One reason FedEx is a corporate leader is it's an organization filled with individual leaders. Indeed, the company has designed the process by which it turns rank-and- file employees into middle managers (and then senior leaders) with as much creativity and attention to detail as the process by which it sorts packages in its Memphis hub.
According to FedEx, its best leaders share nine personal attributes such as charisma, individual consideration, intellectual stimulation, courage, dependability, flexibility, integrity, judgment and respect for others, which the company defines with remarkable specificity. FedEx also has a system for rating aspiring leaders on whether they posses these attributes. The flat management structure minimized the distance between leaders and frontline workers. This has an affect of empowering employees and expanding their responsibilities. Employees who feel empowered through open communication, training, quality improvement tools, and excellent leadership gain the freedom to take risk and innovate in the pursuit of quality and service for both internal and external customers.
The company rank of priorities sets "People" first. This goal is measured through a tool known as Survey-Feedback-Action (SFA) in which subordinates express their opinions of their leader's performance. Thus, says the CEO "every action, every planning process, and every business decisions, requires extraordinary commitment from every manager and every employee" reason why Frederick Smith dedicates 25% of his time taking care of personnel subjects. FedEx management, together with investors and clients want to know what makes people good leaders and how new leaders learn? FedEx has a leadership curriculum that takes up to 14 months to complete which teaches new managers the proper management skills required in order to be successful. "Most people don't realize all the rewards that management has to offer", says Bill Hooker, a senior human-resources specialist at FedEx. "They also don't realize all the frustrations".
Every year, about 3,000 FedEx employees decide they are ready for management positions, however, FedEx CEO Fred Smith realized that more than 10% of first time managers were leaving the company within 14 months of taking on their new assignment. FedEx implemented LEAP - Leadership Evaluation and Awareness Process. This is a process to improve leadership effectiveness and retention within 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.
• Manager's Focused Recommendation: the 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, completed by three to ten of the candidate's co-workers selected by his or her manager. Peers provide their opinion as to the managerial abilities of the candidate.
• LEAP Panel Evaluation: an interview process conducted by a group of mid-level management trained in LEAP assessment. LEAP candidates present written and oral arguments to the panel supporting specific leadership scenarios. In making their decision, the panel considers the Peer Assessment, Manager's Focused Recommendation and the Employee's Leadership Profile. If a candidate is endorsed, they are eligible to apply for management positions, if not endorsed, an employee must wait six months before trying again.
FedEx initiated LEAP about a decade ago, after CEO Smith realized that more than 10% of first time managers were leaving the company within just 14 month of taking on their new assignment. That's why the first LEAP module involves an eight-hour class called "Is Management For Me?" Senior FedEx executives teach these sessions, which take place around the world.
These eight hours alter the new manager's perception towards leadership and responsibility. Fully 20% of the people who experience IMFM choose to pursue a different experience at FedEx and drop out of LEAP. George Pollard, a senior official in human resources, identifies the three biggest frustrations that come with being a leader-at FedEx.
First, there is the increased workload. "Lot of people do not understand that manager's workday starts hours before a shift and ends hours after a shift," Pollard says. Another is the unrelenting sense of obligation. "Managers are never' off the clock," he argues. "We are always representatives of FedEx, even when we're not at work." Last, is the headache of responsibility for other people. "I don't know of any manager who enjoys disciplining people," he says, "but that a real part of being a manager."
At FedEx, they strive for transformational leadership rather than transactional leadership. FedEx's manager's guide relates the following "A transformational leader raises subordinates" awareness about issues of consequence, shift them to higher level needs, influences them to transcend their own self-interests for the good of the company, and inspires them to work harder than they had originally expected.
Leaders must be loyal to their employees, seek partnership rather than impose patriarchy. They must have well-honed sense of duty and bearers of change, while being able to take criticism as well as give it. Transformational leadership starts at the top. Fred Smith, through these principles, has made FedEx into a world-class leader in the overnight delivery industry. Smith leads the industry and follows no one. He inspires his workers by doing and providing an example by which they can follow. The LEAP process that he initiated demonstrates the dedication of FedEx for continuous improvement and opportunity in management. LEAP gave FedEx employees an added incentive to dedicate their careers with the company knowing that the program will help them move-up in the company's corporate ladder. With the organizations strong leadership, which gives emphasis on employee satisfaction, it is no surprise that FedEx continues to be one of the most successful global companies.
For example FedEx has chosen this strategy in response to market demands in which it operates. The industry in which it operates is one upon which nearly all other industries depend due to advances in technology, and have stringent requirements for innovation and quality. They are at beginning of supply chain and are of strategic importance to their customers. Competitive advantage through competitive strategy options; price based, differentiation based or focus strategies. (De Wit and Meyer: 2002) they suggest strategy can be based on price, features, bundling, quality, availability, image, and relations. Firms have to determine what buyers find important. Porter (cited in De Wit & Meyer) suggests that firms must chose between lower cost and differentiation. He says you cannot do both.
Global
The international market place is by far company’s most prominent growth opportunity. The Fedex global story began with growth of Fedex Express, which today covers more than 210 countries with quick, reliable express transportation. Fedex has been a leader in global economy, offering customers more choices and more places. The family of companies representing Fedex operates hubs all over the world, giving customers limitless opportunities to expand their customer base. Each member of Fedex family also offers targeted transportation and information solutions in following the international locations:
Fedex Ground provides small-package ground delivery to every business address in U.S., Canada, and Puerto Rico.
Fedex Freight provides less-than-truckload freight services to Canada, Mexico, Central and South America, and Caribbean.
Fedex Custom Critical offers surface and air expedited solutions for door-to-door delivery of time-specific shipments in U.S., Canada, and Europe.
Fedex Trade Networks provides global e-customs clearance in U.S. and Canada, also offers freight forwarding services that connect U.S. and Canada with Asia, Europe, Latin America and other major international regions.
Fedex Supply Chain Services leverages global transportation and information networks of Fedex companies and their affiliates to provide international supply chain management solutions to customers in North America, South America, Europe, and Asia. (Lockamy and Khurana, 2005, 54-90)
Fedex technology enables customers, couriers and contract delivery personnel to wirelessly access company's information systems networks anytime, anywhere. In fact, Fedex was the first transportation company to embrace wireless technology more than two decades ago, and continues to be a leader in the use of innovative wireless solutions. Customers can access package tracking and drop-off location data for Fedex Express, Fedex Ground and Fedex Home Delivery via Web-enabled devices such as WAP phones, Personal Digital Assistants and pagers. Fedex couriers, contract delivery personnel and other team members use wireless data collection devices to scan bar codes on shipments. These "magic wands" are a key part of what makes it possible for you to find out where your package is in transit, whether on a Fedex Express jet speeding across Atlantic Ocean or a Fedex Ground tractor-trailer on Pennsylvania Turnpike. On average, Fedex Express and Fedex Ground packages are scanned at least a dozen times from pickup to delivery. At pickup, each package's shipping label bar code is immediately scanned to record pickup time, destination and delivery commitment. The scanned information is uploaded to Fedex mainframe. Bar codes are scanned again at every key step of shipping process, allowing customers to follow status of their shipments throughout journey. Fedex's newest data collection device for couriers incorporates a micro radio for hands-free communication with a printer and mobile computer in courier's delivery vehicle. Called PowerPad, devices use Bluetooth wireless technology that allows them to communicate with each other within 30 feet. (Lagrossen, 2003, 109-128)
Strategic Decision Making Process
Most parcel carrier firms emphasize same strategic dimensions and use similar strategies. One common strategy that is occurring in parcel carrier business is high investment in research and development in order to develop better technologies. In parcel carrier business, firms with best technology tend to have a higher market share and this can be seen as a competitive advantage. (Lagrossen, 2003, 109-128)
Business Mission, Objectives and Policies of Fedex
As stated above, one of the key success factors in parcel business is technology. This is what makes a company run and ultimately makes money for company. Another key success factor is marketing. People need to be familiar with carrier’s names and services so they have trust in quality of service provided. The more a parcel carrier is globalized; the better the success it will have when it comes to international deliveries. International deliveries are costly and there are only a few carriers that can provide total global delivery services and this could be a competitive advantage. Customer service is very important, carriers need to keep customers satisfied with their service so they continue to come back and use their service.
- Operations- shipping products, logistics, value chain analysis, financial analysis, handling orders, checking orders.
- Outbound logistics- delivery of products, receiving payment.
- Marketing & Sales- developing a positive image of company making people feel comfortable and satisfied with product. Explain core competencies.
- Service- Concentrates on customer satisfaction, doing anything that satisfies customers.
Due to the fact that United States Postal Service is run and operated by US government many of the financial ratios that are available for this organization are not for many of their competitors. However, information that was attainable from balance sheet and income statement seemed to be extremely high. It would be probably unfair to compare these numbers to other packaging and shipping competitors since US postal service is part of government and they are including mailing service, which is not part of any other shipping companies. (Lagrossen, 2003, 109-128)
Problem Solving Process
One thing that really helps US postal service add value is the fact that it delivers all mail throughout United States. Pretty much everyone uses this service provided by US Postal Service giving it a competitive advantage over other packaging services. One thing that they believe really adds value to their business is their reliability and consistency. The US postal service also feels that consumer values safety and security it gets with US postal service. Lastly, new development of online service part has benefit to organization too.
One Market-Electronic Global Presence
The globe is shrinking and Fedex will need to have a global presence through global distribution systems or lose out to those companies better able to serve global needs. Economic, technological and ecological forces intensify demands for global integration and uniformity. Geographic separation is being rendered irrelevant by explosion and convergence of communications, information, entertainment and commerce. In a global interconnected marketplace, where boundaries, even trade regulations, are being rendered obsolete, consumers clamour for equal access to global goods and services, so that shopping is developing a consistence flavour throughout the world. Major Fedex are becoming more central players in global affairs than most nations. Customers, as evidenced by exponential growth of internet commerce, are less citizens of a particular nation than belonging to universal tribe of consumers defined by needs that are becoming increasingly ubiquitous. (Lagrossen, 2003, 109-128)
New Social Responsibility
Major commercial Fedex will take on increased responsibilities for education, infrastructure, community welfare and security. For example, it is commonplace for mining ventures in under-developed regions to be responsible for establishment of a community infrastructure through provision of roads, schools, medical services and employment for indigenous population. Similarly, in advanced nations, functions such as job placement, vocational training and even operating prisons-areas that seemed to be exclusive preserve of government-are increasingly being devolved to private enterprise.
Dynamic integration of supply-chain network
The integration of supplier into Fedex’s structure adds value to Fedex’s customers. As price competition ceases to be a global force supplier’s role will be to add value not just to reduce costs. Customers and suppliers will work together and form inter-Fedex’s teams, which will facilitate improved communication between Fedex and increase rate of learning. Benefits will be gained from effects of sharing mutual experience and knowledge, which will result in whole chain, becoming better aligned with final customer’s requirements and objectives. (Lagrossen, 2003, 109-128)
Virtual Fedex’s structure
The workforce for many Fedex will be decentralised and even home-based via interactive networks. ‘Why pay for an office that is available for 160 hours per week when it is being used for only 20-40 hours per week?’.’ The merging of information technology and telecommunications has seen a revolution in our society, which will continue and allow for communication from any number of locations. This virtual Fedex will see managers, computer processors, journalists, consultants, designers and many others, all communicating from their own homes and from their customer’s premises. Such areas as technical, research, marketing and information technology functions could be relocated offsite. We shall see emergence of virtual team using teleconferencing through laptop computers and other devices. The successful Fedex's focus will shift from a control-based to a trust-based system through dedicated, trustworthy and loyal employees.
Technological innovation
Ground breaking technology will transform many functions of Fedex. Fedex will need to be dynamic, flexible and cherish impermanence and thrive on chaos. Technology will dramatically change way we communicate, work and socialise. Technological innovation will also improve work processes and accommodate horizontal workflows by providing cross-functional information flows and performance feedback. (Lagrossen, 2003, 109-128)
People come first
Instead of producing moribund Fedex’s personnel by forcing individual to comply with tightly defined corporate norms, companies must find ways to encourage creativity and to nurture and utilise each employee’s unique knowledge and capabilities. World-class Fedex will increasingly treat their employees as their most important assets. Despite pervasive influence of technological innovation most successful enterprises will be ones with quickest reactions, innovative management and best people.
Team-based Fedex’s structure
Participative management through teams will increasingly replace hierarchical structures of today. High-performance teams will manage their direct environment and be instrumental in setting relevant Fedex’s goals.
Clearly communicated vision and objectives
Fedex will need to be tightly focused and highly specialised. The emphasis will be on distinguishing core capabilities, supporting core processes and all other activities will be outsourced. Fedex will need a strong purpose and vision and be focused on its core values in order to make work, meaningful and attract, motivate and retain outstanding people. Fedex’s purpose will be more than just increasing profit or market share; it will reflect an ongoing commitment to adding value to employees, customers and wider community. Authentic leadership will relate to initiating and maintaining momentum in process improvement and will increasingly concentrate on formulating and implementing Fedex-wide strategies. This strategic intent will include attempts to redefine industries, to break rules and to focus on medium to long term. Visionary leadership will be assessed not in terms of charisma but by its success in building on strength of Fedex by preserving core values and by stimulating progress towards trust based relationships within and without Fedex. (Mintzberg, 2000, 89-96)
Culture and Leadership
Fred Smith, creative leader of Fedex, instilled that wherever business is conducted, use of Fedex’s core values is an important ingredient to success. Under Smith’s direction, Fedex has become a major technology user. The use of IT to its business enabled Fedex to surpass the rest in the industry and acknowledge Fred Smith as “visionary who forced his and other companies to think outside proverbial one.” (Mintzberg, 2000, 89-96)
Smith’s objective was to outsmart his competitors and attempt to gain a competitive advantage. He rationed that company “should acquire its own transportation fleet while competitors were buying space on commercial airlines and sub-contracting their shipments to third parties.” Even though Fedex did not see any profit until 1976, it earned reputation of being “absolutely, positively” reliable on its overnight delivery commitments, “an image that has become fundamental to Fedex’s overall success.” (Dale, 2004, 76-91)
The introduction of new technology allowed Fedex to install more than 100,000 sets of PC’s with its own software allowing customers to be linked and logged into their ordering and tracking system in early and mid 1980’s. The emergence of PC’s loaded with Fedex software transformed customer base into an electronic network. This was more important because computers were still uncommon and expensive, so use of this type of program seemed radical. “Smith’s vision, well before commercial launch of Internet, was that information about package is just as important as package itself.” “Information enables corporate customers to tighten their order-to-delivery cycle, exercise just-in-time (JIT) inventory management, and synchronize production levels to market demand.” (Wit and Meyer, 2004, 65)
Employee performance is something Smith firmly believes in and is set in providing as much information as necessary to all of his employees for them to perform their jobs in an efficient manner. “Fedex’s quality of service became synonymous with quality of information provided to its workforce. The “People-Service-Profit” philosophy was exactly what Smith wanted to portray to his employees, company, and competitors. “Fedex was the first transportation company to install computer terminals into all Fedex vehicles, and to issue hand-held barcode scanner systems to its drivers so that real-time information on package status would be available to customers.”2 The application of these changed the way Fedex employees processed and gathered information. (Mintzberg, 2000, 89-96)
Using Internet was another stage that Fedex felt could increase their production and service. In November 1994, Fedex launched a Website that included package-tracking capabilities. Jim Barksdale, former CIO and COO of Fedex, and then CEO of Netscape, says, “It was first outward and visible demonstration of a practical, productive use of Internet by a real business for a real business purpose.”2 One of most important contributions to Internet’s formative years was Smith’s appreciation for technology. (Mintzberg, 2000, 89-96)
The creation of Internet meant Fedex could build one-to-one relationships with its customers. The corporate culture of Fedex was based on superior customer service and displayed an attitude of “doing whatever it takes to serve customers” from top to bottom. The expansion of Internet, therefore, was something Fedex could use to enhance its customer base and create a competitive service advantage. “It allowed Fedex to not only let its customers pull real time information and data into their internal systems, but also to become more involved in internal processes of its customers.” (Grant, 2002, 87)
“Smith’s vision and leadership has been a major contributing factor in transforming Fedex into an E-business. Although there was no consciously planned strategy to build an E-business, decisions that company made to align organization structure with systems and processes has carved out a model for building a successful business for twenty-first century.”2 Under Smith’s leadership, core of Fedex’s strategy has been to “use IT to help customers take advantage of international markets.”2 However, of greater significance is its “information super highway”, which lends support to transportation logistics efficiency as well as selling and supply chain logistics solutions management.
Organization Structure
Value Chain Analysis and Identification of Core Competencies:
Fedex has many ways in which it adds value to organization. First of all a good line of communication with customer adds value because it allows Fedex to see what customers’ needs and desires are. In addition, all of Fedex’s computer systems and programs really add value. They keep company more organized by making tracking of packages easier along with facilitating Fedex’s focus of on time deliveries. Technological development has always been a major way for Fedex to add value since it can cut costs along with creating new ways of finding competitive advantages. Lastly, Fedex’s improving and changing of organizational structure over last few years has added value. By developing different subsidiaries all operating under Fedex brand name has organized company along with improving communication inside company from one division to another. (Mintzberg, 2003, 89)
Managerial Implications
Fedex has enhanced information management in terms of being able to identify critical factors involved with success of an E-business. It has successfully transformed from a conventional business into an advanced E-business in its network economy. Fedex has succeeded in several areas including: visionary leadership in application of new technologies, defining information infrastructure, integrating internal processes, and aligning organizational structure for maximum benefits. (Johnson and Scholes, 2006, 45-98)
Fedex’s key strategy was customer service and for its customers to adapt into its new information technology. Fedex harnessed its new technologies and extended electronic business to all of its customers. Fedex has developed this technology and made it possible for its customers to connect with them in any way customer chooses.
The restructuring of Fedex addressed many processes but in particular integration of logistics as well as supply chain management proved to be most successful. The enabled Fedex to cut inventory levels, reduce costs as well as shortening order-cycle time. This was key for Fedex to improve quality of service they provided to their customers. (Johnson and Scholes, 2006, 45-98)
Fedex has laid out a vast matrix of transportation and information networks that will provide them with a huge competitive advantage for some time. To function as an E-business companies will need to become increasingly customer/solutions focused. All processes must be integrated to ensure a unified customer centered front that provides services throughout value chain, logistics, and parcel carrier business. Fedex’s new restructuring will serve their customers and apply new technologies constantly to improve their response time and value of information they provide. Fedex will continue to build, innovate, and exploit technologies from successful base they have created and will be on top of industry for a long time to come.
References
Dale, B.G. 2004: Managing Quality 4th Edition McGraw Hill, Oxford
De Wit, B and Meyer, R: 2004: Strategy: Process, Content, Context 3rd Edition Thomson
Grant, R. 2002: Contemporary Strategy Analysis 4th Edition Blackwell Publishers, Oxford
Johnson, G. and Scholes, K. 2006: Exploring Corporate Strategy 7th Edition Prentice Hall, Europe
Mintzberg, H ; Lampel, J ; Quinn, J B & Ghoshal, S: 2003: The Strategy Process 4th Edition Prentice Hall, New Jersey
Mintzberg, H: 2000: The Rise and Fall of Strategic Planning Prentice Hall, London
Lagrossen, S: 2003: Exploring impact of culture on quality management. International Journal of Quality and Reliability Management Vol. 20 No. 4 Accessed via Emerald full text 10.10.06
Lockamy, A and Khurana, A 2005: Quality function deployment: total quality management for new product design. International Journal of Quality and Reliability Management Vol. 12: NO. 6 accessed via Emerald full text 10.10.06
