Reference no: EM13836892

Problem: Please discuss the problem that you see in this case study

The Personal Touch

FedEx is an organization that never sleeps and for which every minute counts. Each business day the company's more than 275,000 employees and independent contractors handle an average of 6 million packages, using over 669 aircraft and 71,000 trucks. On the peak days between Christmas and New Years' Eve, it typically ships more than 8 million packages. The company, which generates $33 billion of revenues per year, serves more than 220 countries and territories. Inevitably, some packages miss their delivery time, some miss their destination, and some are damaged. When that happens, FedEx's 4,000 customer service reps in 56 call centers are the people customers call.

Prompt, efficient customer service is extremely important for staying in this highly competitive global shipping industry, let alone doing so with a satisfactory profit. Incoming telephone calls at the FedEx customer service center in Fullerton, California, never stop, and FedEx reps never have an idle moment on shift. Sitting in front of computer monitors in a cluster of cubicles with headsets on, these agents barely have time to stretch their limbs.

A caller complains that her package hasn't arrived, which is a common complaint. Another asks if he can change his pickup time. A third caller is confused about signature: is he supposed to sign for the delivery or will the package just be dropped at his doorstep? The reps are confident and friendly. They welcome any question or complaint even if they have heard it a thousand times before. The words "I am sorry" are uttered often. They are careful not to give the customers a feeling of being rushed, but try to resolve complaints quickly. Time is money.

Several years ago FedEx installed software that reps at the call centers can use to provide faster service. Many of the callers are already registered in the company's database. One of the most frequent requests is to send a FedEx worker to pick up a package. Using the software, a rep can handle such a request in 20 seconds. All she needs to do is enter a name, which leads to a zip code, which in turn leads to a tracking number. That number uniquely identifies the package. Some complaints are more complex. For example, a FedEx driver misunderstood a note a caller had left for him and therefore misdelivered a package. A complaint like that takes no more than 10 minutes to resolve.

 An experienced and efficient rep can handle about 10 callers in 45 minutes. Ideally, though, nobody would call. If FedEx had its way, at least six of the ten callerswould use their computers to go to FedEx's Web site and solve their problem by themselves-because about 60 percent of FedEx's clients have a computer connected to the Internet. Like other companies, FedEx tries to save labor by directing callers to its Web site. Yet, many people prefer to use the phone and talk to a human helper.

Every time a customer decides to use the company's Web site instead of telephoning, the company saves up to $1.87. Efforts to divert callers to the site have been fruitful. In 2005, FedEx call centers received 470,000 calls per day, 83,000 fewer than in 2000. This difference in calls translates into a saving of $57.56 million per year. The company's Web site handles an average of 60 million requests to track packages per month. Operating the Web site does cost money. Each of these requests costs FedEx 3 cents, amounting to $21.6 million per year. However, if all these requests were made by phone, the cost would exceed $1.36 billion per year. As it is impossible to divert all callers to the Web site, the company must maintain call centers. The annual cost of these call centers is $326 million. This cost might decrease over the years, as more and more customers use the Web site, but there will probably always be call centers, because FedEx does not want to lose frustrated customers.

Many people are still uncomfortable doing business at a Web site. The cost of a customer who is frustrated by the company Web site is incalculable. Experience shows that people are willing to encounter one or two obstacles with the Web site, but then they stop trying.

Since its establishment in 1971 as Federal Express Corp., the company was keen on information technologies, but over the years it used an increasing number of disparate systems for different business purposes, such as air freight, ground freight, special logistic operations, and custom shipping of critical items. By 1999, customer information was scattered in computer systems implemented over 14 years. To periodically test service, executives pretend to be customers. They discovered that customers who used more than one FedEx business were not treated consistently. For example, when claiming damages a customer had to fill out 37 fields on a claim form, such as tracking number, ship date, pickup location, and destination, even though FedEx systems already held data for 33 of those fields. The official change of "Federal Express" to "FedEx" started an important move: all the company units were to share the same information systems.

Meanwhile, FedEx's customer service centers were redesigned around a PC-based software desktop. Ifreps could pull up historical data on customers whenever they called-not just their shipping histories, but their preferences and even images of their paper bills- FedEx could provide better, faster service, both to individual customers and to businesses that sold goods through catalogs.

 In 2000, management purchased customer relationship management software called Clarify. A new policy was established: systems and customer service experts are equally responsible for the call centers. Using PCs, reps can pull up historical data on customers whenever customers call. Customer records that are immediately available to reps include shipping histories, preferences, and images of the paper bills. Customers are happier now than they were just a few years ago. So are the reps. Turnover of service reps has decreased 20 percent.

Productivity is important, but so is the reps' service quality. They must be polite, provide customers with correct appropriate information, and try not to give customers a reason to call again. Typically, callers are either determined to speak to a human or they know the help they need is too complex to be available at the company's Web site. Therefore, callers require more time than in the past. The company periodically evaluates the reps' performance based on clearly stated goals that take all these factors into consideration. Typically, 32 percent of the reps' performance rating is based on the quality of their response, and 17 percent on their efficiency. The other 51 percent is based on attendance, adherence to scheduled breaks, and compliance with regulations.

Interestingly, customers are not interested in friendliness, but in quick and accurate information. FedEx constantly follows customer reactions to different help styles. Managers discovered then when reps' time is not limited, they tend to speak with customers beyond the time required to solve the problem. Customers perceive them as too talkative, and they get a bad impression about FedEx. Thus, reps are encouraged to get off the phone as soon as the problem is resolved rather than try to be "nice."

The professionals who work for the vendor of Clarify, the CRM software, spent time with reps to see how well the software serves them. They discovered that reps often move quickly from one window of information to another, and that sometimes they take extra time to find a window that "disappeared." The software engineers decided to modify Clarify so it interacts with Java code. This enables the reps to switch between windows and different applications of Clarify quickly during a call without reentering customer data. For instance, if a customer needs directions to pick up a package, the rep can click the tab of the mapping application. Relying on the customer's account data, the application picks up the customer's zip code. Combining it with the code of the pickup center, the software immediately produces directions, which the rep can read to the customer.

While great improvements have already been accomplished both in service speed and quality, FedEx executives continue to look for ways to improve. They refuse to discuss what their next step is because it might be copied immediately by competitors, but they do reveal that their goal is to bring call centers to the point where a rep never has to put a customer on hold.

Experts expect a single "nervous system" for all types of customer calls by 2010. Software will accept all customer calls from the customer's PC, phone, or handheld device. Special software involving artificial intelligence techniques will screen all incoming calls, evaluate the problem's complexity, and decide whether to direct the calls to other software for resolution or to invite a human rep to intervene.

Introduction

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. Hence, in 1973, FedEx developed and implemented the 'People-Service-Profit' (PSP) philosophy. According to this philosophy, if FedEx takes proper care of its employees, they would provide efficient service to the customers, which would in turn increase profitability. Therefore, the company hardly ever lays off employees.

During its lifespan, FedEx has introduced several HR practises, such as 'Survey Feedback Action' program, a communication program which is designed to encourage employees to give feedback on policies within FedEx. Furthermore, 'Guaranteed Fair Treatment Procedure' (GFTP) ensures that all employees concerns are addressed. The companies 'Leadership Evaluation And Awareness Process' gives non- managerial employees the opportunity to seek management position within FedEx. Finally, FedEx also devised employee training - every six months employees are required to pass a job knowledge test- , recruitment and development programs such as the 'Job Change Application Tracking System'.

HR Practices

Rewards

Since its setting up, FedEx focuses on providing a suitable work environment that encourages employees to come up with innovative solutions. Therefore, a special reward system has been designed to recognize special effort (Bravo Zulu Voucher Program) ranging from letters of recognition to cash rewards. Furthermore, some employees can get performance- based bonuses.

Progress and Personal Development

To help the administration of all the human resource programs, FedEx uses its own computer program called PRISM, which maintains all job applicant databases and processes new hires. Automatically an employee record is created which then have to be continuously updated by the employee who are empowered and expected to maintain their own personal data. Furthermore, the system supports job posting and bidding, job training and testing, enrolment procedures and progress monitoring.

Feedback

Another tool widely used by FedEx is the 'Survey Feedback Action' (SFA) program, which besides helping management taking decisions regarding promotions is used for evaluating the performance of departments and the company in general and the attitude of the employees towards the policies.

Communication               

At FedEx, two-way communication between the management and the employees is strongly encouraged. The employees are allowed to freely express their opinions about management's policies. Policies and systems such as the GFTP, SFA and the Open Door Policy are there to make sure all employee grievance and complaints are resolved.

Retention

Employee retention is a significant aspect of FedEx Human Resources policy. It's is cheaper and more efficient to take good care of one current employee than having to find an new one, as the benefits of retaining that one outweigh the cost of finding and training the new one. Therefore, it's important to keep your employees satisfied and create an environment in which they feel comfortable. At the moment the turnover rate is below 6 percent - while the industry average is about 20 percent. FedEx manages to keep this rate so low due to the extensive training of its employees - the company invests 3 percent of total expenses in training -and by the use of a peer recruiter program. Furthermore, the company takes good care of their employees by offering them healthcare, insurance, a guaranteed workweek and wage parity. All these employee- friendly practices, not only yield financial benefits for FedEx, they also enhance the reputation of the company.

Potential Problems and Recommendations

Even though all seems well for FedEx and for the moment the HR policies are paying off, there are some small threats facing the company.

First there are the pilots and flight crew members, at the beginning of the nineties they decided to form a collective bargaining unit which resulted in FedEx now paying more than average. Something similar might happen right now. Currently pilots are complaining about their hours and schedules, if FedEx does not react to this soon, a strike might occur costing the company millions. Somewhat among the same line is the threat of employees joining unions and resentment among part- time workers. At the moment FedEx is able to keep unions out of the door, which allows FedEx to keep its labour costs lower than any other in the industry. However, we believe that FedEx should keep improving and innovating itself in order to keep their employees satisfied, because nothing is worse than a dissatisfied worker. This can be done by very simple things like new award systems or letting part- time workers more regularly flow into full- time, instead of hiring new people from outside. Something that might aggravate the discontent among employees are the lay- off plans. Traditionally FedEx uses this as a measure of last resort, seeing as they believe in the 'People- Service- Profit' philosophy. If, however, they start to layoff employees - more than usual - this could cause unrest among the workers, resulting in worse performance and again the threat of union involvement.

Finally, and probably just as important, is the global expansion of FedEx. In the United States all the different programs were very successful. This, nevertheless, does not imply that it will be successful in the rest of the world. For instance, the initial introduction of SFA in Canada. It took a while before it was efficient due to the different attitude towards the use of computers and because of the available technical infrastructure and sophistication. Thus, FedEx needs to make sure that it first analyses the infrastructure and the use of technology before implementing strategies globally.

Conclusion

Over the past 30 years FedEx has been a company which has changed the way we view express transportation and delivery services. Furthermore, they have changed the landscape of Human Resource Management practices within companies, setting a precedence for other companies in different industries. FedEx has shown that a company is not only about technology, managers and profit making. It places their employees on pole position, as they are the ones that keep the company going and serve the customers.