|
|
 |
|||||||||||||||||
|
|||||||||||||||||
|
Forecast your future career growth Click here Start Career Scan |
|||||||||
 |
|||||||||
FED-EX -A Miracle success story |
|||||||||
|
The early years
Fred Smith was born with a hip disorder. Due to the early death of his father, Smith’s mother raised the boy. She took great careto ensure that her son grew up just like an ordinary boy rather than the inheritor of a fortune. In school the young Smith was an outstanding student with outstanding organizational skills. FredSmith’s disability cured as he grew up. Fred became involved in sports. At the end of his school time he was voted “best-all-around student” in his senior year. In 1962 Fred entered Yale and majored in economics and political science. Yale was a different playing field for Smith. In Memphis he was a top student; at Yale he had to compete with the best and brightest of his generation. Smith had a hard time standing out among them, and at the beginning, he did not stand out. He later confessed, that he was a poor student. However, even at a time when things did not look very promising the young Smith had goals and plans. One explanation for Fred’s change from an average student at the beginning to an outstanding performer at the end may be the sad death of one of his friends in Memphis during Fred’s first summer break. Fred and his friends rode out to a lake for the weekend. Smith lost control of his car, the car flipped over and his friend in the passenger seat was killed. The circumstances of the death were never verified. Even if Smith was not be guilty in a legal sense, the incident changed him according to the accounts of his college buddies. It made an old man out of Smith. He graduated from Yale in May 1966. After graduation another frontier waited for Smith. As an undergraduate he had enrolled in the USMC platoon leader program. Therefore, military service was waiting for Fred. He was commissioned second lieutenant. At the age of 23 he was about to face the toughest challenge of his life, the war in Vietnam. Smith first became platoon leader; he was later promoted company commander. His first tour lasted seven month and he usually was right were the action was. He was in the middle of one of the toughest wars and he had to fight for his life and the lives of those who trusted him, his soldiers. At that time Smith got to know the less fortunate of society. He came close to the ordinary folks, the people who were much like many of his future workers. He was discharged in July 1969 at the rank of captain. During his time in Vietnam he was awarded several medals, among them one silver star, one bronze star, two purple hearts, the navy commendation medal, and the Vietnamese cross of gallantry. His military experience helped him later to understand his employees. A friend said about Smith’s time in Vietnam, “it gave him toughness.” A reporter later asked him if he went through all the pain with Federal Express to fight his memories of the war; Smith answered with “yes”. It is very likely the war experience made some hardships of starting Fed Ex easier for Smith because he had faced more serious challenges. The experience probably had an impact on the way he later treated his employees. The military develops a strong sense of camaraderie within people. This sense seems to be present at Fed Ex. Fred’s motivational skills were later described by Art Brass, one of Fed Ex’s leading managers, as follows: “If Fred lined up all Fed Ex employees and told them to jump from a bridge, 99.9% would jump.” Lessons learnt- The smaller and long forgotten incidents in our life shape our character and qualities which we are not aware of. The war experience helped Fred Smith into facing the tough challenges of early years of FEDEX . Building team loyalty and team bonding was also due to his army experience. |
|||||||||
Predict your future Professional growth Click here Start Career Scan |
|||||||||
| Starting UP
THE YALE TERM PAPER As an undergraduate Fred had written a paper on an overnight mail service. He received a C for his paper. The professor turned it back with the remark that the idea would never work. With his aviation business in Little Rock, money in his bank account and not really anything else to do, the idea of proving the professor wrong became more and more tempting. Smith himself was a victim of unreliable air-freight service. To repair airplanes his company occasionally needed spare parts. Even for small parts the company had to wait a long time until they were shipped to Little Rock. Air transportation was unreliable and unfriendly. Most of the time the freight forwarders could not tell Smith where his shipment was. Between the pick up point and the point of delivery, air-mail was lost in a huge black hole. Fred had pointed out the substantial weaknesses of the air-freight transport industry in his Yale paper including the fact that air transportation was only thought of as an add-on to passenger service. The air carrier market was heavy regulated. In 1960 airlines had entered the air freight market. They wanted to utilize the unused space in the bellies of aircraft to transport goods. However the oil crisis in the early 70s changed the airline business. Boeing built larger planes. These large planes did not fly on small margins. They could make money just by carrying passengers. During the oil crisis the government also tightened the supply of fuel and airlines had to cut bck on night flights and on routes. “Passengers were day animals and mail was a night animal”, so the two markets suddenly did not fit anymore. All airlines eventually abandoned the air freight market and most never achieved any profit in it. Prior to Smith’s entry there were only a few attempts to run an air mail service in the USA. In 1925 the Ford Motor Corporation flew mail between its plants and considered for some time starting an airmail service, but decided against it. The US Postal Service, Pan Am, and Railway Express Agency had also unsuccessfully tried to run an airmail service. Basically, Smith’s idea of an overnight air mail service had never before been tried on a large scale and everybody who got close to it got burned and lost a lot of money. But someone who just survived Vietnam and who had a family history in transportation is not just ‘everybody’. There was a real need for the service Fred Smith intended to offer and therefore he decided to give it a try.
Lessons learnt- :Inspite of what the world says, you need to back your instinct and conviction. | |||||||||
FEDERAL EXPRESS Launch Fed Ex became incorporated on June 18, 1971 in Delaware. The name of the company was Federal Express Corporation. The big challenge Fed Ex had to face was it had to happen all at once. A slow buildup of a delivery network city by city was not possible. To attract customers a large network had to be in place from day one. With the task of building a national network of mail delivery Fed Ex faced two problems. First, organization: how could a system delivering mail all over the United States work from the very beginning? Fed Ex solved copying the UPS rganizational system. The backbone of the Fed Ex system became the hub and spoke concept. Besides the organizational problem, there was the problem of financing. Demand for the new service was there, but it had never been tried before and the idea required huge starting investments. Smith had to make investment bankers understand the problems and requirements of the new high tech industry. He had to persuade them that computer parts are sometimes small, but very valuable and a must have. He had to explain his idea to serve the market niche for “time-sensitive” parts. He had to make them believe that his idea offered a solution for a real business problem, and that businesses were willing to pay for that solution. There was also the question of trust. The air freight industry did not have a good reputation at the time. Fred Smith had to make people trust him and his company. If you entrust someone with valuable computer parts or important medicine, you want to be sure your package will not be lost. So Fred Smith and Fed Ex faced the challenge of starting a nationwide air-mail system which would meet high customer expectations. The first big customer Fred targeted was the Federal Reserve System. He offered to transport checks and money letters for them. Until then it took a long time to clear checks because they were in the mail for a long time. Fred Smith offered to solve this problem with overnight air delivery. However, due to regional rivalries, the Board of Governors did not approve the plan. Federal Express had derived part of its name from the idea of flying for the Federal Reserve System and even before the company fully operated, its biggest customer was gone. But Fred did not allow himself to be discouraged. He pushed on and created the purple truck line. Lessons learnt- In doing something different early problems are inevitable and you need to be prepared for it |
|||||||||
What are your chances of becoming a CEO Click here Start Career Scan |
|||||||||
| Obstacles and Challenges - Fred Smith once described Fed Ex as “a fright service with 550-mile per hour delivery trucks”.The truck line with 550-mile delivery trucks needed trucks. Smith looked at several airplanes and decided to use a French model, the Falcon 20, produced by Dassault aircraft. Pan Am’s business jet division had the market rights for the USA. The plane had been sold as a small corporate jet, but the market for corporate jets was down. During the recession and the oil crises almost no company could afford a jet. Pan Am’s business jet division had several Falcons and was eager to sell them. When Smith approached Pan Am they made an incredible offer to sell 23 Falcons to him, but there were several problems with the Falcon. First, the plane had to be remodeled to transport air-freight. Second, the plane was too heavy. Fred Smith wanted to operate Fed Ex under the provision for air taxi service; this way he would not have to worry about getting certification in the heavily regulated airline industry. However, the provisions for air taxis had a weight limit and the Falcon exceeded the limit. The Civil Aeronautics Board had to change regulations regarding the weight limit. Smith went to Washington and pushed for a change. He eventually succeeded in July 1972, but it was a tough fight and he came under heavy attack from providers for corporate air services. The deal with Pan Am provided for delivery of the planes until 1974, one each month. The deal had to be renegotiated several times because Fed Ex had trouble providing financing. In addition to the option for 23 Falcons from Pan Am, Fed Ex had bought two Falcons prior to the Pan Am deal and after the deal the company bought an additional 8 planes. Before the company had even started to operate it had bought or signed contracts to buy 33 planes at a total cost of $56.1 million. Smith clearly emphasized growth. Think big and make it big! In May 1972 Smith also started hiring people for his new company. He looked for entrepreneurial type people. “He appealed to the entrepreneurial spirit of most of those he hired”. Sometimes he promised stock options, but nothing was put in writing. Smith gave people a dream; he even told them they would be part of a Fortune 500 company. Again he used the growth target, and he must have been very persuasive. Some of his employees loved to fly, others were longing for the excitement. Frock, the man who had done the feasibility study at AT Kearney, was such a person. Smith lured him down to Little Rock with stock options and the prospect of excitement. Frock brought organizational knowledge to the company; he was a good technical planner. He joined Fed Ex because he was in his late 30's and wanted to get out of the consulting routine. Overall Smith did an incredibly good job in hiring people. He picked people who were very experienced in their field, ready for an adventure, ready to take a pay cut, ready to work hard, and ready to make some sacrifices. Most experts he hired had no corporate experience. They were not spoiled! Smith has to be given credit in mixing these experts with rough groundwork truck people and making them a team. His marine experience probably helped him a great deal. Fed Ex was an exciting place that was everything but plain business. The team used to have knock-down drag-out meetings. One source described the atmosphere down at headquarters as “macho”. Communication was rather informal. Maybe people are more productive when they don’t have to watch every word. They are certainly more creative. Sometimes even the company’s boss appreciated the informal style; Smith is described as “real tense” occasionally. “Once in a while he’d throw something against the wall, so we would try to get him drunk at some bar, hoping it would relax him and, perhaps, keep him away from the office the next day. But he’d come bouncing back early the next morning ready to take on the world again, and get back in the thick of everything going on.” Nineteen seventy-two was not only the year of the start of operations, it was also the year Fed Ex signed its first big customer. Fed Ex bid for a US Postal Service contract. The company undercut all competitors’ bids because Fred wanted the routes. The contract generated cash flow and helped to persuade investors. Fed Ex also tried to win other customers. Ford decided to ship one order with Fed Ex. Fed Ex flew the materials, but since the changes in air regulation provisions regarding weight limits were not lifted until July 1972, Fed Ex was legally not allowed to charge Ford. Therefore, Fed Ex flew for free. Fed Ex had a hard time winning large customers which, in 1972, were the prime focus group for Fed Ex. Smith used his former aircraft salespeople as sales staff. The air freight business was new to them. They had to learn not to accrue high bills. THE FINANCIAL PICTURE AT THE END OF 1972 In 1972, the three profit centers, air mail, charter cargo, and pilot training, yielded revenue of $2.8 million, while expenses run at $3.7 million. The operating loss was $0.93 million, and debts totaled $21.7 million. In addition, the company had severe organizational problems. The accounting department was a mess and the company was fighting deadlines and always on the edge of bankruptcy. Financing was still not secured. In 1973 Fed Ex made its first acquisition. Smith bought Little Rock Airmotive (LRA) of Little Rock. Smith paid $2.5 M for the company with a net worth of just $1.3 million. Nevertheless, the acquisition was a good one. LRA was the main contractor for remodeling the Falcons and, with control over the company, he could make sure the work was carried out in time. Fed Ex also owed LRA a lot of money from remodeling the first jets. With possession of LRA, Fed Ex did not have to pay these bills. Another big change in early 1973 was when the company moved operations to Memphis. The International Airport in Memphis was larger, the weather was better, and the airport was hardly ever closed down. It may not have hurt that Fred knew people with the airport authority and got a very good deal on a hangar. The company was able to rent a hangar at a very low price. In March 1973, a sorting system for 10,000 packages per hour was completed in the new hangar. March also brought the first night of full operation. The day looked very promising. Sales people had called in reporting things were looking good. At night employees and friends had come down to Memphis and waited at the airport for the plane to arrive and unload. When the planes opened their loading doors, the package count was a sobering six. At that point management realized they still had a lot of work to do. Marketing still had to be improved. The network of 11 cities Fed Ex served was still not large enough. On April 17, 1973 Fed Ex started again with a larger network of 25 cities. The plan was to add four cities every week. The night of the second attempt Fed Ex was much more successful. That night the company transported 186 packages. The first run in March was declared to be a test run and April became the official birthday of Fed Ex. May was an even better month for Fed Ex. The average nightly package count was close to 500; in July it was above 1,000 and in October it was at 2,517. Lessons learnt- Where there is a will there is a way. No problem is insurmountable for a determined person. Persistence and toughness are the hallmark of the successful leaders. |
|||||||||
Download 500 ++ best motivating and inspirational ppts at http://kamyabology.com/downloadppts.asp |
|||||||||
Persistence and Never Give up Financing was a huge problem for Fed Ex in the early years. In the beginning, sources of capital were Fred’s father’s trust fund, and loans from banks in Memphis and Little Rock. The company had a hard time finding equity. Investors liked the idea of an overnight air mail service, but they were not willing to put money in it. Smith bought planes and relied on investment bankers from White, Weld & Company who promised to help him raise capital, but they failed to live up to their promise. Fed Ex was in desperate need for money because Pan Am could not deliver the Falcons unless financing was guaranteed. Pan Am threatened to sell them to other customers if Fed Ex would not exercise its option. Smith was in very deep trouble. His investment bankers had promised him they would raise $20 million in bonds and equity if he would throw in additional money. So, with money being so tight in February 1973, Smith forged papers to get loans from the banks in Memphis and Little Rock. The papers stated that his family trust secured the loans. One weekend, after giving a presentation to investors, Smith decided not to fly home, but to go to Vegas instead. He won $27,000 on that trip. This small amount was not crucial but in Smith’s eyes it was a sign, an act of faith. Eventually someone came up with short term capital to save Fed Ex. An entrepreneur by the name of Colonel Crown, who had made his money in construction, saved Fed Ex in early 1973. His company, General Dynamics, secured a $23.7 million loan on May 4. The option with Pan Am was to expire on May 15! In exchange General Dynamics had the option of buying 80.1% of Fed Ex stock at the total price of $16 million. The amazing thing about the deal is Smith’s persistence. Crown’s financial officer was hospitalized, and Crown told Smith he would like to make the investment but he would not do so without approval of his financial adviser. Smith pushed so hard he went to the hospital and settled the deal there. Regulations prohibited General Dynamics as a maker of aircraft from possessing air carriers. Fred was almost certain the option would not be exercised. In 1973 General Dynamics did not take over Fed Ex, but they helped out with loan guarantees. After the first loan, they did an extensive study on Fed Ex (about 3,000 man hours) to make sure their money would not be lost. The study later helped Fed Ex persuade other investors that Fed Ex’s prospects were promising. Crown and General Dynamics did not help Fed Ex for financial reasons; they liked Smith and wanted to give him a chance. They were convinced by Fred Smith’s enthusiasm for his business model. In October 1973 the company was in trouble again. General Dynamics had only agreed to secure the $23.7 million loan until October. When time expired, Fed Ex managed to obtain two $10 million loans each from two banks. The banks only agreed to throw in some additional money if Smith came up with another $4 million himself. Like many times before, his father’s trust secured the loan, but this time tensions were high. The board of trustees was about to uncover Fred’s swindle with the forged papers. The year 1973 was the toughest ever for Fred Smith. Investors did not trust Fred’s youth and replaced him as CEO. He was ousted and a former air force general became CEO; Fred stayed as president. In early 1974 Fed Ex needed a third round of financing. This time the company needed an additional $9 million. Art Brass flew to France to persuade the Rothschilds to come up with the needed funds. The family had already invested a substantial amount of money through their American investment company New Court. Eventually, the Rothschilds agreed to kick in the necessary funds, but it was a tough sell. In 1974 however, Fred Smith finally got caught in the financial turmoil. The trust finally found out Fred had used forged documents to pledge the same shares held by the trust to secure two different loans. Fred’s sisters sued him for his deeds and Fred had to stand trial. He thought about leaving the company altogether, because the pressure was just too much. Investors had asked Fred Smith to resign, while the charges were pending. Fred informed his senior managers he would resign, but they refused to stay if he resigned. Investors were faced with the choice of firing Fred and seeing all senior managers walk away from the company or to keeping Fred. At the end of a very turbulent board meeting it was announced that Fred would stay as chairman, the air force general would leave, and Art Brass would become president. Fred not only won his company back, but eventually was also acquitted. From then on the road to success, even financial success for Fed Ex, was much smoother. In 1976 the company realized $3.5 million net income. In 1977 this figure improved to $8.1 million, and in 1983, the company made its first billion in revenues with a net profit of $88.933 million. In November 1988, Fed Ex even managed to take over one of its biggest competitors, Tiger International. Fed Ex paid $880 million for Tiger. It acquired worldwide landing rights. Fed Ex became a global player with this acquisition. Many analysts viewed the move very skeptically. The international venture turned out to be a money losing business for Fed Ex, But the landing rights and the international oversees network should pay off with wider use of the web. Fed Ex had to cut back on ground operations abroad, but the landing rights are still with the company. Lesson learnt- Successful leaders break down barriers. Fred Smith certainly broke down barriers. He broke down legal barriers and overcame resistance to invest in his company. Breaking down barriers is certainly an ability Fred Smith possessed. Successful leaders also create and manage a compelling vision. Great leaders and followers create a compelling vision and then manage the dream by communicating, recruiting, rewarding, retraining and reorganizing. Many of his early management staff joined Fed Ex because they wanted to be part of a challenge. Smith wanted entrepreneurial type of workers and he gave them the goal to make Fed Ex a Fortune 500 company. Fred Smith worked a lot with persuasion. |
|||||||||
Will you reach to the top in your career Find out Click here Start Career Scan |
|||||||||
SUCCESS SECRETS . - Federal Express employs roughly 145,000 people. The turnover rate is a minuscule 3 percent. It is said that Fed Ex employees have purple blood and are very dedicated to their company. This dedication may come from several programs and features within Fed Ex which are unique. In a interview Fred emphasized the high priority which personnel issues are given within Fed Ex, saying, ”I firmly believe employee dedication mirrors the extent to which an organization demonstrates its commitment to its people.” Fred Smith spends 25% of his time on personnel issues. This shows. Fed Ex has many programs which other companies don’t have. A lot of attention is paid to details. The company, for example, has 25 national recruiting centers. Fed Ex also has a peer recruiter program. Above all, the company has a declared no-layoff policy. Together with superb pay this sounds too good to be true. Logical thinking is behind this policy, not generosity. Fred Smith believes in the People-Service- Profit (P-S-P) philosophy. According to Fred Smith, “The P-S-P philosophy is like an unbroken circle or chain. There are no clearly definable points of entry or exit. The People link is supported by Profit, which is supported by Service, which is supported by People. Each link upholds the others and is, in turn, supported by them.” The PSP philosophy is implemented by answering several basic questions. New employees typically ask the following questions during extensive orientation programs. The first question new employees ask is: “What is expected of me, and what do you want me to do?” One of the challenges for Fed Ex is to gain trust with its customers. Service is therefore important. The way a delivery man behaves could be described as a little business card handed out when a Fed Ex employee makes contact with a customer. Employees have to understand they are not just delivery people, but they are part of a problem solution which Fed Ex offers – a solution for a transport problem. The second question is: “What is in it for me?” It is just natural to ask this question. There has to be some incentive to live up to the challenge of the first question. It is like rewarding children with candy. There are a lot of rewards at Fed Ex. First, the company puts high emphasis on in- house promotions; there is an extensive in-house posting system for job openings. To qualify for promotions employees have many training opportunities. Among them are interactive video instructions. Even better is the leadership evaluation and awareness program, which qualifies non-management employees for management positions. Even with a low level job, at Fed Ex employees have the prospect of getting out and up, and making it to the top! Managers can improve their skills in management through applied personnel skill programs. The company also has a tuition refund program. Besides the training opportunities there are many award programs. For efforts beyond one’s job description, employees are given a “Bravo Zulu”. A “Bravo Zulu” is a formal recognition program and can include both management appreciation and gift certificates or theater tickets. Another award program is the suggestion award program. This program encourages employees to submit ideas. Employees can earn between $100 and $25,000 for ideas. Golden Falcon Awards are for full-time employees, who have demonstrated customer service which goes beyond and above the call of duty. The highest award is the Five Star Award. It awards performance which helps the company to enhance service, profitability, and teamwork. The third question in the PSP circle is: “Where do I go to resolve a problem?” Fed Ex has a very sophisticated and rigid complaint management system. Strict time limits assure complaints are processed within a short period of time. As part of the open door policy every employee can express concerns to the management. There is no time limit for the employee with this program. The company CEO, Fred Smith, gets a list of filed complaints which management must respond to within 14 days. Another program is the Guaranteed Fair Treatment policy. In an appeals process of grievances an employee can take the case all the way to the supreme court level of Federal Express. The Fed Ex supreme court is staffed by senior executives, and often the chairman, Fred Smith himself. The first step in the Guaranteed Fair Treatment policy is a management review of the complaint. A complaint must be filed within 7 days of the incident leading to the complaint. Management must reach a decision within 10 days. During the decision process, management must hear the complainant either personally or in a telephone interview. If the complainant is not satisfied with the result of the management review the decision can be appealed within the next seven day period. The second step is an officer review done by either a vice president or a senior vice president of the division. The complaint must be investigated with a decision being reached as soon as possible or within another 10 days. Again an appeal is possible. The third step is an executive review. The executive review is the Fed Ex supreme court which can overrule any decision made at lower levels. Federal Express also has a survey-feedback-action program to evaluate employee attitudes. If a manager’s feedback scores are low, he or she is expected to develop and implement corrective action. Fed Ex believes employees need a sense of purpose and reward for a job well done. They must have the power to influence what is done and how it is done. Most recently, and despite all the awards and complaints programs, the company had increased trouble with unions. Unions had failed several times before to organize Fed Ex’s pilots. After the merger with Tiger, Federal Express hired many unionized pilots. So far, the Fed Ex pilots have always stood by Fred Lessons learnt - Successful leaders champion the vision. Fred Smith was certain he would create a Fortune 500 company. To him, failure was not an option. The employees love to feel themselves as a legitimate part of what is going on.
|
|||||||||
Download best motivating and inspirational ppts at http://kamyabology.com/downloadppts.asp |
|||||||||
What will take you to the top in your Career Find out Click here Start Career Scan |
|||||||||
Download best motivating and inspirational ppts at http://kamyabology.com/downloadppts.asp |
|||||||||
What will drag your Career Down ? Find out Click here Start Career Scan |
|||||||||
 | |||||||||
| |||||||||
| Download your best motivating and inspirational ppt at http://kamyabology.com/downloadppts.asp |
|||||||||
| |||||||||