FedEx Feels The Pinch Of An Economic Slowdown
FEER(9/13) FedEx Feels The Pinch Of An Economic Slowdown
Updated: Wednesday, September 5, 2001 06:15 PM ET
By Alkman Granitsas in Hong Kong
It's crunch time at Federal Express Corp. The world's biggest express transport company is feeling the heat of a worldwide economic slump. Deliveries are down, earnings are slipping and so too is its stock price.
From top to bottom, FedEx is cutting costs: It's discarding 29 of its old cargo planes and trimming expansion plans, there's a hiring freeze and, for the first time in 13 years, the company-wide profit-sharing plan is being put on ice. Even the chairman, Fred Smith, who founded the company, is feeling the pinch. Last month his annual bonus was cut by 10%.
But one thing FedEx is not doing is laying off people — none of its 144,000 employees worldwide is to face the axe. Since it began operations in 1973 FedEx has developed a reputation as a place that cares about its people; where hanging on to staff is not just the right thing to do, but it's good for business, too.
"The problem is that if you trim too much, when the economy picks up you are going to have a real problem hiring those drivers or pilots back," says Michael Friedman, an analyst at American Express Financial Corp. in New York. "I don't want to say that FedEx is like a family, but they do have the reputation of not trimming too much."
FedEx's employees have responded to this approach. In the United States, FedEx regularly receives awards for its human resources policies. And in Asia, the company dots the rankings of the region's best employers.
In this year's Best Employers in Asia survey, compiled by U.S.-based consulting firm Hewitt Associates, FedEx Malaysia ranks as one of the 20 best places to work in the region, while FedEx units in Hong Kong, Singapore, Thailand, Taiwan and South Korea are ranked among the best places to work in their countries.
There is no single explanation for this. Obviously, things like job security matter. But so too do the many other staff policies that the company has implemented over the years.
Ask any FedEx worker why they like their job, and they will likely tell you about the company's pay and benefits, its in-house training (up to six weeks for some jobs), career prospects (91% of all managers are promoted from within the company), and the perks-free dinner tickets for employees who have provided outstanding service and, among the more unusual practices, having aircraft named after their children.
But it's more than that. The company shows respect for its workers — through communication and empowerment. Every FedEx worker in the world, from a customer-service agent to a managing director, is given autonomy to make decisions and speak his or her mind. Feedback is very much the key to making FedEx work.
"There are a lot of different facets to our people philosophy," says David Cunningham, president of FedEx's Asia-Pacific division in Hong Kong. "But communication is an absolute key."
Once a year, FedEx engages in a worldwide self-criticism. It conducts an anonymous poll of each and every employee in which workers score their managers, their pay, their job conditions and their general satisfaction. Managers' bonuses are partly tied to how well they score in the survey.
"You get to know your workforce very well," Cunningham says. "Every year, 7,000 Asia-Pacific employees tell me how I'm doing."
There are other examples of communication: Daily briefings are held between workers and bosses; there's a quarterly conference call between Cunningham and his managers; and the company has a quasi-judicial complaint procedure whereby disputes can be appealed right to the top of the company.
FedEx operates an in-house satellite-television network that broadcasts five-minute company updates every day to 1,200 sites worldwide.
In the U.S., that kind of communication is ground-breaking. In Asia it's revolutionary. "Over the past 25 years, feedback within a company has gotten more common in the United States. But doing that in Asia is really unique, it's really unheard of," says Cunningham.
Indeed, when FedEx started to localize its management staff four years ago, it discovered that many otherwise talented managers were not used to an environment in which employees could ask questions and make suggestions. So FedEx created a new programme to coach Asian managers on how to handle staff feedback.
"Here in Asia people are used to declaring: 'I am the boss!'" says Ann Mullis, vice-president for personnel at FedEx Asia-Pacific. "But that doesn't really work in this environment."
Employees like it. Steve Wan, a senior courier, says life's been better since he left a rival express company to join FedEx in Hong Kong nine years ago.
"Here at FedEx I feel like there is fairer treatment by management and there is a better team spirit," Wan says. "At FedEx we have an open-door policy, so if I have a question I just walk into my boss's office."
He thinks so much of it that at just 31 years of age Wan has already decided: "I think I will work here until I retire."
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SPIT AND POLISH
FedEx's management style owes much to founder Fred Smith's personal philosophy. A former U.S. Marine Corps pilot, he based much on his experience in the military.
One example is daily morning briefings. Managers lead line workers, such as cargo handlers or couriers, in a quick discussion of the day's work. Sometimes they will limber up with a few minutes of group callisthenics.
