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FedEx Case Study

Submitted in partial fulfillment of the requirements

For Master of Business Administration Degree

Tiffin University at University of Bucharest

Information and Decision Support Course

By

Ciprian Jitaru

Instructor: Prof. John J. Millar Ph.D.

Dean Emeritus and Professor of Management

Cohort 9

November 14, 2010

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1. How the standards set by Fred Smith for FedEx teams improve organizational

performance?

Before talking about the standards set by Fred Smith after the reorganization process we

must talk about the company standards set during thirty-eight year since he founded FedEx.

During all those years FedEx establish a standard of “commitment to total quality service”. Also

the company was ranked consistently as “Worlds Most Admired Companies”, “100 Best

Companies to Work For” and other such awards. So from the beginning high standards were set

and now in the increasing turbulent and competitive business environment FedEx has to set new

standards in order to maintain all those achievements.

What were the main issues that FedEx faced? Main issues were related to the company

growth: due to the company size it became much more difficult to coordinate the activity, to

maintain efficiency, to meet customer’s expectations and to manage employees. Fred Smith had

to find out a solution to address all those issues. The source of those issues was company growth

so the solution found was to reorganize FedEx in eight Strategic Business Units. Splitting the

company in eight business units made mach easier to control the efficiency of each business unit.

Not only that but those business units were more flexible and this allowed them to respond much

better to the customer expectations. Also this reorganization allowed a better managing of the

employees.

Maybe many managers would stop here after reorganizing the company activity in

business units. But Fred Smiths went one step further and he changed the way that employees

were working inside the business units. In stead of a hierarchical structure and approach he

chooses to implement a team approach to get things done. By doing this he transferred the

leadership roles from the managers to the team members allowing them to have an increased
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decision making authority which led also to an increased team accountability and responsibility.

These changes stimulate the employees to find out new solutions for their problems in stead of

waiting for them to come from manager’s levels. Teams are task oriented and having all the

members of the team looking for a solution when a problem occurs is much more productive

than having a single manager looking for a solution. Maybe the best example for a standard set

by Fred Smith is the “golden package” concept. This is a concept focused on the customer need

to have the package delivered in time so it was oriented towards customer satisfaction. In the

same time the concept was reinforcing the team work idea by involving all the team members in

finding a way in which the package can be delivered in time.

Also “superteams” were organized. Those teams were self managed and had little

supervision from the managers. It is known that such teams tend to be more innovative and have

a speed and quality above normal teams. Such teams were directly involved in solving problems

(see billing problems) which saved a lot of money and improved company efficiency and

profitability.

In few words we can say that organizing the company in business units improved both

the quality of the services provided by FedEx but also the efficiency and profitability. Going

further organizing self managed teams allowed FedEx to boost its services quality, efficiency and

profitability trough a better usage of the employees skills and creativity and by having them

motivated by this organizational model.

2. What motivates the members of FedEx to remain highly engaged in their teams?
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Lets discus first what is the effect of organizing people in self managed teams and after

that what is to be done in order to maintain their level of engagement.

What are the main characteristic of a Self Managed Team (SMT)? First of all I think that

the most important characteristic is the fact that SMT have a higher decision making authority.

Maybe this characteristic stems from the fact that the leadership is within the team compared

with normal teams were the leadership is outside the team. The simple fact that team members

are involved in the decision-making process has two immediate effects: team members are

highly motivated because they have “a sense of belonging and ownership in one’s work” and

they feel accountable for the result of their decision. However there is a direct effect on the result

trough the fact that the decision was the result of a team work and so the chances to have a good

decision are increased but also an indirect effect because the team members involved in the

decision making process will do their best to implement the solution in such way that the result is

maximum. In other words if I am involved in the decision making process is more likely to fight

to have a proper implementation compared with the implementation of a solution were I wasn’t

involved.

Another characteristic of SMT is that team member’s roles are interchangeable. This has

in my opinion two consequences: one is that the company is able to harvest much more from its

employees potential and second , the employees are much more motivated because trough this

role changes they have the opportunity to do new tasks and avoid to be bored.

In a SMT work effort is cohesive compared with a normal team were it is individual. This

cohesive effort is improving team results because compared with an individual work effort were

the worker is focused on his separate task without doing any effort to integrate the individual

task in the team objective in SMT all the team members are focused on the final team objective.
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This approach allows team members to “see a bigger picture”, and a much clear final result of

their work and this is a powerful motivational factor which keeps the team members engaged.

In FedEx the use of SMT kept a high level of employee’s engagement. “Quality Action

Team”, the “superteams” are clear examples of SMT usage in order to increase efficacy but also

to keep all employees involved and motivated.

But to keep the level of involvement after the SMT model was implemented required

another set of actions took by Fred Smith. First action was to create a “job-secure environment”.

By doing this he created the right environment for SMT to perform and employees to be

involved. Think what would be the level of employee’s involvement in a SMT working in an

environment were mistakes and failures are punished. Immediately employees will avoid being

involved in decision making process, will avoid responsibility in short it will be no SMT.

Another method used to keep FedEx members highly engaged is reward and recognition

offered trough the Circle of Excellence award offered to the best FedEx station. This award is

motivating people in two ways: one is trough offering recognition and second by stimulating

competition between teams.

3. Describe the role FedEx managers play in facilitating team effectiveness.

Self Managed Teams (SMT) is characterized by the fact that the leadership is

inside the team, not outside. However this doesn’t mean that those teams have no

management. In SMT case the manager role is shifting from management to a facilitator

role.
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As a facilitator the mangers from FedEx has to stimulate team members to take

assume responsibilities and to take charge for problem solving processes. In order to

assure that mangers from FedEx had to empower the teams by giving them the power to

make changes needed to improve productivity and customer satisfaction. In this process

of power transfer from managers to teams implied automatically a responsibilities

transfer towards the team. In other words, if you take the decision you have the

responsibilities for the results derived from that decision. By doing this FedEx managers

were improving team effectiveness because teams were accountable for the results and

also the motivation among team members is improved due to this power and

responsibilities transfer.

Another way used to facilitate team effectiveness is to have FedEx managers

involved in the goal setting process, but compared with normal team in SMT the role of

the manager is to set clear and attainable goals always using team members input and

ideas. This input becomes even more important after the goal is set because the team

members are those which are providing the solutions to reach the goal. More than that

FedEx mangers have to act on the best employees suggestions. So compared with normal

teams where the manager is setting the goal and is also giving the solution needed to

achieve this goal FedEx mangers have a facilitator role and setting goals and finding

solutions is mostly a team task.

Another role that FedEx mangers are playing in SMT is to coach and give

feedback. In order to maintain team effectiveness and motivation a manger has to give

feedback no matter if it is a normal team or a SMT. The difference in SMT case is that

the coaching and feedback process is focused on team activity rather then on individual
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like in normal teams. From what I saw in FedEx case the feedback was focused on

positive examples and those examples were used also in a share best practice process like

Circle of Excellence Award.

4. Leaders play a critical role in building effective teams. Cite evidence from the

case that FedEx mangers performed some of these roles in developing effective teams.

As we discussed in the answer to the previous question the role of the manger in a

SMT is to facilitate not to manage in the classical way. The mangers has the task to create

the optimal work conditions in order to have team members ready to take responsibilities

to work efficient and solve problems on their own.

Let us discuss about the actions that FedEx leaders took in order to assure optimal

work conditions. What is the meaning of optimal work conditions in this case? Fred

Smith was trying to change FedEx structure from classical one in a SMT structure. In

order to have SMT performing effective he had to build the work environment needed for

this team. People are usually afraid to take responsibilities also the teams are afraid. In

order to minimize this he had to build a “job-secure environment” so that people are not

afraid to take decisions even if sometimes the results are not very good. That

environment build by FedEx helped to develop effective SMT.

Another example of actions performed by FedEx leaders in order to build

effective teams is forming the Quality Action Teams. Teams are not appearing in a

spontaneous way, is the role of leaders to build and develop those teams. In this case
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managers not only supported the team development but after results were visible and

positive they used this model world wide.

The “superteams” are another example were FedEx leaders developed effective

teams which are working with little supervision.

In my opinion the most effective action taken by FedEx leaders in order to

develop efficient SMT is the fact that they assured the right work environment for those

teams and they established a reward system to encourage the team development.