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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 ofVivek 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 - couriersto pick up and deliver goods and document, customer representatives and sales executives. If wehire the right people, train them, equip them and manage them properly, they will provide servicethat will satisfy customers and in turn those customers will reward us with business after businessthat generates profits.

1

- 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 FedExs 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 companys philosophy and its HR practices was also conducted.

FedEx was among the first few companies in the world to develop a formal HR policy whichviewed employees as a means for achieving long-term growth and profitability. Framed and valued

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

viewed employees as the key contributors to the companys 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. FedExs

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 companys Leadership Evaluation and Awareness Process gave

FedExs non-managerial employees the opportunity to seek managerial positions at FedEx. FedExhad also devised a succession planning mechanismSuccession 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 worlds largest express transportation companies, providing information and logistics

solutions services. For the financial year ending May 2003, the company generated revenues of $22.5 bnand a net income of $1.47 bn.


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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 Forcemagazine wrote, FedEx is an example of an organization

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

corporations 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)4realized the need foran airfreight system which could deliver documents overnight. He decided to setup his owncompany to effectively serve this need. The company was incorporated as Federal ExpressCorporation 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. Thismarked 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, FedExbuilt a massive hub at Memphis, which eventually became the base of FedExs operations acrossthe world. FedExs 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 fiscal1983, FedExs revenues crossed the $1 billion (bn) mark and the company reported a net incomeof $88.93 million (mn). With this, FedEx became the first company to earn more than $1 bn inrevenues 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 itearned $10 bn in revenues. Among the most significant developments in the 1990s for FedEx wasthe launch of its website www.fedex.com (in 1994). This website allowed customers to perform ahost of business transactions online. In 1998, the Federal Express Corporation was renamed the

FDX Corporation following the $2.4 bn acquisition of Caliber Systems5and its subsidiaries.

In 2001, all of FedExs subsidiaries6 were regrouped on the basis of their operations to formindividual 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 FedExwas able to achieve this phenomenal success largely due to its innovative HR practices and itscommitment towards the development of its employees.

FEDEXS HR PRACTICES

Since its inception, FedExs management focused on providing a suitable work environment thatencouraged 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 ofthe commitment of the employees could be gauged from the fact that during the first couple ofyears, when the company was going through severe financial difficulties, the employees were

3 As quoted in the article, HRs 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 grounddelivery services in the US.

6 FedExs subsidiaries included FedEx Express, FedEx Ground, FedEx Freight, FedEx Custom Critical and

FedEx Trade Networks. The subsidiaries operated independently but competed collectively under theFedExs brand worldwide


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prepared to sell their personal belongings and use their own credit cards to purchase fuel to deliverthe packages to the customers. Even when the employees didnt receive their salary on time, theycontinued 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 FedExs People-Service-Profit (PSP)philosophy. According to this philosophy, if FedEx took proper care of its employees, they wouldprovide efficient service to the customers, which would in turn benefit the company by generatingmore 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 employeemanagement relations. The employees of FedEx were divided into work groups, and therepresentatives of these work groups were asked to respond to a questionnaire which sought theiropinions 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 ofan online database called Personnel Records Information System (PRISM), which formed thehuman resource information system of FedEx. By the 1990s, PRISM had evolved into a fullyautomated, comprehensive database of employee records. It also gathered key employee relateddata on recruitment and selection, training and development, and performance appraisal.

In line with the PSP philosophy, FedEx developed several employee friendly policies regardingrecruitment and selection, training and development, performance appraisal, and corporatecommunication. The company constantly upgraded its HR systems to speed up existing employee relatedprocedures and help the HR department develop new personnel policies. FedEx also periodicallyreviewed 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 companys job eligibility norms recorded inPRISM and the eligible candidates were identified. These candidates then took an aptitude testwhich tested their skills in basic mathematics, English, and reasoning. The written test wasfollowed 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 HRdepartment to quickly fulfill the HR formalities.

TRAINING AND DEVELOPMENT

FedEx ensured that the new recruits were imparted proper training so that they could handle thetasks they were expected to. Apart from imparting job-related skills, the training contributedsignificantly 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 dont come in with a set of skills that stay stagnant. We believe heavily in individualdevelopment. We provide extensive training.7

All new employees underwent an orientation program which educated them about FedExsphilosophy and policies, and the nature of the relationship between superiors and peers at thecompany. The orientation program was followed by a training program, which varied dependingupon the type of job the new recruits were expected to perform. The managers under whom thenew recruits would work were also given instructions regarding the way the new recruits should beimparted on-the-job training.

FedEx viewed its orientation program as a tool for retaining talented employees. FedEx Express,one of FedExs 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 withcustomers. These included the customer service representatives (CSRs), the couriers, and theservice agents. The CSR trainees received eight weeks of intensive training before they wereallowed to handle customer calls. The trainingprogram involved educating CSRs about FedExsservice offerings and putting them in conditions resembling actual workplace conditions. Thetrainees were asked to sit at computers and browse through the screens they would be using infuture. They also had to sit at a computer terminal, known as the hot seat, to listen to live callsmade by customers, so that they could get a feel of the real-time operating environment. Duringthe training course, four tests were administered on job skills. The trainees had to score a minimumof 85% on these tests. Apart from CSRs, couriers and service agents received training for fourweeks, before being assigned field jobs.

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

PRISM also identified the areas in which employees had to improve their skills and provided a list ofreference material which would help them enhance their performance. The management made it clearthat 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 andRobert 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 afterreceiving training, they had to quit the company. Commenting on the significance of periodicallytesting 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 ourcustomers, so we feel its necessary to keep our people current and up to speed.8

In the mid-1980s, FedEx created a Leadership Development Institute (LDI), which developedseveral training programs for various levels of management-cadre employees. The training courseswere conducted in three disciplinesCore Management Principles, Outdoor-based learning, andElectives. The faculty at the LDI, also known as Management Preceptors, consisted of managingdirectors and senior managers. In order to train the companys new front-line managers, LDIdeveloped an 11-week management development program called Field Applied ManagementEducation (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)9to offer a40-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 paidthe entire fee for the course. The employees were permitted to take time off from their job toattend classes which were conducted twice a week. The program was made an integral part ofFedExs training module for IS employees.

GROWTH OPPORTUNITIES

FedEx believed in promoting people from within for higher management cadres. The SFAprogram helped management take decisions regarding promotions, though its utility was confinedto evaluating the performance of the managerial cadre employees only. FedEx also providedopportunities 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 theorganization, FedEx devised a unique program known as Leadership Evaluation and AwarenessProcess (LEAP). This program was conceived in 1988, when FedEx observed that 10% of thenon-managerial cadre employees who were given managerial level tasks for the first time quit theorganization within 14 months of taking up their new tasks. Under the LEAP program, theseemployees 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. Thecomponents of the LEAP program were a session on Is Management for Me, assessment of theemployee leadership skills, a report by the manager concerned on the employees ability to lead people,a report by peers on the employees managerial skills, and a evaluation of theemployee (Refer Exhibit

III for a description of steps involved in LEAP). Every year, an estimated 3,000 FedEx employeesappeared for the LEAP. LEAP turned out to be a very useful tool for FedEx as well as for theemployees. It helped management assess the leadership and managerial skills of its employees and alsoprovided employees the opportunity to assess their leadership potential.

Apart from the regular employees, FedEx hired temporary employees who were paid on an hourlybasis. In order to provide temporary employees the opportunity to gain regular employment inFedEx, the company devised an on-line job posting system known as Job Change ApplicantTracking 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 comprehensiveeducation 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-jobperformance, applicants were allotted numerical scores and were ranked accordingly. Theapplicants who were ranked high were made permanent employees. Since JCATS offeredtemporary 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 toa new place were also eligible to post their applications through JCATS.

In the late 1990s, FedEx introduced an automated, intranet-compatible, skill assessment andsuccession planning program called SPEED (Succession PlanningExecutive Education). SPEEDenabled the employees in the senior management cadre, including vice presidents and senior vicepresidents, to periodically evaluate and rank the skills, preparedness and promotability of thoseemployees who directly reported to them and who were likely to replace them. Such employeeswere offered suggestions regarding the areas in which they needed to improve their skills and werementally prepared to take up their new positions. As part of SPEED, employees enrolled inexecutive 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 managements policies. Thecompany also devised mechanism to address and resolve employee grievances, apart fromemploying a formal communication system to inform employees about the major events takingplace in the company. The employee communication programs implemented by FedEx includedthe 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 thefunctioning of the management and the leadership and managerial skills of its managers, asperceived by the employees. Since 1996 the SFA program has been conducted online to make it

easily accessible to FedExs workforce across the world.The program had three components, Survey, Feedback and Action. The employees (belonging tovarious work groups) were asked to respond to a survey which consisted of 32 questions on theirimmediate superiors and the overall management of FedEx (Refer Exhibit IV). The results of thesurvey were tabulated and handed over to the respective work group managers. The managers thenconducted feedback sessions with the employees, discussing the survey results and identifying theproblems which needed to be addressed. After these sessions were concluded, the members of thework group drafted a formal action plan to solve the identified problems. The plan wasperiodically reviewed to check the progress of the remedial actions being taken. The online surveyenabled the employees to frankly express their views on the management anonymously. The SFAprogram helped FedEx evaluate the performance of the managers and also solve employeeproblems and improve workplace relations.

With a huge global workforce of over 200,000 employees, FedEx felt the need for a forum whichallowed employees to express their job grievances. The company therefore developed the GFTPprogram, in which the grievances of employees were heard up to three levels of the managerialhierarchy. The employees could complain about disciplinary action, performance reviews,retrenchments and job postings. The complaint had to be submitted by the employee within seven daysof the occurrence of the incident leading to the complaint. In the first stage of GFTP, the immediatesuperiors reviewed the complaint. The manager concerned was given 10 days to take a decisionregarding the complaint after hearing either personally from the employee or through a telephonicconversation. If the complainant was dissatisfied with the managers decision, he could challenge itwithin seven days. At the second stage, the complaint was to be reviewed either by the vice president ora 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 reverseany decision made at the previous stages. The amount of scrutiny through which a complaint passedthrough increased the possibility of fair treatment for employees.

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

companys policies (regarding hiring, vocation, seniority, benefits and so on) or complain aboutthem 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 opendoor 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 monitorswere placed near the workstations, enabling the employees to carry on their work while watchingthe broadcast.

FedExs performance appraisal technique was based on the nature of the work performed by theemployees. The management identified different parameters for evaluating the worth of employeesbelonging to different managerial cadres. The employees performance vis--vis the three metricsPeople, Service and Profitsformed the basis for FedEx unique profit sharing plan. The peoplemetric assessed leadership abilities and determined whether managers could provide anenvironment in which employees could contribute effectively. To track the quality of service, thecompany identified Service Quality Indicators (Refer Exhibit V) which measured customersatisfaction.

FedEx used the pre-tax profit margin as a metric to arrive at the incentive to be given to theemployees. 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 theemployees knew what they had to do to maximize profits. All employees who were over 21 yearsof 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 resultsobtained from the survey regarding each individual work group manager were tabulated andconsolidated to arrive at a companywide leadership score (CLS). Based on the individual scoresof each manager and the CLS, the incentives were determined. If, in a particular year, the CLS wasbelow 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 whichincluded, among others, customer orientation, enthusiasm, fit with the team, loyalty, flexibilityand technical expertise. While the regular employees performancewas reviewed and appraisedannually, the performance of temporary employees was reviewed every six months. The test scoresand overall training record of employees was also considered as one of the parameters forperformance evaluation.

EMPLOYEE RETENTION

Employee retention was a significant aspect of FedExs HR policy. Commenting on thesignificance of retaining the employees, McMahan said, In our competitive marketplace,employee loyalty tends to be low. If employees dont like their jobs, they simply walk across thestreet and find a new one. Its important to keep your people happy and to create an environmentwhere 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 thecompany were allowed to join back if their new job did not match their expectations. The companydevised an exit interview which was administered online. The interview asked employees detailsabout 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 workagain for FedEx, if provided an opportunity. The information collected through the exit interviewwas stored in PRISM, to enable further analysis regarding job trends and to identify internalproblems (if any). By employing this process, the management also ensured that the employeesquit the organization on good terms and carried a favorable impression of FedEx. Commenting onthe significance of the exit process, Julie Yancey, director of worldwide people development atFedEx said, We dont want anyone to walk out the door with a bad taste in their mouth or theirfinal memories to be of a bad experience with FedEx.11

FedExs compensation to its employees was among the best in the industry. Apart from salary, theemployees were also offered several exciting perks. For example, the jump seating perquisiteallowed employees to fly free of cost to any place in the world where FedEx aircrafts operated.The companys compensation package was also supplemented by rewards and recognitionprograms (Refer Exhibit VI). The programs were devised in such a way that both the individual aswell as the team efforts were recognized.

Apart from regular rewards, the management also presented cash awards to recognize exceptionalinstances where employees contributed to the companys progress. In one such instance, in 1998,FedEx gave a $25 mn special appreciation bonus to its employees in the US for their exemplarywork (during a 12-day strike at its rival UPS in 1997), which enabled FedEx to handle anadditional 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 financialbenefits for FedEx (through improved employee productivity levels), they also enhanced thereputation 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 EmployersBusiness Ethics 100 Best Corporate Citizens

National MinorityBusiness Council

Outstanding Corporate Support Award

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

Hispanic The Top 100 Companies Providing The Most Opportunities forHispanics

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 ServicesManagement Association

Employer of the Year (2002)

Source: www.fedex.com

FedExs employee-friendly policies resulted in very low turnover rate. In 2000, the turnover ratewas estimated to be below 6%, while the industry average was 20%. The importance which FedExgave 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 wasinFortunemagazines list of the 100 Best Companies to Work for in the US for five consecutiveyears from 1998 to 2002 and in the list of Best Places for Minorities and Women to Work for theyear 2000 and 2001 (Refer Table I for other awards and recognitions received by the company).Commenting on the contribution of the employees in the companys success, McMahan said, Thekey to our success is exceeding customer expectations; and the way we achieve that is through ourpeople.12

QUESTIONS FOR DISCUSSION:

1. FedExs 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 variousHR policies at FedEx. Elaborate on the basic beliefs and values underlying FedExs HRpolicies.

2. According to a FedEx manager, We believe heavily in individual development. We haveextensive training. In light of this statement, examine the employee development programs atFedEx. 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/programsand evaluate their strengths and weaknesses.

4. FedEx was among the first few companies which realized that formal and employee-friendlyHR policies were crucial for ensuring the profitability and productivity of a company in theservice industry. To what extent were the HR policies designed by FedEx responsible for itssuccess 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 entryor exit. Each link upholds the others and is in turn supported by them. The people link issupported 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 thatmotivated and conscientious people provide necessary professional service to ensure profits andcontinued 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 thisthought in mind: Do not promise more than we can deliver, but always strive to deliver morethan 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 managers roles and responsibilities fororientation. The guide introduces the concept of continuing the orientation and assimilationprocess throughout the employees first year on the job.

The New Hire Orientation Video, Welcome to Our World: Offers an inside look at thecompany 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 thejob, a resource list and a dictionary of frequently used terms.

The Tools & Techniques Section:Includes checklists for managers and new employees to usethroughout orientation.

Local Orientation Materials: It is empty, so each division or department can customize thematerials by adding local information.

The contents of the kit are also included on the FedEx Express intranet. The web site mirrorsthe look and feel of the Hire Orientation Kit and includes electronic versions of all printmaterials.

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 iscompulsory for any employee who wants to progress to management level positions within thecompany. The purpose of LEAP is to evaluate a candidate's leadership potential and ensure thatthe 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 managerialresponsibilities.

Employees Leadership Profile: The employee documents successful demonstration of thenine leadership dimensions required to successfully complete the LEAP process. Thedimensions included charismatic leadership, consideration for individuals, intellectualsimulation, courage, dependability, flexibility, integrity, judgment, and respect for others.

Managers Focused Recommendation: A written report from the employee's managersupporting or opposing the candidate's leadership capabilities. It is usually prepared after athree- 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 (selectedby 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 inLEAP assessment. LEAP candidates present written and oral arguments to the panel supportingspecific leadership scenarios. The panel considers the Peer Assessment, Manager's FocusedRecommendation and the Employee's Leadership Profile before arriving at a decision. If acandidate 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 whats 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 managers 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 employeeswho performed above and beyond the call of duty. The award consists of appreciation from themanagement and gift certificates or movie tickets. (The managers were also authorized toreward the subordinates with $100 cash bonuses instantly, in recognition for their work).

Suggestion Award: Employees received cash prizes ranging between $100 and $25,000 foroffering valuable suggestions for improving business operations at FedEx.

Golden Falcon Award: Presented to regular employees who went out of their way to servecustomers and exceeded their (customers) expectations.

The Five Star Award: Considered the best award at FedEx, it is presented to employees whoseperformance helped FedEx improve customer service, profitability and teamwork. The award ispresented to 150 employees every year, who achieved substantially more than their annualobjectives.

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

13 SQIs refer to the problems most likely to cause customer dissatisfaction, like un -answered calls, latepickups etc. Each SQI is given a weight, depending on the extent of dissatisfaction it might cause to acustomer. 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 thecustomer 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. OConnell, 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 CommunicationMeasurement, 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.edu37. www.fedex.com

Related Case Studies:

1. The Tajs People Philosophy and Star System, Reference No. 403-019-1.2. Human Resource Management System Reforms at Matsushita, Reference No. 403-010-1.

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