FedEx

Forty years after it was founded, FedEx is still a logistics force around the world. Founder Fred Smith tells us what he’s learned in that time, and where he’s headed next.

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How many company founders have remained so engaged for so long in the running of their businesses as Fred Smith? In 2013, he celebrates his 40th year at the helm of international logistics company FedEx.

Today, the company employs 315,000 people who handle nine million shipments every day, helping to generate annual revenue nudging US$43b. This success hasn’t gone unnoticed: in 2012, Fortune put Smith at number three in its list of “the 12 greatest entrepreneurs of our time.” And Forbes recently pegged his personal wealth at US$1.8b.

As Chairman, President and CEO of FedEx Corporation, Smith oversees the strategic direction of four operating companies. “Our strategy is built around a very unusual mandate that allows [the company] to compete collectively, operate independently and manage collaboratively,” says Smith.

Each unit has its own area of responsibility. FedEx Express, the largest operating company, serves the air express market and carries time-sensitive items such as medical and surgical equipment.

FedEx Ground, which offers truck-based transportation, focuses on the retail sector. FedEx Freight, which is also ground-based, moves large-scale goods for industry. And FedEx Services provides functions such as information technology (with some 7,000 IT professionals), marketing and human resources.

It also includes FedEx Office, which offers retail-based printing and shipping services.

“So everybody knows they’re FedEx, but there’s enough difference that they know their missions and their market segments are slightly different,” Smith says. “And it has worked splendidly.”

Each division has its own president and CEO who run things on a day-to-day basis; they, Smith and other key personnel form the strategic management committee that runs the company as a whole.

You have to change and you have to have different skill sets as the company becomes broader and deeper.

“It’s a group of very strong executives,” Smith says. “I’m not shouting orders from the bridge. At FedEx, we deal with things in a collegial way. We try to do things horizontally among the operating units. If there’s a disagreement, then obviously it would come to me to adjudicate it.”

He adds, however, he can only recall that happening twice in a decade.

Constant improvement

Smith takes his long tenure at the helm of his company in stride. “It’s just a matter of education and changing what you do as the organization gets bigger,” he says. “You have to change and you have to have different skill sets as the company becomes broader and deeper.”

FedEx was recently named one of the top 10 global companies to work for by research firm Great Place to Work. Smith believes that sort of public recognition reflects the importance of the front-line employees and the great jobs they do.

“We’ve always tried to use very advanced leadership and management techniques to take care of our people,” he says. “We try to make sure everybody understands that they’re empowered to keep what we call our Purple Promise: ‘That I will make every FedEx experience outstanding.’ That’s pretty simple, isn’t it?”

Smith, who was in the same Yale fraternity as George W. Bush in the 1960s, later became an officer in the Marine Corps and served in Vietnam. “In those days, the government was offering all-expenses paid tours of Southeast Asia,” he says wryly. “They were kind enough to send me there twice, for a total of 26 months, so I had a lot of time to think about things.”

One of those things was FedEx, which he had envisioned while at Yale but didn’t make a reality until after he left military service in 1969. In 1971, he took the leap and founded Federal Express Corporation in Little Rock, Arkansas. Two years later, he moved its headquarters to Memphis, Tennessee, started operations and began to offer service to 25 US cities.

That year also saw the fledgling business severely tested by the 1973 oil embargo and financial issues, but Smith says he never felt his company was in danger of collapse.

He says there were probably many times when people said FedEx wouldn’t work, but he considered that “completely irrelevant” because he was relying on three independent marketing studies showing that it would.

“We were very, very confident that the demand was there for the service,” he says. “In fact, the original business plan would have tracked perfectly against the anticipated demand, except for the first Arab oil embargo, which created a huge issue for us.”

But for Smith, considering the life and death experiences he had encountered in Vietnam, none of these obstacles interfered with his long-term view of where he could take FedEx. He says his company embraced information technology from the outset; one of the first practical applications of the internet was FedEx tracking. Smith likes to say that “the information about a package is as important as the package itself.”

And he believes technology will play an increasingly important role in the future of FedEx. “We are, at our essence, just one giant computer system connected with hundreds of thousands of handheld devices,” he says.

Looking ahead

Smith, who’s 68 and has no plans to retire just yet, is bullish about America. “I think at the moment the United States has re-emerged as the best hope for the restoration of global growth, more so than China,” he says. “I think if the United States dealt with our fiscal issue and came up with a more competitive corporate tax regime and promoted energy production … we’ve got the chance to restore economic growth here.”

He believes this growth is directly related to invention, innovation, entrepreneurship and increasing scale.

“The only thing that is almost 100% correlated with job creation is investment,” he says. “If you want to get the economy growing and if you want to employ more people, you must invest.”

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