Key Issues

¶ … FedEx is multidimensional and not necessarily a problem itself, but something that will help the company better develop and remain competitive in a tough market, where companies such as UPS are in for the same clients. First of all, the initial problem was that the sales strategy and approach was unbalanced between FedEx Express and FedEx Ground, from different perspectives.

On one hand, Express seemed the prestigious segment of the company and this is shown both by the compensation (particularly by access to perks such as the President's Club and the possibility to better advance in the company) and access to clients: as the case study shows, sales executives for Express would call potential clients that were already doing business with FedEx or, otherwise, large companies that would need transportation and expedition services anyhow. The accounts were also significantly large, giving way to better bonuses.

At Ground, salary accounts for 82% of the total compensation, which lowers the incentive of sales executives to be proactive in attracting new sales. Accounts are significantly smaller and new sales are also more difficult to attract, particularly because (1) UPS has a strong share of this market segment and is much more recognized in the industry and (2) the FedEx brand is not as strong as in the Express market. This clear lack of balance between Express and Ground sales was the first problem.

Other than the issues already presented, it created problems in the communication with clients, with multiple sales executives often calling on the same accounts. To deal with this problem, the company decided to implement Project ARISE. The key letter in ARISE that explains what this project is about is S: synergy. The idea of Project ARISE is to solve the unbalances in sales between Express and Ground by creating the necessary synergies between these branches.

This gives way to the second problem that will be discussed and for which recommendations will be made: ARISE implementation. There are several key segments where the project needs to be properly implemented: sales general, sales management, sales administration, operations and training. As Jerry Beyl pointed out, the most sensitive area is sales management, primarily compensation. Basically, the difficulty or problem arises from being able to blend the two compensation systems that are practiced at Express and Ground, respectively, into a cohesive system, by reaching a common denominator.

So, the fundamental problem remains, inclusive of the implementation of Project ARISE, developing the new compensation plan. 2. Recommendation Before addressing the issue of compensation, identified as the primary problem in the statement above, it is also useful to decide, first of all, the type of structure that ARISE should choose, something that would also impact the compensation plan. There are two alternative solutions that can be proposed. One is to integrate the sales forces into cohesive units that would combine Express and Ground.

The other is to abstain from integration and to increase the coordination between the two levels, thus providing a greater flexibility within the entire organization. The recommendation from this perspective is to integrate the two sales forces. As previously pointed out, the role of Project ARISE is to create synergies. One can argue that this can be better performed if there is one central command, a joint effort, common resources and objectives, rather than just a flexible structure, resulting from a coordinated solution.

Moving from this to the compensation plan, the recommendation would be to retain the best elements of both plans. One of these is, for example, the compensation plan for Express. The combination of a base salary of 70% and additional benefits, determined by sales, of 30% creates a more competitive atmosphere in the sales team, along with the incentive. A combination of the two systems could be used, with a 75 to 25% ratio, for example.

An important element of the compensation plan could be identifying a way that this could be used as an instrument to drive synergies and cooperation between what was formerly Express and Ground. One of the ways to do this could be to create teams of former Express and Ground sales executives and to award joint bonuses (5 to 10%) if these teams reach a certain revenue level. This would ensure (1) a better communication between the two former segments; (2) a better outreach on both Express and Ground markets; (3) resulting synergies, particularly through cross-selling.

At the same time, the formerly Ground employees should also gain access to some of the perks that the Express executives had, such as the President's Club. As seen from the case study, for many of the executives, work is not only about a pure financial recognition and reward, but also about personal recognition from the top management and the other colleagues.

Technology should also be involved in the implementation of the compensation plan, as a way to increase transparency in the organization, particularly since technology is such a big part of ARISE anyhow. Sales executives should be able to track and verify their performances against the set goal online, thus monitoring how well they did in both Express and Ground (so, their performance will be monitored both against their basic area of expertise and against the combine Express + Ground cross-selling). 3.

Rationale One observation at the start of this rationale is that this is not only about the compensation plan and about implementing ARISES. It is about overlapping two organizational cultures and transforming them into one functional one. So, beyond the compensation plan, integration should be supported by joint actions such as team building efforts and support seminars. These actions will have one primary objective: convince individuals of both Express and Ground that the new integrated structure will create better results for all stakeholders.

The recommendation for the compensation plan previously presented takes into account the main objective of ARISE: cross-selling and creating.