FedEx the largest logistics provider

Executive summary

FedEx is the largest logistics provider with over 275000 employees. Like any other large organizations FedEx also faces some people issues which affect their progress. In this report we have identified the major employee problems and provided the solutions for it.

Firstly we will provide the basic background of FedEx and their Human resource management structure in order to enhance our research in their issues. We have identified 4 major drawbacks or problems in respect to the employees.

  • Diversity
  • Employee stress
  • Employee retention
  • Compensation system

We have analysed these issues and come up with able solutions which they can implement to achieve more success. Our research is based on reliable internet sources, articles and news publishments. For the theory side of the report we have used books and knowledge through previous experience handling these issues.

Before we move onto the main report we would like to acknowledge Mr Han kok for his guidance and value added feedback.

Introduction

History of FedEx

FedEx Corporation provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. FedEx was founded in August of 1971 and it started its operations on April 17, 1973 with the launch of 14 small aircrafts from Memphis International Airport. The first change in the company's corporate identity came in 1994 when Federal Express officially adopted "FedEx" as its primary brand.

FedEx expanded internationally in the late 1980s, buying Italy's SAMIMA and three Japanese freight carriers in 1988 and Tiger International in 1989. That year it doubled overseas sales to become the #1 air cargo company. In 2001 FedEx struck a deal with the United States Postal Service to transport mail shipments and FedEx drop boxes were placed in post offices.

In 2006 FedEx bought UK-based express transportation company ANC Holdings for about $240 million, gaining a fleet of 2,200 vehicles and a network of 80 offices. (ANC was re-branded as FedEx UK.)

Today, FedEx has more than 275,000 people worldwide with an average daily volumeof 7.5 million shipments. It serves over 220 countries. FedEx Corp today ranked number one in customer satisfaction in the Express Delivery industry.

Human Resource Structure in FedEx

There are three levels of executive positions in the Human Resource Management of FedEx. The first level is the Board of Directors; they oversee all the operations broadly and take charge of information technology oversight, nominating and governance, audit and compensation and so on. The second position is Executive President and Chief Executive Officer; he is responsible for final decisions, executive management and worldwide activities of FedEx. His specific works are mainly focused on global communications, marketing and sales, strategic planning and analysis. Lastly, the positions are for Executive Vice Presidents & Chief Officers of different fields and Chief Executive Officers of different territories worldwide, they are in charge of global financial functions, setting the technology direction, solving problems relating to government regulations and developing and executing territories around the world.

Employees ply a very important role in the success of any organization. Thus most outstanding CEOs or Human Resource Managers always claim that people are their most valuable asset. Via proper Human Resources Management, FedEx has lived up to this saying for several decades. We consider that this is why employees of FedEx are a highly productive, satisfied and motivated work force. This is done through providing different kinds of training, renowned benefits, excellent safety and so on.

There is no perfect management as well as no perfect thing. As it is known to all, FedEx has gained huge success in Human Resource Management since the date of its foundation. Nevertheless, it also faces many people related problems such as Diversity Practices, Compensation System, Stress and Retention.

Situation analysis and recommendations

Employee Retention

"Employee retention is a process in which the employees are encouraged to remain with the organization for the maximum period of time or until the completion of the project." (Source- www.retention.naukrihub.com)

Employees today are different, they have numerous opportunities and as soon as they are dissatisfied with their current job they immediately move to another job which they feel is better for them.

Though FedEx has a reputation of being one of the most employee-friendly companies in the world, its retention rates have been on the increase since 2001. FedEx has several innovative human resource programs which have proved to be very successful over the years but it has been struggling to keep its employees in the organization. This might be because FedEx has not come out with any new plans for its employee management and are still following their old ideas.

The importance of retention

The costs involved

Most companies do not realise the hidden costs of turnover. The cost of turnover adds hundreds of thousands of dollars to a company's yearly expenses. This makes a huge difference to the company's profits. By retaining employees the company will have more money to spend on satisfying its employees, which in turn reduces turnover and also increases the productivity of the employees. It adds up to be a very large amount that the company is losing out on by not retaining their employees. Some of the costs that come with turnover are recruitment costs, Training costs and administrative costs.

Company knowledge

Resigning employees may take valuable knowledge about the companies past history, current projects and future plans sometimes to the competitors.

Customer service

Business is usually done with a company because of the relationship the client has with an employee of the company. When this employee leaves, this relationship is severed thus leading to potential client loss.

Turnover results in more turnovers

When an employee leaves, the atmosphere in the office changes. This effect is felt throughout the organization. The other employees are required to make up for the loss. This might lead to more employees leaving the organization.

Regaining efficiency

If an employee leaves then a lot of time is lost in selecting a new employee and training him/her. The new employee might take some time to get used to his new job. Considerable amount of time is lost in this process.

Goodwill

Goodwill is maintained when the turnover levels are low. When the retention levels are high there is a chance of attracting better talent into the organization.

Why employees leave

Money is not the only motivating factor for employees; there are many other needs of employees that need to be satisfied for him/her to stay on in the organization for a longer period of time. Some of the reasons why employees leave are:

Unexpected responsibilities

Employees generally have an idea of what they want their responsibilities to be. In a situation where the job is totally different from his expectations, the employee feels de-motivated and eventually tends to leave the organization to look for a job that meets his requirements.

Lack of growth and appreciation

If the employee feels that his career is stagnant in the organization he will eventually look for other jobs which provide adequate growth opportunities. If the employee is not appreciated or rewarded for his/her work then he/she will not feel motivated to perform in the future.

Lack of trust

This is one of the most important aspects for an employee to remain in the company. If the employee feels that the management does not have trust in him or if he does not trust the management he will not stay in the organization for long. If there is no co-operation between him and his co-workers it becomes very difficult for him to continue working in the organization.

Compensation

Money is one of the most basic needs for employees. If the employee gets a better offer, he will leave the organization.

Stress

Employees cannot be overworked. Overworking leads to stress which in turn leads to de-motivation and finally the employee will resign from the job.

Solutions for managing retention

FedEx has realized the importance of retaining its employees. It has long been trying to reduce its turnover levels but has failed to do so. This is largely because of their one dimensional approach of providing higher salary packages to its employees. FedEx needs to spread out their strategies in a way to cover all the requirements of its employees in order to satisfy them and motivate them to stay back in the organization. The core aspects to be covered are pay, recognition, opportunity and benefits as mentioned in the fig below.

Interview process

This is the first stage of retention. FedEx should have an interview process which enables them to select the right person for the right job. The candidates must also be given an idea of the responsibilities that they might be given. This reduces turnover as most employees leave the organization at a very early stage due to unexpected responsibilities or because they are not the right people for the job they are in.

Performance assessment

Employees can be given bonus according to the level of their performance. This motivates the employees to work towards the required level and when their work is rewarded with adequate bonus the employee feels satisfied and will be willing to work in FedEx for a longer period of time.

Career development program

Every individual will want to know his/her career path in the organization. FedEx can offer various certificate courses for the employees to enhance their knowledge in a field of their choice to improve their chances of getting promoted.

Employee recognition/reward

Positive recognition for work improves the motivational levels of employees. Annual award ceremonies can be held where awards such as best employee of the year, most punctual employee, etc can be given.

Open communication

FedEx should have a two way communication system in place. It is important for the communication to flow from the employees to the management. Employees must be able to voice their views and give suggestions on the decisions of the management. By doing this FedEx will have a better idea of what the needs of the employees are and will be able to take steps towards fulfilling them

Recreational Facilities

Various recreational activities should be arranged. They may include annual or bi-annual trips, sporting activities, etc. By involving the employees in such activities, their stress levels can be reduced effectively.

Gifting culture

Giving out gifts to employees on their birthdays and having a short celebration within the department can make them feel that the management cares about them. This improves inter-personal relationship within the organization and also makes it a better place to work in. Finally FedEx can encourage its employees to have fun. The productivity of the employees always increases when they enjoy the work they do.

Diversity in workforce

Identify the diverse workforce that exists in an organization

Demographics competition for talent, marketplace demands, and the changing environment call for a diverse workforce. This workforce includes men and women, employees with different ethnic backgrounds, younger and older workers, physically challenged employees and other workers who differ from the dominant group of any organization. By bringing a greater pool of talent to the workplace, diversity often results in better decision making, an increased understanding of customers' needs, and a greater staffing ability.

Diversity in workforce can help any international organization to attain success in the industry. A significant part of a diverse workforce is bringing different and important perspectives to the workplace that can help companies gain a competitive advantage.

Diversity Practices in FedEx

There is a lot of conflict about international culture as FedEx does business all over the word. The difference of culture is a strong barrier in any organization. Moreover, there are various governments' policies pertaining to that country. FedEx has to obey the laws of different countries when they penetrate the global market. Specifically, they must obverse significantly the particular laws and policies in a country which can create problems for FedEx. Finally, it is very difficult to manage workforce in the word because of the varying personalities. In a nation, there are special characteristics about the manners of people. Understanding the personality is the key to successful people management.

So, FedEx takes its diversity practices seriously. "We stand as one", this is a philosophy that puts people first and allows diversity to be embraced. FedEx believes that, in order to meet the needs of a diverse customer base, diversity must be reflected in the organization. They recognize that as a global company, diversity is necessarily part of FedEx's culture. Further, the variety of cultures in the employment ranks enables FedEx to better understand the needs of their employees and customers, and to maintain an inclusive environment.

FedEx realizes that diversity gives unique perspectives on an ever changing marketplace. It is because of the commitment that FedEx has to diversity that FedEx enjoys a leading role as a Neighbour of Choice in the community. As mentioned briefly in the management section, FedEx shares their success and the success of their employees, with the community through thriving volunteer service efforts. This can reduce the problems of having a diverse workforce.

The diversity strategy includes supportive partnerships with many worthwhile organizations, such as:

  • American Red Cross
  • United Way
  • Adopt a School
  • Africa in April
  • Habitat for Humanity
  • Hispanic Business Alliance
  • NAACP
  • Special Olympics
  • Welfare to Work programs

For diversity mission statement, their diverse workforce, supplier base and supporting culture enable FedEx to better serve their customers and compete more effectively in the global marketplace. They value the contributions and perspectives of all employees regardless of race, gender, culture, religion, age, nationality, disability, or sexual orientation. They will strive in their workplace practices to deal with their employees, customers and suppliers in a fair and ethical manner.

FedEx values the unique contributions, perspectives, and differences of their team members worldwide, making possible the outstanding service and support provided to their global customers, and sustaining the communities. They have grown to become an industry-leading Fortune 100 company with a truly global presence by understanding the unique needs they serve, and by meeting those needs while exceeding expectations.

The secret of our success is the 275,000 FedEx employees and contractors who reflect the diverse world. Here, talented people from all walks of life, with an amazing variety of skills and perspectives unite with a common purpose - exceptional customer service.

A uniquely inclusive environment - a place where differences are celebrated as strengths and the concept of diversity is woven throughout the entire organization - from top to bottom. Existing to promote cultural awareness, education and information regarding a diverse variety of employee populations within FedEx, and to ensure the inclusion of all employees, these groups include:

  • The Asian Network Group
  • The African-American Network Group
  • The Hispanic Network Group
  • The Women's Network Group
  • FedEx Lesbian, Gay, Bisexual, Transgender (LGBT) & Friends Network

FedEx is very successful today; it is one of the most famous companies in the world. However, FedEx has faced a lot of problem about diverse workforce while operating in the international market.

Recommendations:

FedEx companies are consistently recognized for their progressive and innovative diversity policies and programs. FedEx provides numerous programs and resources designed to support the various diverse communities they serve. FedEx prides itself on building strategic partnerships with companies that share their commitment to diversity.

FedEx can apply the five key competencies for leaders:

  • Thinking globally, leaders must understand the economic, cultural, legal and political environments in which they do business.
  • Appreciating cultural diversity, today it is necessary to be more flexible and open than ever before. Understanding culture can help the international organizations attain the goals when they enter the new markets in the word. It is an important part which decides the organization's success.
  • Development of better technology, information and communications systems is the backbone of the global enterprise.
  • Building partnerships and alliances for an increased ability to negotiate complex alliances and manage network relationship.
  • Sharing leadership, this is a common vision and purpose, will collaborate to make effective decisions and strive for integration.

Workplace Stress

Introduction to Workplace Stress

Stress: can be defined as a specific response by the body to a stimulus, as fear or pain that disturbs or interferes with the normal physiological equilibrium of an organism. (Hensen, 1985)

Workplace stress is the harmful physical and emotional response that occurs when there is a poor match between job demands and the capabilities, resources, or needs of the worker. [1]

Stress-related disorders encompass a broad array of conditions, including psychological disorders (e.g., depression, anxiety, post-traumatic stress disorder) and other types of emotional strain (e.g., dissatisfaction, fatigue, tension, etc.), mal-adaptive behaviours (e.g., aggression, substance abuse), and cognitive impairment (e.g., concentration and memory problems). In turn, these conditions may lead to poor work performance or even injury. Job stress is also associated with various biological reactions that may lead ultimately to compromised health, such as cardiovascular disease, or in extreme cases, death. [1]

Introduction to FedEx Workplace Stress

Put at its simplest FedEx express delivers packages, it sounds like an easy operation but the scale and complexity of the process to ensure timely delivery is enormous. FedEx express delivers approximately 5 million packages a day, operates in 211 countries using 365 airports, 662 aircraft and more than 45000 fleet vehicles. FedEx has 275000 staff spread across the globe. Staff people or team are awarded for their exceptional working over what is expected from them on day to day working. There is a lot of work FedEx people do in one day so work related stress is normal among personnel. Getting rewarded and having a good career growth among such a huge number of employees needs a lot of good work and exceptional working ability. It automatically brings stress among employees to perform better. Birla (2005)

There are many other factors that bring stress among FedEx personnel:

  • High expectation from organization
  • Long working hours
  • Competition among employees for recognition and reward
  • Timely completion of work: FedEx is known for its Timely and undamaged Delivery
  • Sexual molestation
  • lack of job security among employees
  • Office Politics

How to Tackle Stress: to tackle Stress it's very important to understand stress, basically there are two types of stress- Eustress and Distress

Eustress: is a good stress means this stress motivates to do work and fill a person with positive energy to do work and excitement. Motivation is a process to develop Eustress in an employee. [2]

Distress: Distress is a negative stress which causes tension and many Physical and psychological problems in a person if carried out for a long time. This type of stress is harmful and should be removed from workplace stress. [2]

Stress Management

Stress Management: Stress management can be defined as process to minimize the distress and creating eustress in an individual by identifying distress factor, identifying solutions, choosing best alternative or alternatives and applying the alternative to minimize distress and create eustress in an individual. Inlander (1996)

Good management of stress tends to Remove Distress and generates Eustress among Organization's Human Resource.

Recommendation

  • FedEx should include some stress buster elements in their daily schedule like yoga and meditation exercises. FedEx may recruit yoga trainers on contract basis to make office employees learn yoga, it will be very beneficial for company in two ways:
    • It will create good image and caring image of company among the employees and they will be motivated for doing work towards the organizational objectives.
    • Workplace Stress is one of barriers in the growth of organization by demotivating employees to work. And by including stress buster expert in organization this problem may be solved effectively and efficiently.
  • FedEx should build outdoor games infrastructure like Swimming pool, tennis courts, Basketball courts, Gym. Etc for employees so they can keep themselves fit. Because healthy mind lives in healthy body, and outdoor sports activities increases concentration of mind.
  • Including Fun in job like parties, Social gatherings helps personnel in becoming stress free. Company should organize parties, social gatherings, award ceremonies where employees of organization meet with fresh mood and forget workplace stress, it can improve their bonding with their colleagues and improve their networking in organization and it is beneficial for organization. And praising good employee will motivate him and others to work better.

Compensation and Reward system

Introduce compensation and reward system

Compensation and Reward system plays vital role in a business organization, it impacts an employer's ability to recruit and retain qualified employees, maintain morale/satisfaction, encourage peak performance and company loyalty. Moreover, it helps company to achieve internal and external equity and reduce turnover. Martocchio (2003)

FedEx Corp is the premier global provider of transportation, e-commerce and supply chain management services. Like any other companies, FedEx Corp believes that people is its greatest asset. The main focus of the company is to promote a good working environment where in all of the stakeholders will feel respected, satisfied as well as appreciated. The main thinking of FedEx is that there people are the primary entity in the value chain, that is why it is important to focus on the employees first. However, FedEx Corp is facing a lot of problems in pension and health insurance policy. [1]

Pensions strongly influence workers' behaviour, giving younger workers a compelling reason to continue working for their employer and encouraging older workers to retire on a timely basis. Martocchio (2003)

Compensation and Reward system practices in FedEx

On June 1, 2008 FedEx decided to switch pension plans, most employees who participate in a pension plan will begin accruing future benefits under a cash balance formula, which FedEx calls the Portable Pension Account, effective June 1, 2008. About 250,000 employees in the U.S. will be affected by the changes, according to FedEx spokesman Jess Bunn.[3]

Under the new" cash balance" PPA plan, employees' retirement benefits are calculated based on a percentage of their pay which will grow at a designated interest rate. The problem is FedEx will cap their contribution with no inflation protection. So that the new plan is not enough to equal the benefits many of them would have received from the Old plan. Many of them will lose hundreds of thousands of dollars and a secure retirement that they are looking forward to. [4]

Another problem is health insurance. Employer-sponsored health benefits are a vital part of human resources management (HRM) because they compose a large and growing portion of an employee's total compensation package. Health insurance is associated with improved health outcomes and lower mortality, so employees with health insurance are more likely to be productive workers. From health benefitsprograms which improving employee morale, health, and productivity, as well as for attracting and retaining of employees, were explored. Mello (2006)

FedEx employees pay approximately $258 a month for family coverage. For single person, it's $54 a month. In addition, they are not only paying their monthly costs but they also pay copayments, deductible and out of pocket maximums. FedEx just increased their yearly out of pocket health care maximum. It is also important to note that the coverage of their health care keeps diminishing—less and less important health care services are being covered.

Recommendations

One of the key factors to being an effective and successful manager is the capacity to motivate his people to perform at their very best.It is worthwhile for a manager to understand which needs are the more important for individual employees. According to Abraham Maslow:low-level needs such as physiological requirements and safety must be satisfied before higher-level needs such as esteem are pursued. Safety needs- the needs that employees want to feel secure at their jobs or career. In this case, safety needs are not satisfied so FedEx's employees are not satisfied with their jobs. Here are a couple of simple suggestions:

  • For those employees who worked for FedEx more than 20 years: applied the old pension plan.
  • Give more pension policy options for new employees and consider about inflation rate in the future.

Another problem can happen when managers to focus on satisfaction of employees which is cash flow issue. So how can HR manager minimize the cost burden associated with the legally required benefits?

  • Provide effective safety programs including teaching employees and supervisors' safety work procedures and safety awareness.
  • Use health promotion programs that include inspections of the workplace to identify risks such as high levels of exposure to toxic substances and then eliminating those risks.
  • Employ short-time workers for the increasing in demands in short-time

Conclusion

FedEx is the world's largest logistics company employing more than 275000 personnel across the globe. It has its own employee related problems to tackle with-

From deep research on HR issues in FedEx, we suggest some recommendations for FedEx to overcome their problems and maintain the leader position in the logistics industry.

Retention

  • Career development program
  • Employee reward program
  • Open communication
  • Recreation Facilities

Diverse Workforce

  • Progressive and innovative diversity policies and programs
  • support the various diverse communities
  • Building strategic partnerships

Compensation System

  • Apply old Pension program
  • More pension policy options
  • Provide effective safety programs

Stress Management

  • Inspire employees to do Yoga, Meditation, Physical Exercise
  • Build Infrastructure for extracurricular activities
  • Organize parties, award functions and other social activities

References

  • Wayne F. Cascio. (1986), Managing Human Resources, Singapore, Mc Graw- Hill Book Company.
  • Brown R. Donald & Harvey F. Donald (2006), an Experiential Approach to Organization Development (7th Edition), Prentice Hall.
  • Martocchio J. Joseph (2003), Strategic Compensation- A Human Resource Management Approach, Prentice Hall
  • Ahmed, F, M H Ullah, & M K Uddin (2006), Linking HR Practices with the Business Strategy'Strategic Human Resources Management, vol. 34, no. 3, pp. 15-30
  • Hansen, P. (1985),The new Joy of Stress,Andrews McMeelPublishing, Kansas City
  • Inlander B. Charles (1996), 63 Ways to Relive Tension and Stay Healthy,St. Martin's Paperbacks, New York
  • Madan, B. (2005),FedEx Delivers, John Wiley & Sons Inc, Hoboken (New Jersy)
  • Mello A. Jeffery (2006), Strategic Human Resource Management, Thomson South- Western 2nd edition
  • Gary, D. (2006) Human Resource Management, 9th ed, London, Prentice Hall.
  • George W. Bohlander & Scott A. Snell. (2004), Managing Human Resources, 2nd ed, London, South-Western College.
  • Richard M. Hodgetts & Kathryn W. Hegar. (2001), Modern Human Relations at Work, 2nd ed. London, South-Western College.
  1. Segal, Jeanne and Horwitz, Laura et al (2008),Stress at work,accessed Nov 16, 2009 available fromhttp://helpguide.org/mental/work_stress_management.htm#authors)
  2. Wee, Andrew, (2006), Stress: Eustress and Distress, accessed on July 16, 2009,available from http://www.whoisandrewwee.com/uncategorized/stress-eustress-and-distress
  3. FedEx Employee Pension Plan, accessed 5th October 2009 http://www.fedexaminer.com/FedEx/modules.php?name=Surveys&op=results&pollID=8
  4. FedEx, Goodyear Make Big Pension Plan Changes accessed 5th October 2009 http://www.workforce.com/section/00/article/24/77/95.html
  5. FedEx Virtual staff. (2009) FedEx Virtual Cargo, accessed October 17, 2009 http://www.airfrontierva.com/fedex/pubs/POHREV103.pdf
  6. Fundinguniverse, accessed October 15, 2009 http://www.fundinguniverse.com/company-histories/FedEx-Corporation-Company-History.html
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