to take up challenges. During its initial years, when FedEx was relatively un-

known and the overnight express delivery concept was not tested and proven, joining the company

was considered a risky proposition. FedEx lured functional experts by offering them stock options

and opportunities to work in a stimulating and challenging environment.

FedEx followed a systematic process for recruitment and selection. The company recruited people

from leading universities in all the countries it operated in. It also offered internship programs

which groomed people for future job assignments. An estimate revealed that FedEx hired 25,000

employees (including regular and temporary) every year.

Given the increasing number of applications which the HR department received for various

positions, the old manual process, which required the employees to fill a 20-page application form

(as prescribed by the US government), proved to be inconvenient, both for the applicants as well as

for the company. Therefore, in 2001, FedEx automated its job application and applicant screening

procedures by developing an online job application form, accessible to the applicants through the

„Career Center‟ icon placed on www.fedex.com. FedEx had job openings in several

areas/positions: administrative support, aviation maintenance, couriers, customer service,

electronic commerce, engineering and operations, finance/air operations, HR, IT,

marketing/communications, ramp transport, sales, service agents and vehicle technicians. The

applicants could apply for positions which matched their skill sets. They could apply online for

internships (for college students) as well as salaried positions. The applicants could fill details

pertaining to their preference (location, nature of job, etc.). The site also helped the applicants

create an online resume.

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The applicant information was then matched with the company‟s job eligibility norms recorded in

PRISM and the eligible candidates were identified. These candidates then took an aptitude test

which tested their skills in basic mathematics, English, and reasoning. The written test was

followed by an interview. The candidates who performed well in the interview underwent a fitness

test and a background check, following which they were offered employment at FedEx.

The new system expedited the screening process and reduced the processing time by nearly 50%. It also enabled the HR staff to concentrate on tasks such as checking the references and follow up. The system also ensured that the application forms were completely filled, enabling the HR department to quickly fulfill the HR formalities.

TRAINING AND DEVELOPMENT

FedEx ensured that the new recruits were imparted proper training so that they could handle the tasks they were expected to. Apart from imparting job-related skills, the training contributed significantly towards the overall development of the employees. Larry McMahan (McMahan), Vice-President of Human Resources at FedEx, said, “One reason people like to work here is that they just don‟t come in with a set of skills that stay stagnant. We believe heavily in individual development. We provide extensive training.”

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All new employees underwent an orientation program which educated them about FedEx‟s philosophy and policies, and the nature of the relationship between superiors and peers at the company. The orientation program was followed by a training program, which varied depending upon the type of job the new recruits were expected to perform. The managers under whom the new recruits would work were also given instructions regarding the way the new recruits should be imparted on-the-job training.

FedEx viewed its orientation program as a tool for retaining talented employees. FedEx Express, one of FedEx‟s subsidiaries, devised a hire orientation kit (in association with a private HR firm) to help the managers as well as the new recruits understand the key components of the orientation process (Refer Exhibit II).

FedEx gave considerable emphasis to the training of those employees who interacted directly with customers. These included the customer service representatives (CSRs), the couriers, and the service agents. The CSR trainees received eight weeks of intensive training before they were allowed to handle customer calls. The training program involved educating CSRs about FedEx‟s service offerings and putting them in conditions resembling actual workplace conditions. The trainees were asked to sit at computers and browse through the screens they would be using in future. They also had to sit at a computer terminal, known as the hot seat, to listen to live calls made by customers, so that they could get a feel of the real-time operating environment. During the training course, four tests were administered on job skills. The trainees had to score a minimum of 85% on these tests. Apart from CSRs, couriers and service agents received training for four weeks, before being assigned field jobs.

At FedEx, training was a continuous process for existing employees so that they could further develop their skills. In order to test employees‟ proficiency at their respective jobs, FedEx developed a job knowledge testing program (conducted once in every six months). The employees could take the test online from any computer terminal within the company. The marks (which were received within 24 hours) scored by the employees were recorded in the employee training record section in PRISM.

PRISM also identified the areas in which employees had to improve their skills and provided a list of reference material which would help them enhance their performance. The management made it clear that every employee had to pass the test. Those employees who failed the test in successive attempts

7 As quoted in the article, “The Search For the Young and Gifted,” by John Byrne, Andy Reinhardt and

Robert D Hof, BusinessWeek, October 4, 1999.

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were required to pursue further training before they took the test again. If they failed it even after receiving training, they had to quit the company. Commenting on the significance of periodically testing the employees‟ skills, Bud Demetriou, Training and Testing technology manager, FedEx, said, “We see a direct correlation between their job knowledge and the quality of service they give to our customers, so we feel it‟s necessary to keep our people current and up to speed.”

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In the mid-1980s, FedEx created a „Leadership Development Institute‟ (LDI), which developed

several training programs for various levels of management-cadre employees. The training courses

were conducted in three disciplines – Core Management Principles, Outdoor-based learning, and

Electives. The faculty at the LDI, also known as „Management Preceptors,‟ consisted of managing

directors and senior managers. In order to train the company‟s new front-line managers, LDI

developed an 11-week management development program called „Field Applied Management

Education‟ (FAME). This program imparted training in leadership and field operations.

FedEx imparted training in both IT skills and management skills to its Information System (IS)

employees. In 1995, the company tied up with the Christian Brothers University (CBU)9 to offer a

40-week training course specifically designed for IS employees. Through this course they received

training in marketing, accounting and economics as well as training in object programming,

transaction management, distributed data management and client-server computing. FedEx paid

the entire fee for the course. The employees were permitted to take time off from their job to

attend classes which were conducted twice a week. The program was made an integral part of

FedEx‟s training module for IS employees.

GROWTH OPPORTUNITIES

FedEx believed in promoting people from within for higher management cadres. The SFA

program helped management take decisions regarding promotions, though its utility was confined

to evaluating the performance of the managerial cadre employees only. FedEx also provided

opportunities to employees from the non-managerial cadres to move up to the managerial level.

In order to encourage non-managerial cadre employees to move to the managerial level within the

organization, FedEx devised a unique program known as „Leadership Evaluation and Awareness

Process‟ (LEAP). This program was conceived in 1988, when FedEx observed that 10% of the

non-managerial cadre employees who were given managerial level tasks for the first time quit the

organization within 14 months of taking up their new tasks. Under the LEAP program, these

employees got the opportunity to assess their ability to take up managerial responsibilities.

The employees had to undergo a grueling process in order to qualify for the managerial positions. The

components of the LEAP program were a session on “Is Management for Me,” assessment of the

employee leadership skills, a report by the manager concerned on the employee‟s ability to lead people,

a report by peers on the employee‟s managerial skills, and a evaluation of the employee (Refer Exhibit

III for a description of steps involved in LEAP). Every year, an estimated 3,000 FedEx employees

appeared for the LEAP. LEAP turned out to be a very useful tool for FedEx as well as for the

employees. It helped management assess the leadership and managerial skills of its employees and also

provided employees the opportunity to assess their leadership potential.

Apart from the regular employees, FedEx hired temporary employees who were paid on an hourly

basis. In order to provide temporary employees the opportunity to gain regular employment in

FedEx, the company devised an on-line job posting system known as „Job Change Applicant

Tracking System‟ (JCATS). Every Friday, FedEx posted the available job positions on JCATS.

Once the temporary employees posted their job application, the system retrieved their job records

8 As quoted in the article, “Does Training Pay Off,” by Steve Blickstein, in “Across the Board,” June 1996.

9 Founded in 1871 in US, CBU has more than 110 full-time faculty members providing comprehensive

education to 2,000 students from 25 countries worldwide.

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from PRISM. Based on the records, which indicated the length of the service and on-the-job

performance, applicants were allotted numerical scores and were ranked accordingly. The

applicants who were ranked high were made permanent employees. Since JCATS offered

temporary employees the opportunity to become permanent employees, it motivated them to work

hard and perform well. Regular employees who were seeking a job change or wanted to transfer to

a new place were also eligible to post their applications through JCATS.

In the late 1990s, FedEx introduced an automated, intranet-compatible, skill assessment and

succession planning program called „SPEED‟ (Succession Planning Executive Education). SPEED

enabled the employees in the senior management cadre, including vice presidents and senior vice

presidents, to periodically evaluate and rank the skills, preparedness and promotability of those

employees who directly reported to them and who were likely to replace them. Such employees

were offered suggestions regarding the areas in which they needed to improve their skills and were

mentally prepared to take up their new positions. As part of SPEED, employees enrolled in

executive education programs at the LDI to improve their skills.

EMPLOYEE COMMUNICATION AND PERFORMANCE APPRAISAL

At FedEx, two-way communication between the management and the employees was encouraged.

The employees were allowed to freely express their opinions about management‟s policies. The

company also devised mechanism to address and resolve employee grievances, apart from

employing a formal communication system to inform employees about the major events taking

place in the company. The employee communication programs implemented by FedEx included

the SFA program, Guaranteed Fair Treatment Procedure (GFTP) and Open Door Policy (ODP).

FedEx conducted an SFA program every year in April to get a holistic picture about the

functioning of the management and the leadership and managerial skills of its managers, as

perceived by the employees. Since 1996 the SFA program has been conducted online to make it

easily accessible to FedEx‟s workforce across the world.

The program had three components, Survey, Feedback and Action. The employees (belonging to

various work groups) were asked to respond to a survey which consisted of 32 questions on their

immediate superiors and the overall management of FedEx (Refer Exhibit IV). The results of the

survey were tabulated and handed over to the respective work group managers. The managers then

conducted feedback sessions with the employees, discussing the survey results and identifying the

problems which needed to be addressed. After these sessions were concluded, the members of the

work group drafted a formal action plan to solve the identified problems. The plan was

periodically reviewed to check the progress of the remedial actions being taken. The online survey

enabled the employees to frankly express their views on the management anonymously. The SFA

program helped FedEx evaluate the performance of the managers and also solve employee

problems and improve workplace relations.

With a huge global workforce of over 200,000 employees, FedEx felt the need for a forum which

allowed employees to express their job grievances. The company therefore developed the „GFTP‟

program, in which the grievances of employees were heard up to three levels of the managerial

hierarchy. The employees could complain about disciplinary action, performance reviews,

retrenchments and job postings. The complaint had to be submitted by the employee within seven days

of the occurrence of the incident leading to the complaint. In the first stage of GFTP, the immediate

superiors reviewed the complaint. The manager concerned was given 10 days to take a decision

regarding the complaint after hearing either personally from the employee or through a telephonic

conversation. If the complainant was dissatisfied with the manager‟s decision, he could challenge it

within seven days. At the second stage, the complaint was to be reviewed either by the vice president or

a senior vice president of the division, who had to decide upon the complaint within 10 days. If the

complainant was still dissatisfied, he could appeal against it. At the final stage, the complaint was

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reviewed by the FedEx Supreme Court headed by Smith. The Supreme Court was authorized to reverse

any decision made at the previous stages. The amount of scrutiny through which a complaint passed

through increased the possibility of fair treatment for employees.

FedEx also introduced an open door policy which allowed employees to either question the

company‟s policies (regarding hiring, vocation, seniority, benefits and so on) or complain about

them to management. The employees had to submit their complaints through an open door forum,

which was sent across to the management official concerned. The official had to answer the open

door enquiry within fourteen calendar days.

At FedEx, employees were kept informed about the significant events taking place in the company.

An in-house satellite cable network called „FXTV‟ was created, through which information

(quarterly results, mergers, and so on) was communicated to the employees. Television monitors

were placed near the workstations, enabling the employees to carry on their work while watching

the broadcast.

FedEx‟s performance appraisal technique was based on the nature of the work performed by the

employees. The management identified different parameters for evaluating the worth of employees

belonging to different managerial cadres. The employees‟ performance vis-à-vis the three metrics –

People, Service and Profits – formed the basis for FedEx‟ unique profit sharing plan. The people

metric assessed leadership abilities and determined whether managers could provide an

environment in which employees could contribute effectively. To track the quality of service, the

company identified „Service Quality Indicators‟ (Refer Exhibit V) which measured customer

satisfaction.

FedEx used the pre-tax profit margin as a metric to arrive at the incentive to be given to the

employees. The supervisors and employees were constantly provided the latest financial data

(including budgets) pertaining to the department in which they worked. This was done so that the

employees knew what they had to do to maximize profits. All employees who were over 21 years

of age and who had worked at FedEx for a minimum of 1000 hours within a calendar year

automatically qualified for the profit sharing plan on the first day of June or December every year.

The management also used the SFA program to evaluate managers‟ performance. The results

obtained from the survey regarding each individual work group manager were tabulated and

consolidated to arrive at a „companywide leadership score‟ (CLS). Based on the individual scores

of each manager and the CLS, the incentives were determined. If, in a particular year, the CLS was

below that of the previous year, the managers did not receive their annual bonus.

The performance review of non-managerial employees was done on the basis of parameters which

included, among others, customer orientation, enthusiasm, „fit‟ with the team, loyalty, flexibility

and technical expertise. While the regular employees‟ performance was reviewed and appraised

annually, the performance of temporary employees was reviewed every six months. The test scores

and overall training record of employees was also considered as one of the parameters for

performance evaluation.

EMPLOYEE RETENTION

Employee retention was a significant aspect of FedEx‟s HR policy. Commenting on the

significance of retaining the employees, McMahan said, “In our competitive marketplace,

employee loyalty tends to be low. If employees don‟t like their jobs, they simply walk across the

street and find a new one. It‟s important to keep your people happy and to create an environment

where they want to stay.”10

10

As quoted in the article, “Guaranteed Delivery”, by Lucie P. Lawrence, posted on www.

watsonwyatt.com.

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FedEx strove to maintain good relationships with its employees. The employees who had quit the

company were allowed to join back if their new job did not match their expectations. The company

devised an exit interview which was administered online. The interview asked employees details

about their new job: the compensation offered; the job profile and more. The employees were

asked to explain why they quit their job at FedEx and whether or not they were willing to work

again for FedEx, if provided an opportunity. The information collected through the exit interview

was stored in PRISM, to enable further analysis regarding job trends and to identify internal

problems (if any). By employing this process, the management also ensured that the employees

quit the organization on good terms and carried a favorable impression of FedEx. Commenting on

the significance of the exit process, Julie Yancey, director of worldwide people development at

FedEx said, “We don‟t want anyone to walk out the door with a bad taste in their mouth or their

final memories to be of a bad experience with FedEx.”11

FedEx‟s compensation to its employees was among the best in the industry. Apart from salary, the

employees were also offered several exciting perks. For example, the “jump seating” perquisite

allowed employees to fly free of cost to any place in the world where FedEx aircrafts operated.

The company‟s compensation package was also supplemented by rewards and recognition

programs (Refer Exhibit VI). The programs were devised in such a way that both the individual as

well as the team efforts were recognized.

Apart from regular rewards, the management also presented cash awards to recognize exceptional

instances where employees contributed to the company‟s progress. In one such instance, in 1998,

FedEx gave a $25 mn special appreciation bonus to its employees in the US for their exemplary

work (during a 12-day strike at its rival UPS in 1997), which enabled FedEx to handle an

additional 800,000 packages every day.

THE BENEFITS REAPED

Over the years, FedEx developed several innovative HR programs that served as a benchmark for

many organizations, particularly in the service industry. These programs not only yielded financial

benefits for FedEx (through improved employee productivity levels), they also enhanced the

reputation of the company as an employee-friendly, service-oriented organization.

Table I

Recognition Received by FedEx for its HR Policies

Magazine/Institution Recognition Received

Fortune The 100 Best Companies to Work for in America

50 Best Companies in America for Asians, Blacks, & Hispanics

Minority Engineer Top 50 Employers

Business Ethics 100 Best Corporate Citizens

National Minority

Business Council

Outstanding Corporate Support Award

Div2000.com Div 50: America's Top Organizations for Multi-Cultural Business

Opportunities

Hispanic The Top 100 Companies Providing The Most Opportunities for

Hispanics

11

As quoted in the article, “Welcoming Back Dot-Com Dropouts,” by Stephanie. E, Week, June 19, 2000.

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Next Step Magazine Diversity 100 Recognition Award

Employee Services

Management Association

Employer of the Year (2002)

Source: www.fedex.com

FedEx‟s employee-friendly policies resulted in very low turnover rate. In 2000, the turnover rate

was estimated to be below 6%, while the industry average was 20%. The importance which FedEx

gave to training and development helped it attract and retain skilled workforce.

The HR policies of FedEx had brought several recognitions to the company (Refer Table I). It was

in Fortune magazine‟s list of the “100 Best Companies to Work for in the US” for five consecutive

years from 1998 to 2002 and in the list of “Best Places for Minorities and Women to Work” for the

year 2000 and 2001 (Refer Table I for other awards and recognitions received by the company).

Commenting on the contribution of the employees in the company‟s success, McMahan said, “The

key to our success is exceeding customer expectations; and the way we achieve that is through our

people.”12

QUESTIONS FOR DISCUSSION:

1. FedEx‟s People-Service-Profit (PSP) philosophy governed every activity at the company.

Discuss the role played by the PSP philosophy in the framing and implementation of various

HR policies at FedEx. Elaborate on the basic beliefs and values underlying FedEx‟s HR

policies.

2. According to a FedEx manager, “We believe heavily in individual development. We have

extensive training.” In light of this statement, examine the employee development programs at

FedEx. In what way did these development programs serve as a tool for employee-retention?

Explain.

3. FedEx has received considerable recognition for its innovative, employee-friendly policies/

programs by industry analysts and HR experts. Briefly discuss each of these policies/programs

and evaluate their strengths and weaknesses.

4. FedEx was among the first few companies which realized that formal and employee-friendly

HR policies were crucial for ensuring the profitability and productivity of a company in the

service industry. To what extent were the HR policies designed by FedEx responsible for its

success in the logistics industry? Discuss.

12

As quoted in the article, “Guaranteed Delivery,” by Lucie .P. Lawrence, posted on www.watsonwyatt.com.

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Exhibit I

„People-Service-Profit‟ Philosophy at FedEx

The core philosophy that governs every activity at FedEx is „People-Service-Profit‟ (PSP): Take

care of our people; they in turn will deliver impeccable service demanded by our customers,

who will reward us with the profitability necessary to secure our future. People-Service-Profit:

These three words are the very foundation of Federal Express.

The P-S-P Philosophy is like an unbroken chain. There are no clearly definable points of entry

or exit. Each link upholds the others and is in turn supported by them. The people link is

supported by profit, which is supported by service, which is supported by people.

FedEx is dedicated to the principle that our people are our most important asset - a belief that

motivated and conscientious people provide necessary professional service to ensure profits and

continued growth.

Our most important company objective is to provide a totally dependable service to our

customers. Our customers' satisfaction is the key to our success. At FedEx we try to keep this

thought in mind: Do not promise more than we can deliver, but always strive to deliver more

than we promise.

Any business exists only as long as it makes an adequate return on its shareholders' investment.

FedEx is no exception to this iron law of economics. Our continued ability to provide the profit

that ensures our success and our employees' future remains one of our highest priorities.

Source: “People-Service-Profit,” posted on www.fedex-careeres.com

Exhibit II

The Hire Orientation Kit

The key components of FedEx Express Hire Orientation Kit are:

A Guide to New Hire Orientation: Outlines the manager‟s roles and responsibilities for

orientation. The guide introduces the concept of continuing the orientation and assimilation

process throughout the employee‟s first year on the job.

The New Hire Orientation Video, Welcome to Our World: Offers an inside look at the

company and features FedEx Express employees at work.

Welcome to Our World, A New Hire Companion to Orientation at FedEx Express: Introduces employees to the world of FedEx Express with action steps for their first days on the

job, a resource list and a dictionary of frequently used terms.

The Tools & Techniques Section: Includes checklists for managers and new employees to use

throughout orientation.

Local Orientation Materials: It is empty, so each division or department can customize the

materials by adding local information.

The contents of the kit are also included on the FedEx Express intranet. The web site mirrors

the look and feel of the Hire Orientation Kit and includes electronic versions of all print

materials.

Source: “Guaranteed Delivery,” by Lucie .P. Lawrence, posted on www.watsonwyatt.com

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Exhibit III

The Leadership Evaluation and Awareness Process

Leadership Evaluation and Awareness Process (LEAP)

A process implemented to improve leadership effectiveness and retention at FedEx. LEAP is

compulsory for any employee who wants to progress to management level positions within the

company. The purpose of LEAP is to evaluate a candidate's leadership potential and ensure that

the individual carefully considers his or her interest in and aptitude for leadership.

A candidate must complete the following process to become LEAP-endorsed:

“Is Management for Me?”: A one-day class that familiarizes candidates with managerial

responsibilities.

Employee‟s Leadership Profile: The employee documents successful demonstration of the

nine leadership dimensions required to successfully complete the LEAP process. The

dimensions included charismatic leadership, consideration for individuals, intellectual

simulation, courage, dependability, flexibility, integrity, judgment, and respect for others.

Manager‟s Focused Recommendation: A written report from the employee's manager

supporting or opposing the candidate's leadership capabilities. It is usually prepared after a

three- to six-month period, during which the manager coaches and evaluates the employee.

Peer Assessment: An evaluation of the candidate by three to ten of the candidate's coworkers (selected

by his or her manager). Peers provide their opinion on the managerial abilities of the candidate.

LEAP Panel Evaluation: An interview conducted by a group of mid- level managers trained in

LEAP assessment. LEAP candidates present written and oral arguments to the panel supporting

specific leadership scenarios. The panel considers the Peer Assessment, Manager's Focused

Recommendation and the Employee's Leadership Profile before arriving at a decision. If a

candidate is endorsed, he/she is eligible to apply for a management position; if not endorsed,

he/she must wait six months before trying again.

Adapted from “FedEx Attributes Success to People First Philosophy,” posted on www.fedex.com, and

“People Delivering Service Overnight,” posted on www.serviceexcellence.co.uk.

Exhibit IV

Key Questions Asked in the SFA Program

(Pertaining to the employees’ boss)

I feel free to tell my manager what I think

My manager lets me know what‟s expected of me

Favoritism is not a problem in my work group

My manager helps us find ways to do our jobs better

My manager is willing to listen to my concerns

My manager asks for my ideas about things affecting our work

My manager lets me know when I have done a good job

My manager treats me with respect and dignity

My manager keeps me informed about things I need to know

My manager lets me do my job without interfering

My manager‟s boss gives us the support we need

Source: “People Delivering Service Overnight” posted on www.serviceexcellence.co.uk

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Exhibit V

The Statistical Quality Indicators

S.No SQI13

Component Weighing Factor

1 Lost Package 50

2 Damaged package 30

3 Complaints responded 10

4 Overnight wrong day late 10

5 International priority inbound wrong day late 10

6 Other wrong day late 10

7 Late pickup stops 3

8 Traces 3

9 Right Day Late 1

10 Invoice adjustment 1

11 Missing Point of Delivery 1

12 Abandoned Calls 1

Total 130

Source: Presentation titled “Integrated Performance Measurement, the Measures Should Carry the

Message,” by Will Artley, posted on www.orau.gov

Exhibit VI

Rewards and Recognitions Program at FedEx

Bravo Zulu (“well done”- a term used in the US Navy): The award is given to the employees

who performed above and beyond the call of duty. The award consists of appreciation from the

management and gift certificates or movie tickets. (The managers were also authorized to

reward the subordinates with $100 cash bonuses instantly, in recognition for their work).

Suggestion Award: Employees received cash prizes ranging between $100 and $25,000 for

offering valuable suggestions for improving business operations at FedEx.

Golden Falcon Award: Presented to regular employees who went out of their way to serve

customers and exceeded their (customers‟) expectations.

The Five Star Award: Considered the best award at FedEx, it is presented to employees whose

performance helped FedEx improve customer service, profitability and teamwork. The award is

presented to 150 employees every year, who achieved substantially more than their annual

objectives.

Humanitarian Award: Given to employees who displayed courage and kindness to help the

needy. Only outstanding instances of courage and kindness are recognized by the award.

Source: Adapted from “The Story of FedEx – A Chronicle of Achievements” posted on www.sri.com and

“People Delivering Service Overnight” posted on www.serviceexcellence.co.uk.

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SQI‟s refer to the problems most likely to cause customer dissatisfaction, like un-answered calls, late

pickups etc. Each SQI is given a weight, depending on the extent of dissatisfaction it might cause to a

customer. The number of times each SQI occured is determined, than it is factored in the weights to

arrive at the total number of daily failures by an employee. The higher the SQI score, the lower the

customer satisfaction, and vice versa.

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Additional Readings & References:

1. Smith, Bob, FedEx's Key to Success, Management Review, July 1993.

2. Smith, Bob, Award Honors Excellence in Human Resources, HR Focus, July 1993.

3. O‟Connell, Sandra E, System Redesign makes FedEx a Technology Leader, HR

Magazine, April 1994.

4. McGee, Marianne, Kolbas, FedEx Sends IS Staff to School, Information Week, October 30, 1995.

5. Lindahl, Rosa V, Automation Breaks the Language Barrier, HR Magazine, March 1996.

6. Blickstein, Steve, Does Training Pay Off? Across the Board, June 1996.

7. Gebhart, Jane, The World on Time, Sloan Management Review, Fall 1996.

8. Row, Hath, Is Management for Me? That Is the Question, www.fastcompany.com,

February 13, 1998.

9. Yeow, Jimmy, FedEx Strategy to Stay Ahead of Competition, Business Times, July 21, 1999.

10. Byrne, John, Reinhardt, Andy, Hof, Robert D, The Search for the Young and Gifted,

Business Week, October 4, 1999.

11. Develop Quantitative Scorecards to Measure CSR Performance Objectively, www3.best-in-class.com, February 7, 2000.

12. Monitor Employee Satisfaction through Developed Measurement Devices, www3.best-

in class.com, February 21, 2000.

13. Robertson, Ed, FedEx Delivers on Employee Feedback, Total Communication

Measurement, September 2000.

14. Vera, Ricardo, When People are Placed First..., www.ppc.uwstout.edu, October 12, 2000.

15. Xu, Weidong, Long Range Planning for Call Centers at FedEx, Journal of Business

Forecasting Methods & Systems, Winter 1999/2000.

16. Neil, Stephanie, Welcoming Back Dot-Com Dropouts, E Week, June 19, 2000.

17. Vaas, Lisa, Interns Require Real Jobs, E Week, July 06, 2000.

18. Dash, Julekha, FedEx Grooms Teens at Technology Camp, Computerworld, August 07, 2000.

19. Dash, Julekha, Student Interns Hand Out Mixed Grades to Employers, Computerworld,

October 2, 2000.

20. Levering, Robert, Going Places, Fortune, January 8, 2001.

21. Kantor Goodwin, Linda, FedEx Technology Camp, THE Journal, January 2001.

22. The HR data machine at FedEx, Best Practice Measurement Strategies, March 2001.

23. Lawrence, Lucie, P, Guaranteed Delivery, www.watsonwyatt.com, September 2001.

24. Mayne, Joe, Do you really want to be a Manager? www.geocities.com, 2001.

25. Zemke, Ron, FedEx, Training, March 2002.

26. Baxter, John, The FedEx Four, Commercial Carrier Journal, April 2002.

27. HR's Push for Productivity, www.workforce.com, September 03, 2002.

28. Brandel, Mary, Home-Schooling IT Talent, Computerworld, January 27, 2003.

29. Autherson, Rachel, Delivering Service through Culture, Career Times, April 07, 2003

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30. Keane, Angela Greiling, FedEx Offers Buyouts, Traffic World, June 09, 2003.

31. The Week, Journal of Commerce, June 09, 2003.

32. Developing and Retaining Call Center Employees, www3.best-in-class.com.

33. Excellence Workplace Learning Performance, www.astd.org.

34. People Delivering Service Overnight, www.serviceexcellence.co.uk.

35. FedEx Attributes Success to People-first Philosophy, www.fedex.com.

36. Quality at Federal Express, weatherhead.cwru.edu

37. www.fedex.com

Related Case Studies:

1. The Taj‟s People Philosophy and Star System, Reference No. 403-019-1.

2. Human Resource Management System Reforms at Matsushita, Reference No. 403-010-1.

Documents

Human Resource Management: Best Practices at FedEx Corporation