Fred Smith started FedEx in the early 1970s, only two years removed from service in Vietnam in the Marine Corps. Still the leader of the company today, Smith has built one of the world’s most successful logistics firm on leadership principles derived from his experiences in the Marines. These principles have become incorporated in FedEx’s corporate philosophy, organizational culture and its organizational structure. This style has allowed the company to deliver a high-consistency level of service and strong returns to investors.
Former Marine Fred Smith has based his own personal leadership style at FedEx on the principles derived from his experiences in the Marine Corps (Smith, 2010). Smith has incorporated many of his personal leadership lessons into the FedEx Leadership Institute, where the firm’s managers are trained. Smith has noted that those trained in the military will immediately recognize many of the principles that are taught at the FedEx Leadership Institute as being familiar from their military training.
The influence of the military has lead to a strong hierarchical leadership style with centralized command structures at FedEx. The company makes most major decisions at its Memphis headquarters and then disseminates these decisions to regional managers for implementation. The company even makes a strong emphasis on hiring ex-military in order because they tend to be a better cultural fit with the hierarchical management structure. The company believes that veterans are “team players and have great leadership skills”, which makes them well-suited for the company’s organizational culture and generally a good fit for the leadership style that Fred Smith has created (Epstein, 1998).
Armed with thousands of ex-military in the management ranks, FedEx has built an organizational structure that emphasizes centralized decision-making and reliance on local managers to lead the employees, a structure similar to what is found in the military. The centralized structure allows for decision implementation to take place in a coherent manner, essential for a company wherein thousands of geographically isolated operating units must work in tight coordination with one another to facilitate overnight delivery of goods around the world.
FedEx has a nine-point system which is used to evaluate leadership potential among its employees. These points are charisma, individual consideration, intellectual stimulation, courage, dependability, flexibility, integrity, judgment and respect for others (Row, 1998). The company views these values as being central to strong transactional leadership. Changes to FedEx’s business model are few and far between at this point in the company’s existence. The bulk of economic value derives from executing the same transactions repeatedly, day after day. The values do incorporate, however, a couple of aspects of transformational leadership, particularly the emphasis on individual consideration and intellectual stimulation, which the company identifies as the ability to improve the abilities and though processes of fellow employees.
Advantages and Disadvantages
The transactional leadership style that FedEx emphasizes has several advantages. First, it facilitates day-to-day excellence in operations. This emphasis on short-term operational excellence allows the company to execute millions of individual transactions each day with a low error rate (MindTools.com, 2010). The transactional leadership style also has the benefit of allowing the firm to improve its profitability over time by making efficiency improvements. This has value for firms such as FedEx that are operating in industries that are based on large volumes of low-value transactions, in which minor improvements can lead to significant cost savings when spread out over millions of transactions. The transactional leadership style developed is based on the hypothesis that...
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