federal express case study

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CASE STUDY F ED E RA L E X PR E SSThe first time you tolerate anything other than a movement toward 100 percent customersatisfaction, you're on the road to mediocrity.

Frederick W. Smith,Federal Express chairman and chief executive officer

Federal Express Corporation (FedEx) was founded in 1973 by Frederick W. Smith. A formermilitary pilot with a vision to create the air-express industry, Smith started his company with 14small planes. Some 17 years later, FedEx had a fleet of 419 planes delivering packages allover the world. At the end of fiscal-year ( FY) 1990, the company employed 90,000 people,processed 1.5 million shipments daily, and totaled $7 billion in revenues.Since 1973, FedEx had received 195 awards, but the most prestigious was received onDecember 13, 1990, when Smith accepted the Malcolm Baldrige National Quality Award(MBNQA) from the President of the United States, George Bush. Federal Express was the firstcompany to win in the service category since the award was established in 1988. In 1990, theU.S. Department of Commerce received 160,000 requests for MBNOA applications, but only 97companies completed the rigorous application process. (See Exhibit 1 for MBNQA applicationheadings.) ..As President Bush left the stage following the presentation of the award, Smith caught his

attention and pledged his support for the potential Persian Gulf conflict with Iraq. (FedEx flewpersonnel and supplies into the Gulf.) The Iraq situation posed a particular challenge for FedEx,because oil prices had more than doubled between August and December 1990. Unlike thecommercial airlines, FedEx did not vary its shipping rates on a regular basis. In addition,overnight-delivery growth rates were slowing, which mad~ competitive activities from Emery,the U.S. Postal Service's express division, and Airborne more threatening than in the past. Costwas becoming a bigger factor in the overnight purchase decision as quality efforts improvedservice rates across the industry.

After the presentation, Smith walked offstage and joined the other 1990MBNOA award win-ners (IBM Corporation, Wallace Company, and the Cadillac Division of General Motors) at around-table discussion about the challenges facing a company that focuses on quality. The firstquestion referred to the chalJengesfacing FedEx. USA Today asked, "In tough economic times,isn't it too costly to implement quality-improvement programs that require retraining the workforce?" As Smith's quotation at the.beginning of this case suggests, the road to the MBNQAwinner's circle has arrowspolnted one way.Company Philosophy

Customer satisfaction begins with employee satisfaction. Putting people first in every action,every planning decision, every business decision requires a tremendous commitment from everymanager and every employee in the company.

James L. Barksdale, Chief Operating Officer

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EXHIBIT 1 Malcolm Baldrige National Quality Award Application Headings1990 Exam ina tion Ca tegor ies /I tems Maximum Poin ts1.0 Leadership 100

1.1 S en io r e xe cu tiv e le ad er sh ip 301.2 Q u a li ty v a lu e s 201.3 M a na ge me nt fo r q ua lity 301.4 Pub li c respons ib il it y 20

2.0 I nf or ma tio n a nd A na ly sis 602.1 S co pe a nd m an age me nt o f q ua lity d ata an d in form ation 352.2 A na ly sis o f q ua lity d ata a nd in fo rm atio n 25

3.0 S tr ate gic q ua lit y p la nn in g 903.1 S tr at eg ic q ua lit y p la nn in g p ro ce ss 403.2 Q u alit y le ad er sh ip in dic at or s in p la nn in g 253.3 Qua li ty p r io r it ies 25

4.0 H u ma n r es ou rc e u tiliz at io n 1504.1 H um an re so urc e m a na ge me nt 304.2 E mp lo y ee i nv o lv e men t 404.3 Q u alit y e du ca tio n a nd t ra in in g 404 . 4 E m plo ye e re co gn itio n a nd p erfo rm a nc e m ea su re m en t 2 04.5 E m plo ye e w ell-b ein g a nd m ora le 20

5.0 Q ua lity a ssu ra nce o f p ro du cts a nd se rv ic es 1505 . 1 D es ig n a nd in trod uctio n of q uality p rod uc ts a nd se rv ice s 305 . 2 P ro ce ss a nd q ua lity c on tro l 2 55.3 C on tin uo us im p ro ve m en t o f p ro ce ss es , p ro du cts 25

a n d s e rv ic e s.5. 4 Q u a li ty a s se s sme n t 1 55.5 Documentat ion 105.6 Q ua lity a ss ura nc e, q ua lity a ss es sm e nt, a nd 2 5

q u al it y imp r ov e men t o f s up po rt s erv ic es a nda nd b us i n e ss p ro ce ss es .

5.7 Q ua lity a ss ura nc e, q ua lity a ss es sm en t, a nd 20q ua lity im p ro ve me nt o f s up plie r.

6.0 Q u alit y r es ult s 1506.1 Quality o f p ro du ct s a nd s er vic es . 506.2 C om pa ris on o f q ua lity re su lts 356 . 3 B us in es s p ro ce ss , o pe ra tio na l, a nd s up po rt s erv ic e 35

q u ali ty imp r ov e men t.6.4 S u pp li er q u al it y imp r ov e men t. 3 0

7 . 0 C u s to me r s a ti sf ac ti on 3007 . 1 K no wle dg e o f c us to me r re qu ire me nts a nd e xp ec ta tio ns 507.2 C u st om e r r ela tio ns hip m a na ge m en t 307 . 3 C u st om e r s er vlc e s ta nd ar ds 207 . 4 C om m itm en t to c us to me rs 207 . 5 C o m pla in t r es olu tio n fo r q ua lit y im p ro ve m en t 30 -.:c.7 . 6 C u s to me r s a ti sf ac tio n d e te n ni na li on 507 . 7 C u st om e r s at is fa ct io n r es ult s 507 . 8 Custom er satisfaction com parison 50Total 1000

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FedEx viewed its job as selling service; it sold the promise that a package or letter would arrive"absolutely, positively overnight." Sometimes fulfilling this promise required employees to workharder. FedEx COO Barksdale liked to use this letter from a customer to stress the idea:

The Saturday before Labor D ay, I was anxiously aw aiting a package being delivered to m e via Fed-e ra l E xp re ss. It con tain ed m ate rials w hich h ad to be con so lid ate d w ith a no the r p ackag e, the n sen t o nto Europe that n ight. It was 4:00 P.M. w hen the package fina lly arrived; so I rushed to your locals ta tion . U nfo rtu nate ly, I d id n't arrive u ntil afte r yo ur c lo sin g tim e. I w as fu rio us. A fte r lis te nin g to m ystory, Ingrid Jam es ... the operations m anager at Em eryv ille ... prom ised she w ould do w hatevershe could to get the package out that n ight. S he waited 45 m inutes w hile I c om piled the m aterials andm ade sure the package m ade it out that n ight. W hen I arrived in my o ffice th e fo llo win g T ue sd aym orning, I had faxes adVising m e that the packages w ere rece ived. H aving an em ployee like M s.Jam es tells m e that you and your em ployees care about the custom er's business. To m e she" notju st In grid Jam es, she is F e de ra l E x pr es s.

Barksdale agreed: "She is Federal Express. That says it all. Our people hold in their hands our ..customer's perception of quality. Clearly, the degree to which people choose to exert their besteffort determines our success in a competitive global economy. The question is: how do weorganize our companies and prepare alJpeople to lead?" The answer, according to the People-Service-Profit (P-S-P) philosophy, relied heavily on management's ability to create anenvironment that encouraged and allowed people to choose to deliver superior service. Inshort, Barksdale said, Customer satisfaction begins with employee satisfaction. Our employeeshave been acting on their own to keep customers satisfied even before empowerment becamea buzzword." Consequently, the P-S-P philosophy guided FedEx in all its policies and actions.

Attention to quality service emerged early in FedEx's history. For instance, FedExadvertised the company's high service levels vis-a-vis Emery in 1975 with the slogan, "FederalExpress. Twice as Good as the Best in the Business." In the 1970s, service was measured bythe percentage of overnight deliveries that were made on time. In the 19aOs, however, FedExmanagers concluded that high service percentages would not be sufficient in the future. Forexample, a 99-percent success rate, at FedEx's 1990 volume, translated into 2.5 million actualfailures per year.EXHIBIT 2 Federal Express quality

To bolster quality efforts, FedEx adopted the Quality Improvement Process(QIP). This process helped establish two important ideas to support the P-S-Pphilosophy. First, QIP recognized the correlation between doing things rightthe first time and productivity: the Q :: P paradigm (quality:::: productivity).Second, QIP defined quality service not in statistical terms, but as

performance to the standards of the customer: "100%" satisfaction became theuncompromising goal. Exhibit 2, which appears in the FedEx employee handbook, is a graphicrepresentation of these philosophies.

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Systems and ProcessQuality Improvement. FedEx initiated a quality-education program in 1985, but the programwas statistically oriented and it lost momentum. By mid-198?, the FedEx customer-servicedepartment was struggling with problems related to rapid growth in the overnight service. Atthis time, FedEx selected Organizational Dynamics Incorporated (001), an internationalconsulting firm located in Burlington, Massachusetts, to initiate a companywide educationprogram on quality. 001 led workshops for senior vice presidents and managing directors, andit trained managers to facilitate workshops for employees. The 001 process focused more onthe thought processes in quality improvement than on statistical techniques. The goal was toget managers and employees to analyze problems in systematic and uniform ways.

The construction of the quality program rested on five modules:1. The Meaning of Quality included the concepts of customer focus, total

involvement, quality measurement, systems support and continuousimprovement as everyone's job.

2. The Cost of Quality emphasized rework and waste as the cost of not doing qualitywork-breaking down total costs into avoidable versus necessary costs.

3. You and Your Customer helped show that everyone at FedEx was both a supplierand a customer (see the section "Customer/Supplier Alignment").

4. Continuous Improvement developed the themes ot Module 1 and showed how tomeet customer needs in innovative ways.

5. Making Quality Happen encouraged people to take a leadership role inimplementing quality programs.

Quality Action Teams. To implement the framework of ideas in the modules, FedEx institutedQuality Action Teams (QAT). The teams organized when employees saw a need to change theway they did their jobs. The OATs used a problem-solving process known as the FADEframework: focus on a particular problem or opportunity, analyze the data, develop solutionsand action plans, and execute the plans for solutions (see Exhibit 3). In addition, extensivetraining was given to provide the QAT members with tools to augment the FADE process-tools such as fish-bone diagrams, flow charts, action plans, and pareto analysis.With the FADE process, FedEx elicited creative solutions through employee involvement andcareful analysis. For example, one OAT in the main package-sorting hub devised mnemonic devices to help new employees remember the abbreviations for destination cities. These changessaved FedEx an estimated $3 million in training costs.

In addition to hitting improvement "home runs," the QATs focused on small, incrementalchanges. According to Martha Thomas, managing director of disbursements, employees werecharged with the challenge of constantly changing their systems to increase their throughput.Thomas viewed the main function of the QATs as catalysts to help FedEx cultivate a culture ofcontinuous improvement: "We are trying to encourage a culture of smaller improvements- andmore of them. I think 80 percent of the problems are system problems, so you con-stantfy haveto change the system." She gave the following example:

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Our customers, in this case FedEx employees, told us that they hated to wait for expensereimbursements. We figured that, in any day, 100 percent of a day's mail is processed; itmay be 10 percent of yesterday and 90 percent of the day before. Why not do 100 percentof today's mail today? Through QATs, the employees figured out how to stagger theschedule so it could be done. Now a check iswritten the same day we receive the expensereport.

EXHIBIT 3 Federal Express the problem-solving process.Customer SatisfactionMeasurement.It should not be thought thatFederal Express ignores itscustomers' perceptions of itsperformance. They have loggedcustomer complaints since the early80s and use the information ininternal evaluations of systems.Originally, Fred Smith dubbed thesecustomer complaints "TheHierarchy of Horrors," a listing ofthe eight most common customercomplaints. In order they are:Wrong day delivery, right day latedelivery, pickup not made, lostpackage, customer misinformed byFederal Express, billing and

paperwork mistakes, employee performance failures, and damaged packageThe importance of the Hierarchy of Horrors was that it clearly indicated that there was more tomeasure than just on-time delivery.

Service Quality Indicators. In the late 19805 Federal Express decided they needed a moreproactive, comprehensive, and customer-oriented measure of performance. Instead ofeliminating the Hierarchy of Horrors, they borrowed from it. Breaking down the customer'sconcept of quality service into components, the Hierarchy of Horrors listed all the things thatcould go wrong with an overnight delivery. This list, combined with methods of measurement,evolved into the Service Quality Indicators (SQI, pronounced "sky") shown in Exhibit 4. salaccounted for every package that entered the FedEx system, and each of the 12 indicatorsmeasured service quality from the customer's point of view. Each customer complaint wasassigned points and given a weight. For example, a lost package had a weight of 10, and a right

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day/late delivery had a weight of 1. Combining the number of failures c i t the appropriate weightsproduced a record of Total Daily Failure Points. This figure was tracked, compared withprojections, and communicated to every employee on a daily basis through FXTV, the world'slargest private television station.

EXHIBIT 4 Federal Express Service Quality Indicators (Sal)Beginning in FY 1989, the overall quality of service was measured by the Service QualityIndex (SOl). This index weighted service failures from the customers' perspective, andcomprised the 12 components shown below.

Failure TypeRight day late service failuresWrong day late service failuresTraces (not answered by COSMOS)Complaints reopened by customersMissing proofs of delivery (PODS)Invoice adjustments requestedMissed pick upsLost packagesDamaged packagesDelay minutes/aircraft ("0" based)OvergoodsAbandoned calls

Weighting Factor151511

10101055i

Anthony Byrd, a senior project analyst and author of Sections 6 and 7 of the MBNQAapplication, talked about the challenges of measuring quality in a service company as follows:

The M B N QA application has rnanutactunnq biases; it relies heavily on statistical process control(SPC). We tried to impress upon the MBNQA examiners that quality is our basis of competition in themarket place. Our strategy is to offer enhanced value through quality service, and we go beyond thequality-control measures. We go beyond sampling; we take a census of all our packages. This givesus performance figures on evel}' package that goes through the system, and we communicate thosefigures to all the employees. This puts us in our own league.

Customer Satisfaction Surveys. Neither the Hierarchy of Horrors nor its successor, the SQI,replaced Customer Satisfaction Surveys, which act as a barometer of performance. Quarterly, aCustomer Satisfaction Study was conducted by phone across Federal Express' four mainmarket segments: base business (phone request for pick-up), U.S. export customers, manned-center customers (drop-off packages at store-front centers), and drop-box customers. On afive-point satisfaction scale, Federal Express only recognized the highest rating of completelysatisfied as an acceptable level of customer satisfaction instead of combining somewhat andcompletely satisfied. Thus, they were only. measuring improvement towards their goal of 100%

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complete customer satisfaction.

In addition to this generalized study, Federal Express also utilized Targeted CustomerSatisfaction Studies (a direct-mail survey of customers who have used 1 of 10 specific FedExprocesses), Federal Express Center Comment Cards, Customer Automation Studies (a surveyof FedEx largest customers who use the Powership shipping and billing computer systems on-site), and the Canadian Customer Study (largest source of business outside U.S.).

Results of all the surveys were compiled to identify trends, allow for customer segmentationto a meaningful level, and provide a detailed measure of service attr ibutes.

EXHIBIT 5 Federal Express Customer/Supplier Alignment What do you need from me? What do you do with what Igive you? Are there any gaps between what Igive you and what you need? How well am I doing? What gaps can be eliminated now? What measures can we use to ensure requirements are being met? What gaps are still remaining? What will we do to close these remaining gaps over time? When can we meet again? What is my Service Agreement?

Customer/Supplier Alignment. The concept of an internal customer was a naturalextension of the FedEx Q = P philosophy: Good relationships between customers and suppliersincrease productivity. The Customer/Supplier Alignment (CSA) was a quality process forinternal service. If any party requested a CSA, both parties were required to act on the request.First, one party listed and ranked the 10 most important services they provided to their intemalcustomer. (CSA questions are listed in Exhibit 5.) Then, that same party listed how well he orshe supplied the customer's needs, thereby rating his or her own performance. Next, the otherparty went through the same process. Jeff Campbell, a senior manager in procurement, relatedthe following CSA experience:

There is a part of Federal Express called Sort Facilit ies Development (SFD), which develops mini-hubs from the ground up. They are very dependent upon my department (procurement) to supply,just in time, the conveyor systems, transfer units, an d controllers-anything they need-to build asorting facility anywhere in the country. Traditionally, there had not been a good relationship betweenprocurement and SFD, so a eSA meeting was called. When we got to the meeting, the 10 things wewere sure that they neededfrom us were not even on their list! Obviously, we had some things to talkabout.

Campbell added, "We also use CSA between employees and managers. If you think about itAmanager is the supplier of the resources that the employee needs to do his or her jobeffectively."

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Guaranteed Fair Treatment Process. Employee support systems were part of the FedEx"People First" philosophy. In all departments of the company, a plaque displayed the Guaran-teed Fair Treatment Procedure (GFTP). Exhibit 6 shows the steps by which an employee couldappeal any eligible issue through a process of systematic reviews by progressively higher lev-els of management. Campbell summarized GFTP as "a three-step process that gives em-ployees access to upper management within 21 working days." Every Tuesday, CEO Smith andCOO Barksdale listened to GFTP appeals. When asked how these employees could afford thetime spent on the GFTP process, Barksdale replied: "How can we afford not to? ... Our peoplehave helped us see that some policies need revision, or perhaps need to be rethoughtaltogether. "Survey/Feedback/Action. Exhibit 7 is a sample scoring page from the annual survey FedExused to solicit employee feedback. This survey, Surveyl Feedback/Action (SFA), supportedboth the People First philosophy and OIP by creating a system that charged work groups toexamine management's effectiveness (see Exhibit 8). The SFA was a standard, anonymousquestionnaire given each year to all employees. After six weeks, the results were retumed, andthe group's manager was required to have a feedback meeting to identify specific concerns orproblems. The outcome of the feedback meeting was a list of clear, concise actions to be takento address concerns and lead to improved results.

Anne Manning, a senior specialist in public relations, said of theSFA,Employee-satisfactionsurveysexistat othercompanies,butthe resultsoftengo intothe "greatblackhole." At FedEx,we think action is the most importantpart-and it is monitored.If a managerisundera certainscorein theLeadershipindex,heor sheis puton a "critical"list, anda facilitatorfromthe human resourcesdepartmentis assignedto that work group.The companywideLeadershipindexscoremustimproveyearoveryear; if it doesn't,no managergetsabonus.

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leadership Evaluation Awareness Process. Manning continued,It is tough to be a manager at FedEx; you can't give orders, you have to give direction. Thereare lots of people who are very good at what they do but won't make good managers, so westarted the Leadership Evaluation Awareness Process (LEAP). This four-step process, whichcan take up to a year to complete, informs potential managers about the challenges connectedwith leading people: .Step 1 asks the candidate to consider: Is management for me? All the costs, responsibilities,and benefits are explored.Step 2 is a series of written assignments on the subjects of leadership and personaldevelopment.Step 3 requires peers to review the candidate, being especially candid about his or herleadership ability.Step 4 has a board review the candidate's progress and conduct final interviews with thecandidate.After successfully completing LEAP, the candidate is eligible to apply for a first-level

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management position. LEAP is difficult, because it's important. It takes leaders to empowerpeople; it. turns people on to think they can-make things happen, that they can make adifference, that they can change their jobs and make it belter. But they have to have autonomy.Thj3Y have to have power. For example, our customer-service reps solve problems: They canreimburse customers up to $250; it is their decision.

Technology and InnovationIn leading the market of a high-value-added service, FedEx employees constantly searched forways to serve their time-sensitive customers better. Citing the People First philosophy, Smithand Barksdale fostered a culture at FedEx that stimulated innovation. Barksdale said,Well-intentioned efforts are just as important as successes. And, if you hang your sales andcustomer-support people who tr y to do something that doesn't quite work-you'll get peoplewho won't do anything. That's the reason we've tried to create a work place that encourages themotivated people who come to us to stay that way.FedEx management operated under the assumptions that (1) a job-secure environment stim-ulates risk taking and innovation, and (2) a risk-taking environment leads to learning and to newsolutions that will satisfy customers. To guarantee a job-secure environment, FedEx had a nolayoff policy. Glen Chambers, managing director of procurement, said of this policy, "The mostdramatic test of this People First commitment came when Zapmail, an electronic mail service,was discontinued in 1987. Over 1300 people were disseminated throughout the organization;no one lost a job. That is a pretty strong commitment."COSMOS. In applying technology to package handling, FedEx led the industry. Every packagethat entered the FedEx system was tracked by a central computer system, COSMOS(Customer, Operations, Service, Master On-Line System). This system was a worldwidenetwork transmitting customer information to and receiving it in a central database in Memphis,Tennessee. The system was continuously updated with new information about packagemovements, customer pickups, invoices, and deliveries. In 1992, COSMOS was accessed over250,000 times each day to determine the exact position of a package located in the FedExsystem. The COSMOS system allowed customer-service representatives to handle customerinquiries with confidence.

The COSMOS system relied on a 10..cJigitbar code located on every overnight package.When a package was picked up, the courier passed his or her hand-held computer(Supertracker) over the bar code and entered the destination zip code and the type of service.When the courier returned to the van, the Supertracker was fitted into a port in the dispatchcomputer, which transmitted the information to COSMOS.

When packages arrived in the Memphis hub or one of the regional hubs, they wereunloaded and sorted. Before the packages left for their destinations, they were scanned by aSupertracker to confirm their exit from the sort facility. As the package was delivered, a finalscan was done by the courier to enter recipient and location information into COSMOS. Theability to give a customer accurate and timely information about a package was central to the P-S-P philosophy and FedEx's success.

Another example of FedEx's commitment to increasing productivity through technology wasthe Digitally Assisted Dispatch System (DADS), which communicated to approximately 30,000

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couriers through interactive screens in their vans. Each courier va n was equipped with theDADS, which ensured a quick response to delivery and pickup requests.EXHIBIT 6 The FedEx Guaranteed Fair Treatment Procedure

STEP 1: M AN AG EM EN T REVIEWComplainant

Subm its w ritten com pla in t to a m em ber of m anagem ent (m anager, senior m anager or m anagingd ire cto r) w ith in 7 ca le nd ar d ays o f o cc urre nc e of th e e lig ib le is su e.

M an ag er, S en io r M an ag er, M an ag in g D ire cto r R eview a ll releva nt in fo rm atio n.

Hold a t ele ph o ne c on fe re n ce and /o r mee ti ng wi th compla inant . M ake decision either to uphold, m odify, or overturn m anagem ent's action.

C om mu nica te th eir d ecisio n in w ritin g to co mp la in an t a nd P erso nn el m atrix.Ibte:W hen rnu ltip le levels of m anag em ent e xis t, a consensus de cisio n w ill be ren dere d. A ll o f thea bove sh ould occur w ith in 10 ca le nd ar d ays of rece ipt o f th e com plaint, u nless w ritten notice of tim ee xte nsio n is p ro vid ed to co mp la in an t a nd P erso nn el.

S TE P 2; O FFIC ER R E;V IEWComplainant .

S ubm its w ritten com pla in t to a n o fficer (vice pres ide nt o r sen io r vice p re sid en t) o f th e d iv is io nw ith in 7 ca le nd ar da ys o f S te p 1 decision .

Vice President and Senior Vice PresidentR ev ie w a ll re le va nt in fo rm atio n.C on du ct a dd itio na l in ve stig atio n, w he n n ec es sa ry .M ake decision either to uphold, m odify or overturn m anagem ent's action or initia te a Board ofReview.

Note : W hen m ultiple levels of m anagem ent exist, a consensus decision W ill be rendered. All of theabove should occur w ith in 10 calendar days of rece ip t of the com pla in t. un less w ritten notice of tim ee xte ns io n is p ro vid ed to co mp la in t a nd P ers on al.

STEP 3 : EXEC UTIVE REVIEWComplainant

Su bm its w ritte n com plaint w ithin 7 calen dar da ys of Step 2 d ecision to Em plo yee R ela tion sD ep artm en t, w ho in ve stiga te s and pre pare s G FTP case file for Ap pea ls B oa rd rev ie w.

A pp ea ls B oa rdR ev ie ws a ll re le va nt in fo nn atio n.M akes d ecision to u ph old , overtum o r initiate B oa rd of R eview o r ta ke other a ppro pria te a ction .All of the above shou ld occur w ithin 14 calendar days of receipt 01complain!, unless w ritten no tice of tim ee xte nsio ns a re p ro vid ed to co mp la in an t a nd P ers on ne l.Responds in w riting to com pla inant w ithin 3 ca lendar days of decision w ith copy to Personne lm atrix an d the co mplain an t's ch ain of com ma nd .

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EXHIBIT 7 Federal Express 1990 Survey Feedback Action* W orkgroup #1000O rg an iz atio n N am eLast Nam e, First N ame M a na ge m en t L ev elAirportlD DepartmentN",8 M ay 1 ,1990 PercentSometime

Favourable Fav I U nf Unfav # No Ans1 . Can t ell m y manager w hat I th ink. 86 14 0 12. M y m anager te lls m e w hat is expected. 8 6 0 1 4 13. Favoritism not a problem in my w orkgroup. 57 0 43 14 . M y m anager helps us do our job better. 43 29 29 15. M y m an ag er liste ns to m y c on ce rn s. 86 0 1 4 16. M y manager asks for m y id ea s a bo ut w ork . 67 0 3 3 27. M y manager te lls me when I do a good job. 100 0 a 18 . M y m anager treats m e w ith respect. 1 0 0 0 0 19 . M y m an age r ke ep s m e in fo rm ed . 83 0 17 2

1 0 . M y m anager does not interfere w ith job. 71 29 0 111. M y m anager's boss gives us support w e jieed. 5 0 1 7 33 212. U pper m anagem ent te lls us com pany goals. 50 33 17 213. U pper m anagem ent listens to ideas from m y levet. 0 0 1 0 0 21 4 . H av e c on fid en ce in th e fairn ess o f m an ag em en t. 1 7 33 50 21 5 . C an be sure of a job if I d o good work. 1 0 0 0 0 116. Proud to w ork for Federal EXpress. 1 0 0 0 a 11 7 . W ork leading to kind of future I w ant. 1 0 0 0 0 218. F ed E:> :d oe s a g oo d jo b fo r o ur cu sto me rs . 100 0 a 11 9 . W orking for Federal Express is a good deal. 100 0 0 12 0 . Paid fa irly for this kind of w ork. 57 0 4 3 12 1 . Benefit program s m eet m ost of m y needs. 1 0 0 0 0 12 2 . P eo ple c oo pe ra te w ith in th is w ork gro up . 100 a 0 123. T he re is co op era tio n b etw een w orkg ro up s, 86 1 4 0 12 4 . In m y environm ent w e use safe w ork practices. 1 0 0 a a 2 . '" ~25. R ules a nd pro ce dure s d o n ot inte rfe re . 43 1 4 43 126 . A ble to g et s up plie s a nd re so urc es. 86 0 1 4 1 ., " .27. Have enough freedom to do m y job well. 1 0 0 0 a 128. W o r kg ro u p in v olv e d in imp r ov in g s e rv ic e to c u stome r s. 1 0 0 0 0 329. 1 98 9 S FA c on ce rn s w ere a dd re ss ed s atis fa cto rily . 33 17 50 2

SFA average percent favorable 76IRindex= 71L ea de rs hip ind ex '" 78L ea de rsh ip a vg = 3.8

Local Q uestion 1 33 1 7 50 2Local Q uestion 2 100 0 0 2Local Q uestion 3 0 a 1 0 0 4L o ca l Q u e st io n 4 33 1 7 50 2Local Q uestion 5 33 33 33 2Local Question 6 33 33 33 2

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Local Question 7 60 0 40 3Local Question 8 50 17 33 2Local Question 9 71 0 29 1Local Question 10 100 0 0 7* This exhibit does not reflect actual survey results.

Exhibit 8 FedEx SFA and the Quality Improvement ProcessThe Survey Feedback Action program shares many of the goals of the QualityImprovement Process (OIP) now used throughout Federal Express. Both programs areefforts to promote and maintain the highest quality in all operations through theinvolvement of all Federal Express employees. SFA is based- upon some of the same"pillars of quality" used in the OIP, such as the following: Total Involvement of everyone in the organization, not just management. People

execute those things to which they are committed; they become committed whenthey are involved.

Measurement of quality. SFA provides a consistent measurement of your group'sperceptions of your leadership and of the organization

Continuous Improvement-doing the fight things right, better tomorrow thanyesterday, and constantly looking for ways to correct or prevent problems.

SFA and QIP complement each other. Both the feedback and action steps of the SFA areopportunities for you as a manager to employ tools and processes of the OIP to ensure thatyour people-management skills are the most effective they can be and that the concerns ofyour employees are resolvedEach phase of SPA may be viewed in terms of inputs and outputs, as follows:

INPUT OUTPUTSURVEY Your group's responses to Report of responses for the entireSFA items as marked on the work group. Numbers aresurvey forms. indicators (not final answers) of

your goal's morale.FEEDBACK Survey report or results. Quality Action Plan which shows most

Discussion of the specific significant problems, analysis ofmeaning of those indicators root causes for each problem,for your group. and at least the beginning ofdeveloped solutions.

ACTION Your group's Quality Action Problems corrected or improved.Plan, executed according to Improved morale andthe plan. satisfaction in the work group.

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One way to view the SFA feedback meeting is as a concentrated opportunity for you to leadyour group in practicing the FADE process (Focus- Analyze-Develop-Execute) on the "PEOPLEconcerns" of your work group.Powership. FedEx strengthened ties with its customers by providing a computerized shipping-management system (Powership). FedEx provided an electronic scale, microcomputer terminal,barcode scanner, and printer at no charge. With the Powership system, a customer was able toprint air bills for programmed addresses, download transactions to FedEx (thus eliminatingclerical tasks such as reconciling invoices), manage accounts receivable, and track packagesthrough COSMOS. By offering a complete distribution solution, FedEx had made itselfindispensable to the overnight vendor.

The FutureFedEx continued to search out and develop the technologies necessary to lead the overnightindustry. The company believed that such technologies as image processing of signatures andinvoices, fiber-optic communications, battery technology, and expert-systems developmentwould lead the way into the 1990s and beyond. Mike Babineaux, a senior specialist in procure-ment who had been hired in the 1970s when the company was a fledgling, talked as followsabout the future at FedEx:I always sayFEC doesn't just stand for "Federal Express Corporation"; it also stands for "ForEver Changing." At FedEx, change is a matter of survival, because the business is changing soquickly. As growth slows, there seems to be more resistance to change within FedEx. It is anatural thing to do, but Federal Express will face plenty of new challenges-like theinternational market. We have to educate that market in the ways that overnight delivery can bea competitive weapon for any business. There will be other challenges in the future as well. I' lltell you one thing I have seen-in Fred Smith's office is a space shuttle painted FedEx colors,purple and orange! Itmakes methink.Back on EarthUSA Today asked, "In tough economic times, isn't it too costly to implement quality-improvement programs that require retraining the work force?" Smith replied,

Quality is the best way to reduce costs. It doesn't increase costs. We recently had thehighest service level in Federal Express's history on one day, and we also calculated it wasabsolutely our lowest cost day, The real issue in quality is that it reduces cost by eliminatingrework, repairs, and most importantly, eliminating the cost of replacing customers who haveleft because of the lack of quality. Anyone who's unwilling to spend on quality is really map-ping a blueprint for liquidation.

Smith concluded,One of the big things about getting employees involved in the quality process is to makethem kind of have an out-of-body experience, to help them look at the world as a consumeras opposed to a producer. Employees have worked diligently over the years in a concertedeffort to achieve 100 percent satisfaction, and our People First philosophy encourages thatquest for quality.

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Discussion Questionsl. What is the FedEx philosophy toward quality?2.What specific elements/actions has FedEx implemented in i ts quality improvement history?3. Discuss the pros and cons of each elemenVaction from question 2.4. What quality actions should FedEx consider for the future?

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