fedex organizational design

Organizational Design Introduction FedEx is a logistics company focused on the overnight courier business, but with brand extensions into ground courier, office supplies, and customs-related business lines. Based in Memphis, the company operates a highly centralized system where most key operating decisions are made at headquarters, and the different national and regional subsidiaries are to carry out the instructions. There are two reasons for this structure.

One is that the entire company must be virtue of its business operate in a tightly coordinated manner, such that the different elements cannot simply do their own thing or packages will not be delivered on time. The other is that the founder, Fred Smith, is a former Marine and brought a lot of military influence to the company's culture and structure. This paper will examine the organizational design at FedEx, and perhaps make recommendations for the transformation of some aspects of it.

Formal Structure The formal structure of FedEx is as follows. The highest level breaks the company down into its multiple operating subsidiaries. Many of these were brought into FedEx via acquisition, and therefore not fully integrated into the structure of the company, but rather left as standalone entities with only thin links back to the core overnight business. The structure of the overnight business focuses operating decision-making in Memphis, but then fans out to allow for certain operational decisions to be made at the regional subsidiaries.

By and large, FedEx works with a strict hierarchy for its chain of command, within the overnight business. Each manager will have a manager above – so a manager of a city facility will report to a regional manager, who will report to a national manager. The national manager reports back to Memphis. Within that, Memphis provides considerable operating support, including most scheduling.

The job of local managers is to adapt their practices to meet organizational needs and to align with whatever times for plane arrivals that are mandated from Memphis. Span of control is usually restricted by geography, until it reaches the highest levels of command at headquarters. Each manager will understand clearly the geography, as the company breaks each station's footprint down by specific boundaries, such that every address within the company's service area is attached to a specific station.

Thus, the geographic structure of span of control is formalized. The same degree of formalization exists within the different functions of the company. Each national subsidiary will be responsible for oversight of regional operations, but also for national-level marketing. Human resources is done at the regional and station levels. Finance is done at the national level, but each station will make its own contribution. The work cascades upwards under this structure.

Because each role has very specific and clearly defined span of control, each person in the company has specific performance targets and best practices that have been documented to ensure a consistent standard of performance. There is little to no role ambiguity within the company. This enables work to be done, and each person to understand the contribution that they make to both regional and overall objectives. Individual line managers understand what their team contributes.

This is made possible by the relative maturity of the company – in a high growth environment such clarity would not be possible, but at this point change at FedEx is incremental in nature. The structure of FedEx is mechanistic in nature. Because of the chain of command structure, jobs do not simply create themselves organically. Again, the nature of the business makes this possible.

FedEx will start with economic analysis that predicts workflows, possible because the company serves a broad swath of the economy, and thus its revenues are closely aligned with the state of the economy overall. This analysis allows for the centralized decision making. If a region is expected to see a certain amount of economic growth, positions will be created in advance in order to support that growth. Thus, a centralized and mechanistic structure is not only possible but works well for the company.

One of the interesting elements of FedEx's organizational design is that there is little in the way of informal structure. Adherence to chain of command may not be at military levels, but it does remain an important part of how the company runs. The fact that even a station manager has only limited power under the structure means that any informal power and communication is mainly at the higher levels of the business, where managers in different geographies might have more frequent communication.

Head offices can coordinate to some degree, but this is not informal at that point. Strengths & Weaknesses For the most part, FedEx is a well-run company, and the structure succeeds because of several key strengths. First, the company's centralized decision-making allows for high-end statistical analysis that facilitates the movement of so many packages overnight each night, with a very low failure rate. A less centralized structure might not achieve that.

Second, the chain of command supports the centralized structure – if too much informal decision-making occurred that would undermine the ability of the company to deliver on promises to its customers. A third strength is that there is a clearly defined span of control for each role.

In a company where there is little role ambiguity at any level, there is clarity about the work that needs to be done, which is great for employee engagement, but also works well for ensuring that there are no service gaps – those can be identified at any one of several managerial levels and dealt with. There are also a few weaknesses, however. First, there is not necessarily enough communication within the company. A lot of communication simply flows from a senior manager back to Memphis, and vice versa.

At the middle and senior management levels, communication with each other does not occur as much as might be beneficial, such as sharing information about best practices for certain jobs. A second weakness of this structure is that it relies heavily on data. If the wrong decisions are taken up centrally, and tactical decisions are made for distant locations, this might create issues for local management, particularly in countries with high power distance that are apt to simply accept orders from superiors without questioning.

There is risk that relying only on data means head office is making decisions that would benefit from some qualitative.