Case Study: Best Practices at

FedEx Corporation
Assignment 1
Human Resources

Group 4
Details of Team Members

Name Roll No PRN

Anish Padhi C-04 19020441036
Divyanshu Shukla C-14 19020441087
Namrata Singh C-35 19020441160
Priyanka Maharana C-46 19020441196
Shipra C-56 19020441243
Vinay Kumar Chaubey C-66 19020441307
1

SUMMARY

The case examines FedEx Corporation’s various innovative HR practices, which earned it, the
reputation of being one of the most employee friendly companies in the world. The case gives
an overview of the best practices employed by the company in the recruitment, selection,
training and development of employees. It also details the performance appraisal system and
employee retention strategies of FedEx. Finally, the case reviews the benefits reaped by the
company because of the employee friendly HR practices.it further helps us in understanding
the role of an organizational philosophy in the development of human resource policies in the
multinational organization. FedEx being among the 100 “Best Companies to Work For” in the
US announced by FORTUNE magazine and the Great Places to Work Institute. FedEx (the
largest employer in 2008 list and only shipping company included) now figures in this list in
10 of the past 11 years after being named to the “Best Companies to Work For” Hall of Fame
in 2005. FedEx was ranked as 97th overall. FedEx already has a reputation of being one of the
most employee-friendly companies in the world.

The history of FedEx goes back to 1971, when Frederick W. Smith felt the need for an
airfreight system which could deliver documents overnight. He decided to setup his own
company to effectively serve this need. Smith always believed that since FedEx was essentially
a service organization, employees were largely responsible for ensuring success. FedEx was
incorporated as ‘Federal Express Corporation’ in June 1971 at Little Rock, Arkansas, US. Since
it began in 1971, its’ management focused on providing a suitable work environment that
encouraged employees to come up with innovative solutions. Such was the commitment of
the employees to the company that, when FedEx was going through severe financial
difficulties during the first couple of years, the employees were prepared to sell their personal
belongings. They were also prepared to 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.

FedEx has developed several innovative human resource programs over the years. These
programs have served as a benchmark for many companies. In 1973, Founder and CEO, Smith
had developed and implemented FedEx’s ‘People-Service-Profit’ (PSP) philosophy. This
philosophy was based on the fact that if FedEx took proper care of its employees, they would
provide efficient service to the customers. This in turn would benefit the company by
generating more profits. Survey-Feedback-Action Program, the SFA program (a key employee
relations and satisfaction program) helped management take decisions regarding
promotions. From its inception, the SFA was administered manually, but that changed in 1992
with the introduction of online survey system in the US and other automations. Each April,
every employee is asked to participate in the on-line survey. After the results are gathered,
managers hold feedback sessions with their employees to discuss the survey findings and
identify problems within and outside of their department. In 1988, FedEx devised a program
known as ‘Leadership Evaluation and Awareness Process’ (LEAP) to encourage non-
managerial cadre employees to move to the managerial level within the company. The
employee communication programs implemented by FedEx included the SFA program,
Guaranteed Fair Treatment Procedure and Open-Door Policy.

HUMAN RESOURCE ASSIGNMENT GROUP 4

2

FedEx also devised a mechanism to address and resolve employee grievances. This was apart
from employing a formal communication system to inform employees about the major events
taking place in the company. Job Change Applicant Tracking System (JCATS) is an on-line
computer job posting system that allows hourly employees to post for any available job.
FedEx rewards employees for their work with awards such as the ‘Bravo Zulu’ and the ‘Golden
Falcon Award’. FedEx is an example of an organization that has created an effective HR
strategy that supports productivity and profitability.

SWOT ANALYSIS

1. Strengths
I. Reputed Brand: - FEDEX very good brand value in US. Brand value is very
important attribute for growing strong business across the world.
II. Global Presence: - FEDEX is a global brand which serves customers across more
than 200 countries. Its global network including air and ground
network provides delivery of packages to more than 220 countries and
territories through a large range of U.S. and international shipping services.
III. Equipped with New Technology: - FedEx has adopted excellent technologies
which enables the customers to easily pick and drop from more than fifty
thousand locations in US only. It picks up and delivers more than 14 million
shipments daily.
IV. Good Financial Performance: - The financial performance of FedEx in the past
few years and has kept growing stronger. In 2018, its revenue has increased by
around 9% as compared to the previous year.
V. Broad Service Portfolio: - FedEx has brought a broad portfolio of services for its
customers to suit the needs of a diverse range of customer segments. Varying
customer segments have varying needs that need being fulfilled.
VI. Strategic Acquisitions: - The company has made a series of strategic acquisitions
to improve its portfolio of services. It acquired P2P Mailing Limited which is a
leading provider of worldwide, low-cost e-commerce transportation solutions
and many more.

2. Weaknesses

I. High Operating Costs: - The operating costs for FedEx have kept growing year over
year.
II. Low Scope for Differentiation: - The overall level of competition in the parcel
industry has increased a lot. This has led to reduced scope for differentiation in
services. Competing brands are aggressive about improving their market share.
Most of them provide a similar kind of services.
III. Over-Dependence on the US Markets: - FedEx depends on the US market for a
very large part of its revenue. US accounted for more than two third of the brand’s
revenue. Its international revenue was just around half of its revenue from US.
This shows its over dependence on the US markets.

HUMAN RESOURCE ASSIGNMENT GROUP 4

3

IV. Seasonality of Business: - FedEx’s another weakness is its seasonality of business.

Its businesses are cyclical in nature. As seasonal fluctuations happen, they affect
volumes, revenues and earnings. US business peaks in late November and
December whereas its international business peaks before the Holiday season. So,
seasonality can have a major effect on its business and revenue.

3. Opportunities

I. AI and Digital Technology: - Technology offers the biggest opportunities in the

twenty first century for everyone. In the parcel industry too AI and digital
technology can be used to provide the customers with better experiences.
II. Partnerships: - FedEx brand has emerged as an excellent supply chain partner
offering great solutions for supply chain issues. It can strike more partnerships
with other brands that can help it improve its range of services and capabilities.
III. Diversification: - Diversifying into related fields will also help it grow its business.
FedEx is financially strong and investing in new businesses can help it overcome
some key challenges that are obstructing faster growth in the international
markets.
IV. Scope in Asian Countries: - The Asian economies are among the fastest growing
currently. India and China offer major opportunities of growth for brands like
FedEx. The company must try to grow its presence in these markets to grow its
international range.

4. Threats

I. Competitive Threat: - Competition in the parcel industry has grown intense. Top
competitors of FedEx include UPS, USPS, and DHL. UPS is at the top with the highest
market share. FedEx is investing more in increasing their market but nevertheless,
competition is still the biggest threat in the way of growth.
II. Regulatory Threat: - The regulatory environment has grown very fast around the
globe which is being a barrier to fast international expansion. Apart from increased
compliance related costs, brands have to worry about compliance in the several
markets they operate in other nations.
III. Strengthening Dollar and Economic Fluctuations: - Economic fluctuations from
time to time in the international markets can affect sales and revenue. Moreover,
the continuously strengthening dollar worldwide is affecting the income from
international markets. A stronger dollar leads to reduced net income for the US
based companies.

BEST PRACTICES IN THE ORGANISATION

Larry McMahan, Vice President of Human Resource 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.” Fedex ensured that the
new recruits were imparted proper training so that they can handle the tasks they were

HUMAN RESOURCE ASSIGNMENT GROUP 4

4

expected to. Apart from job training, there lessons helped in the holistic growth of the
employee in the organisation. FedEx believed in promoting people from within to higher
management positions. The Survey Feedback Action (SFA), 1979, helped management take
decisions regarding promotions, appraisals etc. Two of the best practices mentioned in the
case study are: -

1. FedEx devised a unique program known as the Leadership Evaluation and Awareness
Process (LEAP) to encourage non-managerial level employees to move to the managerial
level within the organisation. This happened in the year 1988, when FedEx observed that
10% of the non-managerial level employees who were given the managerial task for the
first time quit their jobs in the first 14 months of taking up their new tasks. Under LEAP,
such employees got a chance to assess and evaluate their abilities to take up managerial
responsibilities. They underwent a gruelling process in order to qualify for these positions.
The components of the LEAP program included “Is Management for Me” evaluation,
which involved: -

• 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 managerial skills, and
• Evaluation of the employee

This method helped management assess leadership and managerial skills of its employees
and also provided employees the opportunities to assess their potential.
FedEx also hired employees on a temporary basis, who were paid hurly on the basis of
tasks they performed. They felt the need to provide opportunities to these temporary
employees, to gain regular employment in the organisation. Due to this the company
devises an on-line job posting system known as “Job Change Application Tracking System”
(JCATS). Jobs were posted on this portal every Friday and once the temporary employees
posted their job applications, the system retrieved their job records from PRISM
(Personnel Records Information System). Based on the data available on this, employees
were given scored and were ranked accordingly. The employees who were ranked high
were made permanent employees. This practice motivated people to work harder and
perform well. Regular employees who were seeking a job change or wanted a transfer to
a new place were also eligible to post their applications through JCATS.
Taking another step, FedEx launched a fully automated, intranet-compatible, skill
assessment and succession planning program called “SPEED” (Succession Planning
Executive Education). This enabled senior employees including vice presidents and senior
vice presidents, to evaluate and rank the skills, preparedness and promotability of those
employees who reported directly to him.

2. FedEx 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. This program included the SFA program, Guaranteed
Fair Treatment Procedure (GFTP) and Open-Door Policy (OPD). Every year in April, FedEx
conducted the SFA program to get to get an overall picture about the functioning of the
management and the leadership and managerial skills of its managers, as perceived by
the employees. This program was made online for easy access.

HUMAN RESOURCE ASSIGNMENT GROUP 4

5

Since The online survey enabled the employees to frankly express their views on the
management anonymously, it helped FedEx evaluate the performance of the managers
and also solve employees’ problems and improve workplace relations. On the GFTP
program the employees could complain about the disciplinary action, performance
reviews, retrenchments and job postings. The rule being, the complaint had to be
submitted by the employee within seven days of the occurrence of the incident leading
to the complaint. The concerned manager 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 employee isn’t satisfied with the manager’s decision, he/she can
challenge it within seven days.
At the second stage, the complaint was re-viewed either by the vice president or a senior
vice president of the division. If the complaint is still not addressed, It was reviewed by
the FedEx supreme court headed by Smith. The Supreme Court had the authority to
reverse any decision taken by anyone at the previous stages.
These two policies address one of the major problems that the organisations encounter
these days, Employee growth and Grievance Redressal. And not only did FedEx come up
with the innovative and creative solution to it, I also set an example for the ways an
organisation should handle its employees.

QUESTIONS FOR DISCUSSION:

Q1. FedEx 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.

Ans -
People-Service-Profit PSP was a philosophy developed by Fredrick W Smith who believed
that since FedEx was a service organization, its success depended on its employees. This
is where the idea of the PSP philosophy came to him. The philosophy stated that 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 bedrock of all management decisions taken at 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.
• FedEx also automated 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. It is also gathered key employee related
data to recruitment and selection, training and development and performance
appraisal
• In terms of Service all customer facing employees spent a minimum of 8 weeks of
intensive training, that included 4 tests and a minimum score of 85% was required
to qualify, this emphasises the focus on efficient service

HUMAN RESOURCE ASSIGNMENT GROUP 4

6

• Via PRISM FedEx tested and identified the areas in which there was a need for
improvement and pushed the employees to better performance
• In mid-1980 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 - Management
Principles, Outdoor-based learning, and Electives. The faculty at LDI, also known
as Management Preceptors,' consisted of managing directors’ senior managers.
The program was developed in order to train the company's new front-line
managers. This program imparted training in leadership field operations
• In order to encourage non-managerial cadre employees to move to a managerial
position within the organization, FedEx developed LEAP (Leadership Evaluation
and Awareness Process. LEAP was a resounding success as it helped the
management gauge the leadership and managerial skills of its employees and also
provided the employees an opportunity to assess their leadership potential and
showed them a path towards the same.
• Through the JCATS (Job Change Application Tracking System) it provided the
temporary employees a path to become permanent employees and gave them
motivation to give their best in their current job. It was also a great way for the
existing permanent employees to make a switch to different role
• SPEED (Succession Planning Executive Education) enabled the senior management
to periodically evaluate employees who directly reported to them and were likely
to replace them. These employees were appraised about the areas they needed
to improve on and were mentally prepared to take up the role
• In terms of communication they had three programs, SFA program, Guaranteed
Fair Treatment procedure (GFTP) and an Open-Door Policy (ODP). All these were
geared towards the addressal and the resolution of the employee grievances
• FedEx used the PSP model to give out performance appraisals as well, the pre-tax
profit margin was a metric to arrive at the incentive to be given
• Any employee who was 21 and above and had worked 1000 hours within a
calendar year automatically qualified for the profit-sharing plan

Q2. 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.

Ans -
At the core of the philosophy of FedEx was the PSP model, this stands for People
Service Profit in essence it followed the principle that Happy people that is employees
will lead to better service which leads to better service and that leads to higher
profits.

For this philosophy to work FedEx needed the employees to be highly skilled and
extremely customer oriented and at the same time be ready to give it their all to the
company, this was achieved in the following ways,

HUMAN RESOURCE ASSIGNMENT GROUP 4

7

• Right from orientation employee development is a major focus for FedEx, with CSR
trainees requiring a minimum of 4 weeks of training before being allowed to handle
customer calls. Couriers and service agents had a minimum of 4 weeks before being
allowed on field
• FedEx had a continuous development program for existing employees so that they
could keep developing their skills
• FedEx conducted a bi yearly Job knowledge testing program that was compulsory to
Pass. PRISM stored the evaluation details and further suggested reference material
that the employee had to use to improve his or her performance
• In the mid 1980’s FedEx created Leadership Development Institute (LDI), which
contained several training programs for various levels of Management cadre
employees, the faculty of LDI were MDs and senior managers
• FDI further developed an 11-week management program called ‘Field Applied
Management Education’ (FAME) that was specific for new frontline managers
• For the Information System employees, FedEx tied up with Christian Brothers and
offered a 40 week program, that was fully paid for by FedEx and imparted training in
Marketing accounting and economics as well as object programming, transaction
management, distributed data management and client server computing
• Succession Planning Executive Education (SPEED) was a program that evaluated and
test those employees that were about to step into senior management positions,
based on the assessment they received they were offered suggestions on the areas in
which they needed to improve on

Q3. 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.

Ans –

Name of Program About the Program Strengths Weakness

GFTP Ensured all types of Multiple levels being Time taking

Guaranteed Fair employee grievances involved made it a process
Treatment Policy were addressed transparent Process Needed many
The employee was senior level
Heard at upto 3 levels of assured of no biases employees to
Management and prejudices being drop regular
at play work to get
involved

PSP Take care of Has been a clear Needs people

People-Service- People(employees) and success for FedEx with very high
Profit they’ll give great service internal
that will generate higher Makes the motivation
profits employees feel truly
valued All employees
need to

HUMAN RESOURCE ASSIGNMENT GROUP 4

8

This was the core The employees as a completely

philosophy of FedEx result worked for bought into the
themselves rather philosophy for it
The belief is that people than for the to be a success
are the most important company
asset

SFA Employees were divided Cost Effective Inflexibility

Survey Feedback into work groups and the
Action representatives of these Generalizability Issues with depth
groups were asked to
respond to a Reliability Needs high level
questionnaire of honesty from
Versatility the employees
The result was tabulated
and shared with the work
group and feedback
sessions were conducted

Post this a formal action

plan was developed to
solve the problems

LEAP It was developed to Gave the employees Depended a lot

Leadership improve leadership a clear path to a on Managers
Evaluation and effectiveness and management
Awareness Process retention position Biases

Was compulsory for an Extremely cost

employee to a effective since there
Management position was no external
hiring
The process contained the
following steps - A one day Increased Morale
class about management,
Profile generation,
Manager
Recommendation, Peer
Assessment, Panel
Evaluation

PRISM It was the human resource One Stop for all Not cost
Personnel Records information system of employee related effective
Information FedEx data
System Employee files
It was a fully automated Data readily were difficult to
comprehensive system available for track

HUMAN RESOURCE ASSIGNMENT GROUP 4

9

which enabled significant performance

and constant interaction Evaluation by Security Breach
with all managers and all Managers
employees

Q4. 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.

Ans -
Some of the best HR practices that were implemented at FedEx, made it one of the best
places to work. The company has a reputation for being the most employee-friendly
workplace in the world. Complimenting FedEx’s HR innovation, Work Force Magazine has
commented - “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.” 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
inception in 1973, the people-service-profit (PSP) philosophy viewed employees as the
key contributors to the company profitability. The corporation’s philosophy was that
employees should be doing the kind of work they want to do. The HR department
managed to build a very strong relationship with the employees, a Two- way relationship
which eventually led to the so called Heightened Organizational effectiveness.

ISSUES AND SOLUTIONS

As mentioned in the study that company faced issues in Recruitment in its initial days as
people thought that joining the new company was a risky proposition. In response to this
FedEx lured functional experts by offering them stock options and opportunities to work in a
stimulating and challenging environment. Another issue faced by the company was that the
increasing number of applications, the old manual process of recruiting proved to be
inconvenient for applicants as well as 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 Icon’ option placed on wwww.fedex.com.
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
aptitude test which tested their skills in basic Maths, 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. The
new system expedited the screening process and reduced the processing time by nearly 50
%.

HUMAN RESOURCE ASSIGNMENT GROUP 4