Fedex Lessons

April 12, 2011

Business

Starting up your own business these days is harder than ever as the economy is one of the most challenging ones we have faced in decades however it is also one of the best times to start a business and if you already started a business, now is the time to take advantage of a down economy to really excel and to beat your competitors when adversity is the greatest.

I think we can all learn from Federal Express, the company started by Fred Smith after he got out of the Air Force flying fighter jets in the Vietnam War and becoming a decorated war hero. Most every business person is familiar with the actual story about Fred Smith submitting an MBA term paper which was pretty much the business plan for starting Fed Ex at Harvard and receiving a C- from his Professor. Fred has that paper framed on the wall of his office which is a reminder of his perseverance and determination to make Federal Express a success, but I want to delve into some other  interesting details about Federal Express and how they leap-frogged their competition.

Military Logistics Background Pays off in the Commercial Sector
Fred became very familiar with the US military logistics operations as it supported the large US Air Force infrastructure and with the NORAD B-52 Nuclear Bomber sorties and coverage routes with back-up jets that were flown with the specific purpose of backing up the primary B-52 Bombers if they should ever experience a mechanical malfunction. The Back-up Bombers were flown East To West and West To East to shadow the routes of the primary B-532 Bombers and were prepared to take over and complete a mission if a primary B-52 bomber ever experienced a mechanical malfunction that grounded the plane when it was in official service.

Fred took that coverage methodology and applied it to Federal Express where he would have empty back-up Fed-Ex planes flying east to west and west to east to provide back-up coverage if any of the primary Fed-Ex freight jets carrying fed-ex parcels ever experienced a mechanical malfunction that would ground the plane. If one of the primary Fed-Ex freight jets went out of service with a loaded cargo of Fed-Ex parcels and packages, it would land at the nearest commercial airport and be met by one of the  East-West West-East back-up empty fed-ex jets and the cargo on the grounded plane would be transferred to the back-up Fed-Ex jet to complete the delivery as guaranteed by Federal Express. That’s how they guarantee overnight delivery. This is a brilliant application of military logistics to a commercial application.

Doing Whatever It Takes to Make the Company a Success
Some time during the first year of operation When Fred was piloting one of the small pool of Fed-Ex jets he received a radio transmission from his accountant informing him that they would not be able to make the payroll for the Pilots employed by Fed-Ex that week. Fred asked how much they were short and his accountant replied $25,000.00. Fred changed course for the jet he was flying from Memphis to Las Vegas. After a marathon gambling session of high stakes poker, Fred was able to walk away with $25,000.00 in winnings required to make the payroll that week.

Hiring the Right Employees
When Fred came up with the idea of tracking a package with bar codes and entering it in the computer system so that an envelope or package could be tracked from the start of the shipment to the very end, the experts said that it couldn’t be done or that it would be too expensive to design and implement. After a thorough and exhaustive search, Fed Ex found a talented IBM Executive and Programmer, Jim Barksdale who confidently said he could deliver this tracking system on time and within budget. Jim made it happen and Fed-Ex stock soared after the tracking system was launched and implemented. Later on in Jim’s career, he was hired as the CEO of Netscape and he was on a 12 city whirl-wind road show with their lead underwriter, Morgan Stanley. In every one of the major 12 cities from New York City to Chicago to San Francisco, Jim was high-fived by virtually every Fed-Ex driver when he made that tour as every Fed-Ex employee knew that he was the guy that got the Fed-Ex Bar Code Tracking system done and made their Fed-Ex stock holdings value soar.

Lessons Learned For Small Business
You need to have a vision and be prepared to fight for your vision and to persevere even if the experts tell you you have the wrong idea or that your business will never fly because its never been done before. Instead of asking why? Ask why not? Which is exactly what Fred Smith did when launching Fed-Ex.

Lead by example. Early on, Fred flew the freight planes side by side with his pilots showing support and solidarity and demonstrating commitment to the business and  what he expected out of every Fed-Ex employee.

Share the profits with your employees – Fed-Ex has an excellent employee stock option and stock purchase plan. Bonuses are tied to achievement and exceeding their assigned goals. Be clear about the mission statement and what goals the company wants to attain.

Spend the extra money to hire extraordinarily good people. It will pay off in the long run and will make it easier for you to grow the company and to attract great people.

Communicate your vision of where you see the company going short term and long term. Encourage teamwork every step of the way and let them know that you cannot be successful without their help and commitment. Check your ego at the door. Fred worked down in the trenches to make things happen and to show support for his employees. A key attribute of a great entrepreneur is the ability to motivate by setting the right example and to listen carefully to the customer and employees to help improve their product and services.

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