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.
Ben
Worked for Express for 20 years. 15 as an operations manager. Planned to retire at this company in my mid- fifties. Towards the end of my tenure 2016-2019 the company had started already to take a turn to ridiculousness. Red tape, handcuffs, and bureaucracy caused the “purple promise” to be a thing of old. Now it was chasing goals, reports to directors and regional vps who like to think very highly of themselves and continued to have their thumb on the operation with constant calls and reporting. I was a 2nd generation of FedEx Express and loved the company in the beginning when we had the direct means to make every interaction a great one. But now you have your Sr manager, Director, regional Vp, Sales manager, inside sales manager, account sales manager, safety specialist, etc etc. I resigned in 2019 to work for myself because I saw the writing on the wall and was the best decision and looks to be the right one. The culture in this company is no longer what it use to be and they grew too fast to be able to manage it effectively and threw people and positions to manage it
Jason
Not one mention of Jim Vena, who now sits on the board of directors. I’m not sure how this isn’t the main story line, seeing as how he goes from company to company decimating their employees and entire town’s economies after buying millions in stocks-artificially inflating them in the short term then moving on to another company, leaving executives scrambling to rehire enough people to even keep the company running. (see precision scheduled railroading)
Sorry, FedEx employees. It’s only going to get worse. Way worse.
Ben
Sad but a fact there are cycles in business. Unfortunately, boards of directors sometimes forget this when the feast is on. Workers who are very young and not experienced this. Don’t know to prepare for it.
ka
lol it was outstanding when the ground driver blocked my screen door, and then when i asked him to not do that, it was an outstanding feded experience the next day when he slammed that same screen door.
John Costanzo
Good article and perspective on the culture within FedEx, Mark. The writing has been on the wall for several months for all logistics companies tied to the ebbs and flows of Industrial Production. FedEx has weathered economic declines and layoffs before, and will again… but I’m sure it wasn’t an easy decision for a company with such a strong people oriented culture.
John Costanzo
LDK Global Logistics
Fedmech
Started 1979, retired 2021.
When I started Federal Express was a Great company and had great people who cared about doing their job the best they could. Team work was everywhere. It didn’t matter what your ‘position’ was. Pilots would help load and unload planes. Drivers made sales and built relationships with their customers.
The company killed all that by becoming bureaucratic, woke, and forgetting that the employees are the most important asset, not the share holder.
JJ
FedEx is racing to cut costs, but at the same time offering massive discounts to “win” or “save” business. When will they learn that the race to the bottom isn’t going to work. Express is failing mostly because of the One Rate program in a failed attempt to win Amazon shipper business. Sad state of affairs for an otherwise reputable organization.
DJ
FedEx Express service has been terrible the last several months… Package pickup at my facility for Express packages I need delivered the next day are rarely ever done. Most of the time the pickups aren’t completed until the day after. I have to call up and complain the to get my packages picked up. I am now in the habit of calling up the day of making the online pickup appointment just to ensure the pickup happens. And it is difficult to almost impossible to speak to an actual human being- the virtual assistant has only a limited amount of choices- for instance you cannot say ‘customer service’ and get connected to someone. You have to choose from the limited options it gives you of which none addresses why I am calling. I would email these issues to FedEx however there isn’t a way to do that (I have searched the FedEx website and the internet- you are directed to call the 1-800GoFedEx number where the virtual assistant is very useless). FedEx leaves me with the impression they don’t want to actually hear from their customers when things aren’t going well. I guess when your choices are limited for next day deliveries you simply don’t have many choices and FedEx knows this.