Human resources challenges in FedEx's Kinko's acquisition

Human Resources Function

The company I have chosen is FedEx. It was founded in 1971, and launched the overnight delivery industry. Since that time, it has grown rapidly, spreading across the world. There are over 100,000 employees worldwide.

FedEx operates in the overnight delivery industry. The company operates the world's second-largest fleet of aircraft, and has operations in almost all countries in the world. The company is organized along divisional lines. Some of the units include Express (overnight delivery), Home/Ground (land-based delivery), and FedEx Kinko's (retail outlets). Operations are based in Memphis, TN. Kinko's is headquarted in Dallas, and there are substantial operations in Oakland, Miami, Toronto and a few main centers overseas.

The company was founded by Fred Smith, an ex-Marine who took the military's goods delivery system and applied it to the private sector. The culture has always been conservative. The drivers have typically adhered to stricter policies regarding personal appearance than other courier businesses. The culture places high value on reliability and punctuality, so these aspects are considered an integral part of the company's culture. Another key aspect of FedEx corporate culture is entrepreneurialism. The company's history is marked by stories of employees striking out on their own to solve problems. Each employee is empowered to solve problems on their own, to find unique solutions for both the company and its customers.

The employees at FedEx come from a wide variety of backgrounds. The company has long had a healthy racial mix, as well as an educational mix. Being an industry leader, and one with complex operating systems, FedEx has always attracted highly-educated talent at the managerial level. At the front-end level, a mix of education levels can be found. There is also a high level of diversity with respect to gender and sexuality.

The hierarchical structure at FedEx is relatively flat. Each division is subdivided geographically. The typical chain of command involves a couple of layers at the executive level, followed by a geographical manager. This manager will typically have only one layer between him/her and the front of the line employees. Many of the functional managers and staff (human resources, marketing, customer service) are located at the main hubs, or otherwise removed from the core delivery functions. Kinko's staff are entirely separate yet again, and the company is still operated with a high degree of autonomy from the rest of the operations.

Analysis of the Problem

There are a couple of key human resources problems at FedEx. The first one is the integration of Kinko's into the company. Prior to its acquisition by FedEx, Kinko's had a corporate culture entirely different from that of FedEx. Kinko's culture was more in line with that of a retail environment. The staff were typically young, and were allowed significant freedom of expression. The turnover level was considerably higher than that of FedEx as well. Moreover, the working atmosphere was more casual, as befits a retail environment staffed almost exclusively by young people.

The integration of Kinko's staff into the FedEx corporate culture has proven difficult for both companies. Many of the Kinko's staff balked at new restrictions on their personal appearance, and other forms of indoctrination into a more conservative culture. The high rate of turnover has been a problem for FedEx managers, who are accustomed to building their business on the basis of long-term relationships, between both they and their staff, but also between the staff and the customers. This culture clash has presented FedEx with problems in integrating Kinko's into their operations, and the profits predicted at the time of the merger have yet to materialize.

Another human resources issue facing FedEx is that of an aging workforce. The company had gone through some severe growing pains in its early years and one of the results was that the company and its employees had developed a strong relationship. Employees had given a lot to FedEx because they believed in its success and in return FedEx has taken care of its employees.

The situation now, however, is that many of these employees have decreased in efficiency. They are aging, and the job is often physically demanding, both in terms of speed of movement and in terms of heavy lifting. Many of the older workers are no longer capable to performing their tasks at the level they once did. FedEx is now faced with a situation where not only do they have older workers doing less, but these workers are also becoming injured more often, and the younger workers sometimes resent having to pick up the slack, especially since they make less money. The issue is complicated by the fact that the older employees enjoy a certain amount of protection from management, in terms of their employment, pay and working conditions.

Both of these situations are hampering FedEx at a time when their business is already under pressure due to an economic slowdown and the high cost of jet fuel. The company must find a way to increase the efficiency of its workforce despite its increasing age; and must find a way to better integrate the distinct corporate culture of its Kinko's arm in order to reap the rewards that merger was supposed to bring.

Solutions and Implementation

To bring the cultures of FedEx and Kinko's closer together, FedEx should do two main things. The first is that they should afford Kinko's workers the same level of wages and benefits. This will help to attract and retain workers who are more in line with the FedEx culture. It will also help to ease the transition towards a greater level of professionalism for the existing workers. There needs to be opportunities for Kinko's employees to move into other areas of the company. In the retail environment, a job is seldom viewed as a career, whereas a large number of FedEx employees in other divisions do view their job as a career. I would recommend developing a specific program for Kinko's employees to move into other roles at FedEx. It will give them a greater feeling of belonging to the company, which will encourage a greater level of enculturation. In addition, it would bring some of the Kinko's culture to FedEx.

There may be obstacles in terms of longtime FedEx employees who feel that their culture has been an integral part of their success over the years. Cultural change in large organizations is not difficult, but the issue is simply one of understanding that it will not change quickly at Kinko's either, and this must be accounted for as well.

To address the issue of older workers, first the younger workers should receive their benefits and maximum salaries sooner. This will ease their feeling of inequality. Currently, FedEx lags its competitors in terms of the time it takes to reach the maximum wage and benefit levels. This time should be shortened, to give all employees a sense of worth.

Another possible solution is employee education. FedEx uses a system of performance measurement that is very numbers-oriented. Performance measurement should include a numeric value attached to the service side function. This would communicate the message to all clearly as to what components of the job are most valued by the company. Right now only the physical components are measured and communicated, many of the soft skills are given no quantification.

Another way to deal with the issue is to offer incentives for early retirement. The older workers are not likely slacking off - they would work harder if they could. It is simply a reflection of reality that older workers cannot handle the same amount of physically demanding work that younger workers can. The company should plan for a career arc amongst its manual workers (cargo staff and couriers) that ends at age 55 instead of 65. The company should make it easier financially for older workers to retire. Most workers do prefer to retire gradually, so a program that allows for this would be beneficial to the workers and at the same time allow them to offer the company what they offer the most - the value of the relationships they've built over time with the customers.

References no author (2007) a Ream of Culture Clashes at FedEx Kinko's. AdPulp.com. Retrieved May 19, 2008 at http://www.adpulp.com/archives/2007/05/a_ream_of_cultu.php

Hirschman, Carolyn. (2001). Exit Strategies: Older Workers Want to Retire Gradually. HR Magazine. Retrieved May 19, 2008 at http://www.allbusiness.com/human-resources/workforce-management-hiring/833239-1.html.