FedEx Corp. has coined many slogans in its 50-plus years of business. But the most enduring, and perhaps most meaningful, is what is known as the Purple Promise.
It is only seven words: “I will make every FedEx experience outstanding.” It is more than just a slogan. It is a beacon that has guided employees and management as they built a remarkable enterprise through service quality, dedication and commitment. It also defined the familylike culture that has existed for decades and that has made the company an exemplary place to work.
The slogan, and the meaning behind it, was brought to life by Hollywood in the 2000 film “Cast Away.” Chuck Noland, the character played by Tom Hanks, was a company “troubleshooter” who always went the extra mile to get the job done. Noland was marooned on a deserted South Pacific island following the crash of a FedEx freighter. After his rescue, he returned to Memphis, Tennessee, FedEx’s (NYSE: FDX) headquarters, to rejoin what founder Frederick W. Smith called “the FedEx family.”
That deep bond, however, has now been shaken to the core. The largest one-time reduction in positions in the company’s history, an expected 12,000 at least for now, has left affected employees, as well as those still there, stunned and confused. FedEx had not experienced any mass reductions until the 2008 financial crisis, according to a person familiar with the company’s history. Those cuts pale in comparison to what has gone on since June and continued through last week with the layoffs of at least 10% of what is estimated to be 4,000 officers and directors worldwide.
FedEx employs between 500,000 and 550,000 people across the globe. Though 12,000 is a fraction of the total workforce, for a company with the reputation of FedEx it is an emotional blow for all concerned.
The cuts, which were announced last Wednesday, came without warning, were seemingly at random and were not based on performance, according to people interviewed for this story. No explanations were given, and employees as of this past weekend remained in the dark about the status of projects they had been working on, the people said. The prevailing mood among those laid off and those who were not was a “state of shock,” said one.
The cuts touched almost every corner of FedEx. It even hit FedEx Freight, the company’s less-than-truckload unit, which has been the parent’s best-performing unit over the past couple of years.
In a separate move, FedEx Freight on Friday announced a second round of temporary driver furloughs to offset the decline in industrial production that is at the heart of an LTL carrier’s business. According to a person familiar with the matter, there are only so many rounds of furloughs that the unit can implement before it must begin laying off drivers, unless business picks up. That may not happen until the second half of 2023.
Bad news was good news
Those who know FedEx, but who are not inside it, applauded the mass layoff announcement. It was a long time in coming, they said. The company has a bloated hierarchy and has spent too much time chasing revenue and not enough time, like rival UPS Inc. (NYSE: UPS), focusing on cost, they argued. UPS CEO Carol B. Tomé began cost reductions almost from the day she stepped into the job in June 2020. FedEx, meanwhile, fell behind the curve in the hope that adding revenue would offset its lack of organizational efficiency, they contended.
The mess hit the fan in mid-September when FedEx preannounced terrible fiscal 2023 first-quarter results as trans-Pacific volume fell off a cliff and the company couldn’t cut costs fast enough to neutralize it. At that point, top executives realized that something had to be done. The cuts began at FedEx Express, the air and international unit that bore the brunt of the volume drop, but have since cascaded across the company.
Some may argue that if Smith, who stepped down as CEO last year in favor of Raj Subramaniam, had still been in the role, this type of workforce reduction would have never happened. Smith, who is now executive chairman, is still the most powerful force at FedEx. If he wanted to intervene, he probably could have.
Much animosity has been directed toward Subramaniam, widely perceived as the architect of the layoffs. But as a more than 30-year FedEx veteran as wedded to FedEx as anyone else, it is easy to imagine how difficult this was for him.
FedEx is a public company, and shareholders could not be happy watching its share price drop and languish following the mid-September announcement. (The share price has since bounced back in the wake of the layoff announcement). There are also new sheriffs in town. In a historic move, FedEx last June awarded an investor activist, D.E. Shaw Group, two seats on its board and the choice of a third seat at some point in time.
An outsider with no deep personal connection to the company, Shaw seeks one thing: to maximize shareholder value. Though with only 1% of FedEx shares, it is questionable as to how much clout the activist actually has.
The most important question is to what extent FedEx, in its effort to trim fat, has cut into bone. Roles and teams are being changed. Groups are being consolidated. Will the push for efficiency disrupt service quality and reliability? Will remaining employees be too worried and distracted to do their jobs optimally? Will rivals seek to capitalize on any internal turmoil in the wake of the cutbacks? The answers will reveal themselves in due course.
Final thought
This reporter has covered FedEx since 1984. He has watched the company grow, thrive, make mistakes and recover ever stronger from them. He has the utmost regard for Smith, whom he has long considered the finest American chief executive of the past 50 years.
This reporter is aware of the powerful link between the company and its employees, many of whom, including those who were laid off, are and were lifers and had hoped to retire there. He has talked to several who have nothing but good things to say about FedEx: how they were treated, were given the opportunity to flourish and advance, and were, without sounding too cloying, taken care of in return for putting in the work. They said that the Purple Promise, though rocked to its foundation by last week’s events, is still an appropriate mantra for the company.
This reporter has chronicled the good and bad at FedEx and has reported objectively on its trials and triumphs. Even as an outsider, but one who is a little closer than most, it was a painful week to live through.
Mehrdad Ghofraniha
FedEx is the only carrier that has a “FedEx Sucks” Facebook page. As a retail customer I avoid FedEx like the plague
Raymond Fundora
I have Been with the fedex over 30 years. In your article I don’t see you talking to any of the drivers that make the company what it is today or should I say what it was. With this economy the way it is and they are cutting our hours left and right this is what we get for loyalty. I’ve never seen it so bad we don’t even have safe vehicles to go on a road. The company is trying to push out the senior guys sense of course we make the higher hourly rate. (Which is still atleast $10.00 per avg less than UPS)Upper mgmt bonuses weren’t mentioned in your article either.As always,I am sure there were plenty of $ for them.. We tried to make this company Union 25 plus years ago .Fred Smith Spent millions of dollars to make sure this wouldn’t happen. Still mine boggles me how the pilots are Union and everybody else is not..
Carmine DiMaria
I was hoping to retire from FedEx but left after 33 years due to lack of confidence in Executive leadership. I worked in management for nearly 25 of those years enduring the highs and lows that any company operates through. FedEx is not being run the way Mr. Smith or his original executives such as Dave Bronczek, Dave Rebholz, and James Barksdale ran it during the early days. Through the “brown out” of the UPS strike, the 5% cut in salaried pay, and the numerous reduction in merit increases including 0 AIC payouts, I was still proud to be part of a great global organization. Sadly, the “no layoff” philosophy will not survive the changes yet to come. The most important part of the PSP philosophy was the PEOPLE and that is sadly gone.
William Doran
The company especially express is on a downward spiral. They stopped caring about their employees, especially the 25+ year employee. They used to put the fear of God in you, now we hire anything that walks and they get away with murder. They slapped us long time workers with no raise after the pandemic and anyone who wasn’t at top pay got a $2/hr raise. Many top range workers like myself left before Xmas! All with the same reason. I saw new hires that were God forbid awful, get away with murder while management went after the old timers to get the job done. I got out at 62 with 30 years in and I was so happy. I got the battle scars to prove it. 173880R! Never look back!! Company sucks.
Tibor Fuchs
As a former trainer at FedEx Express it is painful to read about these cutbacks. I have faith that we will get through this just like so many other great companies have done.
Bryan P Fain
The fact they were just hit with a $366m judgement doesn’t help matters either.
I work for Express and in the past couple of months a hiring freeze has been implemented. We’re down 6 drivers and don’t have the staff to cover our station’s routes. On top of this part-time and casual courier positions have been discontinued. Those people took up A LOT of slack We’ve collapsed and consolidated all we can, but you can’t fit 8 gallons of b.s. in a 5 gallon container; did I mention the hiring freeze?
The purple promise is on a ventilator and the family is thinking about calling the peacher.
Need I say more?
Sonja A Floyd
Thank you for your insight and thoughtfulness of this article.
I am still at FedEx after 33.5 years but the People, Service, Profit or PSP motto is now a three letter dirty word.
Sincerely,
Sam
This company is being run into the ground by Memphis management !!! I’ve never seen it so bad!!! Really sad. Ups shows them the right way to do it with a union,but they think they’re smarter then everyone. Fedex is the next KODAK