Competitive Advantage through Human Resource Management : FedEx Express
Category : Human Resource Management Essays
Competitive Advantage through Human Resource Management
Human Resources Management
According to , Human Resources Management is the philosophy, policies, procedures, and practices that are connected to the administration of the employees of an organization. HRM is particularly linked with all the activities that contribute to successfully attracting, developing, motivating, and maintaining a high-performing workforce that adds to an organization’s competitive advantage (2002). HRM is involved with the institution and implementation of policies, programs, and procedures that affect the performance, competences, and loyalty of the organization’s workforce. Through these policies and procedures, individuals are attracted, retained, motivated, and developed to perform the work of the organization. It is through these policies and procedures that the organization seeks to mold and shape the actions of the employees to operate successfully, comply with various public policies, provide satisfactory quality of employment, and improve its position in the market place through strengthened ability to compete and serve (1996).
HRM as a source of Competitive Advantage
HRM practices according to (2002) are increasingly viewed as a means to contribute profitability, quality, and other organizational goals through enhancing and supporting organizational operations. (2003), argues that a carefully crafted human resources strategy can be or at least can result in, a source of competitive advantage in the market place.
According to (2002), incorporating the top management’s goals to the HRM practices and policies will bring out and reward the types of behaviour necessary for achieving an organizations’ strategy. Effective HRM practices can enhance an organization’s competitive advantage by creating both cist leadership and differentiation. The HRM function focuses its activities on ways to help the organization achieve corporate goals like growing through recruiting and hiring employees, orienting and training them and making their initial and future job assignments. HRM contributions to a cost leadership strategy focus on recruiting and retaining employees who can work as efficient and productive as possible. HRM contributes to the successful use of differentiation strategy by recruiting and retaining employees who can perform high quality work and who can provide exemplary customer service (2002).
Human Resource Management is a source of an organization’s competitive advantage because:
1. It provides the right kinds of talent to the organization at the right time. HRM is expected to assure that a supply of qualified labor in a timely fashion (1996).
2. It ensures that the organization is properly staffed. When done effectively, the staffing, recruitment, and selection process provides a flow of qualified individuals for filling open positions within the organization on a timely and efficient basis (1996).
3. Using appraisals, the employees are assesses and evaluated. Employee appraisals have very profound implications for both the employees and for the future success of the organization (1996).
4. Using effective pay systems, the management can focus employees’ efforts toward desired organizational goals (1996).
5. Ensures that the employees are properly skilled to perform their tasks and supports the organization’s growth through career development. The goal of training as part of the human resources management processes is to create cost-effective programs that build the skills to perform effectively (1996).
Competitive Advantage through Strategic Human Resource Management
Strategic human resource management aims at the improvement of the way human resources are managed strategically within organizations, with the definitive goal of improving organizational performance, as judged by its impact on the organization’s declared corporate strategy, the customer or shareholders (2000). Strategic human resource management (SHRM) is a philosophy of people management based on the belief that human resources are uniquely important to sustain the success of a business. SHRM can be defined as the process of linking the human resource functions with the strategic objectives of the organization in order to improve performance (2006). Strategic human resource management involves the linking of HRM with the strategic goals and objectives of the organization in order to achieve a progressive business performance and achieve an organizational structure that promotes innovation and flexibility (1991). Strategic HRM according to (2004) has emerged as a major approach to improving the competitive advantage of the firm. The goals and objectives of HRM are aligned with the strategic objectives and plans of the organization. The role of HRM is to determine the human resources needed to support strategic objectives and to ensure that employees are selected, trained, evaluated, and rewarded in ways that further the achievement of business objectives. Strategic HRM is frequently described as a linear, balanced process that begins with the identification of goals that will guide human resource practices. The integration of the HR programs with the goals of the organization will result to the organization’s increased value. The recruitment, compensation, performance appraisal, promotion, training and other functions are designed and managed so that they work towards the strategic objectives of the firm (). Strategic HRM has the purpose of improving the way that human resources are managed within firms. The main objective of strategic HRM is to improve organizational performance as judged by its impact on the organization’s declared corporate strategy (200). Strategic human resources management means accepting the HRM function as a strategic partner in both the formulation of the organization’s strategies and the implementation of those strategies through activities such as recruiting, selecting, training, and rewarding personnel (2002). The enhanced value of innovation in determining competitive advantage requires organizations to attract, train and develop, and retain employees of the highest quality. Over time and throughout rapidly changing circumstances, organizations must be able to sustain the competitive advantage that the knowledge and skills of these employees provide. In the past, competitive advantage could be gained through finding better, cheaper access to financial capital, or marketing a new product, or inventing some new technologies. While cheap and ready access to capital, high-quality products, and new technology remain important components of any organization’s competitive advantage, today’s business environment requires a greater focus on the human resources element in business. Out of this realization has come SHRM ( 2002).
According to (2000), effective SHRM planning aids in creating a competitive advantage for an organization (). SHRM planning when done correctly provides a number of direct and indirect benefits for an organization.
- Identification of gaps between an organization’s current situation and desired future
- Explicit communication of organizational goals
- Encouragement of proactive instead of reactive behavior
- Stimulation of critical thinking
- Creation of common bonds and a sense of shared values and expectations
- Identification of the potential problems and opportunities
- HRM costs may be lower because management can anticipate imbalances before they become unmanageable and expensive
- More time is available to locate talent because needs are anticipated and identified before the actual staffing is required
- Better opportunities exist to include women and minority groups in future growth plans.
- Development of managers can be better planned
FedEx express is the world’s leading express transportation company that provides fast and reliable delivery to every U.S. address and to more than 220 countries and territories. FedEx Express uses a global air-and-ground network to speed delivery of time-sensitive shipments, usually in one to two business days with the delivery time guaranteed ().
The company has in excess of one million customers, served by more than 140,000 employees across approximately 50,000 drop-off locations, with 645 aircraft and approximately 42,000 motorized vehicles in its integral global network ().
FedEx Express takes its commitment to diversity seriously. The company was built on a philosophy that puts people first. That philosophy, People-Service-Profit, maintains that when a company establishes a culture that is respectful and rewarding for employees, they will deliver exceptional service to customers. Customers, in turn will reward the company with their business and loyalty, creating a profitable enterprise that can provide job satisfaction and job security for its employees. FedEx Express is a subsidiary of FedEx Corporation, connects areas that generate 90% of the world’s gross domestic product in 24-48 hours with door-to-door, customs-cleared service and money-back guarantee. The company’s unmatched air route authorities and infrastructure make it the world’s largest express transportation company, providing fast, reliable and time definite transportation (2000).
FedEx Express: Competitive Advantage
Federal Express’s strategy is to differentiate itself from its competitors by offering superior customer service and guaranteed on-time deliveries. Since the same basic technologies are available to UPS, DHL, and FedEx other competitors, it is FedEx workforce – its human resource – who necessarily provide FedEx with a crucial competitive advantage (2006).
FedEx’s overall HR strategy is aimed at building a committed, competent, and customer-oriented workforce.
Key Human Resource Strategies
Recruitment and Selection – Recruits skilled and competent workforce at all levels and institutes various promotion – from within activities aimed at giving employees every opportunity to fully utilize their skills gifts at work. The company follows no lay-off policy (Ahmed et al 2006).
Communication Strategy – Uses various mechanisms to build healthy two-way communication. All the employees and senior managers routinely participate in interactive discussion and question-answer programs (2006).
Compensation Strategy – Provides highly competitive salaries and pay-for-performance incentives. Gives guarantee of greatest possible fair treatment and employee security for all employees (2006).
Training and Development Strategy – Training is one of the most important events at FedEx to meet the goal of 100 percent customer satisfaction. FedEx follows ‘promotion from within policy’. For this, FedEx undertakes and arranges extensive training for all employees and managers covering quality management, leadership concepts, and company philosophy (2006).
Employee Retention – FedEx Express, with a turnover rate of about 1 percent, is one of the companies that have found effective ways of keeping their employees. One of the reasons it is successful is that employees have career opportunities. Federal express has a policy of strictly promoting from within. It also recognizes the efforts of its people through awards, open communication, and other incentives. Employee retention is interrelated with recruitment and employee relations. Each impacts the other, and all three are related. Federal Express begins its retention efforts by centralizing its recruitment efforts. Federal express retains employees as well as improves their skills, by making sure its employees receive proper training in job performance skills (1992a).
Federal Express’s Effective Human Resources Management Strategies
Policies built on “People-Service-Profits”
Federal Express Corporation’s greatest asset is its people. The company aims to promote a working environment where the employees and contractors feel respected, satisfied and appreciated. The FedEx philosophy is that people are the primary link in the value chain, and thus, value is created by focusing on employees first. This emphasis on employee satisfaction is illustrated by the organization’s annual attitude survey. At FedEx, the attitude survey forms part of the annual managerial evaluation and reward process. FedEx’s philosophy has gained an increasing base of empirical support. For example, (1985) hypothesized that HR practices would be related to employee attitudes which would be consequently related to customer satisfaction. They found significant relations between HR practices and customer reports of the quality of service they received (1997). Federal Express according to (1992b) applies commonly known managerial concepts and effectively translates them into action through a philosophy they define as “people, service, profits”. They point out that its is no accident that “people” are listed first in the phrase. Federal express says that people are placed first because it makes good business sense.
The People. Service, Profits philosophy is implemented by asking and answering several basic questions. The first is, “What is expected of me, and what do you want me to do?” Federal Express tries to spend a lot of time answering that question for their personnel by having an extensive orientation program that explains Federal Express’ values. The second most important question is, “What is in it for me?” Federal Express provides tangible evidence of what is in for them. The company strictly adheres to a promotion from within and career progression policy. An extensive job posting system keeps employees informed of opportunities. When a position is open, notices are posted throughout the company for all employees to see (1992b).
1. Recruitment and Selection
According to (2002), recruitment is an HRM process that is involve in the discovery, development, seeking, and attracting the right people to fill actual or anticipated job vacancies. Selection is the process of obtaining and using information about job applicants in order to determine who should be hired for short or long-term positions. Placement involves matching individuals to jobs, based on the demands of the job and the competencies, preferences, interests, and personality of the individual. Selection and placement yield a match between the organization’s needs for specific qualified individuals and different needs of employees that determine the type of work that is satisfying for them (2002).
The core philosophy of FedEx that governs its every activity is People-Service-Profit (PSP): Take care of the people; they will in turn deliver impeccable service demanded by the customers, who will reward the company with the profitability necessary to secure FedEx’s competitive advantage. FedEx is dedicated to the principle that stresses the importance of its people as assets of the company. The company believes that motivated and diligent people provide indispensable professional service to ensure profits and continued growth (). The company also make selection regardless of race, religion, gender, national origin, citizenship, disability, or age ().
2. Career Development/ Advancement
Career development is an ongoing, formalized effort by an organization that focuses on developing and enriching the organization’s human resources in light of both the employees’ and the organization’s needs. Career planning is the process by which an individual formulates career goals and develops a plan for reaching those goals. Career development looks at individual careers from the viewpoint of the organization, whereas career planning looks at careers through the eyes of individual employees (2002).
Every FedEx office and worksite strives to cultivate an open, supportive environment where each employee can reach their full potential and freely contribute to the company’s success. The company’s founding philosophy, People-Service-Profit, supports the fair treatment of its people as the most valued asset and cornerstone of FedEx’s success (1998).
There is ample opportunity for all employees to advance within the company. Another popular career advancement tool is a tuition refund program, where the company reimburses employees for their tuition costs.
3. Incentives and Benefits
Career Advancement is not the only incentive used to increase the retention of employees. One approach that works well is the awards program, which is designed to reinforce desired behavior such as quality work and customer focus. Federal Express believes this and other incentive programs help them deliver high-quality service and keep their people motivated. Federal Express knows that acknowledging efforts is essential for a motivated and satisfied work force, and that such acknowledgement stimulates new ideas and encourages better performance and team spirit. One of the nice things about the Federal Express incentive is that the customers is left out of this reward process. Customers have a voice in selecting outstanding service. The Golden Falcon Award is given to full-time employees who have demonstrated service to their customers that goes above and beyond the call of duty. Nominations for these awards are usually based on unsolicited internal, as well as external, customer letters citing outstanding performance. Winners of these awards are announced monthly, usually through company publications and video programs. Winners receive an award and, most important, shares of stock. Federal Express' highest award, is the Five Star Award, given to individuals for outstanding performance which has materially helped the corporation enhance service, profitability, and teamwork. Several categories of employees are eligible for the award including nonmanagerial employees, managers or senior managers, and managing directors and officers. (1992b).
The company offers an active work environment that supports its employees in building their career, and a broad compensation and progressive benefits program that rewards every employee’s contributions to the business ().
FedEx Corporation offers its employees with outstanding benefits and an extremely competitive salary. In addition, the company also provides rewards that go well beyond financial compensation and fringe benefits. Each employee has opportunity to grow, succeed and be recognized for his or her contributions.
The company is also aware that employees have unique and
diverse needs. That is the reason why it created a benefits package that
provides flexible, customized coverage so that the employees can choose the
options that best address their benefit needs. Among the benefit options offered
are medical, dental and vision care, disability protection, medical absence pay,
short- and long-term disability and worker’s compensation. Basic life insurance
programs are company-paid with supplemental options available at a cost. The
company also provides two plans, a pension plan and a retirement savings plan,
designed to help the employees obtain their long-term savings goals and help
prepare for retirement.
In addition to tuition assistance programs, everyone can participate in the company’s employee stock purchase plan, receive reduced rate shipping, global travel opportunities and participate in its credit association ().
Federal Express’ success with employee relations and retention depends on candid communication. Federal Express spends enormous time on their internal employee response program. The heart of this program is an open door procedure where employees are encouraged to find answers to situations they find disagreeable, controversial, or contrary to existing policy. Open doors, especially the way Federal Express uses them, can be effective, but perhaps the company’s most successful communication tool is their renowned Guaranteed Fair Treatment Procedure (GFTP). This procedure which they believe is the cornerstone of their “people” philosophy, gives each Federal Express employee the right to have any eligible issue go through a systematic review by progressively higher levels of management. Their GFTP helps ensure that personnel have a right to discuss complaints without fear of retaliation. The company also believes it helps them maintain an open atmosphere as well as keep their complaint handling process fair and equitable. The Federal Express survey/feedback/action program compliments the GFTP and other communication tools. It is an annual survey of employee attitudes. Management uses the survey to learn what they need to do to improve in specific departments and with the company in general ( 1992b).
5. Employee Motivation
Higher employee motivation leads to greater creativity, productivity and discretionary effort, which in turn lead to improved company performance.
6. Employee Training
Top management at FedEx Express has always believed that training is a key factor in a successful business. FedEx Express values training; it is a policy that management members join in 40 hours of training every year. The company attempts to achieve 100% customer satisfaction and believes that only committed workforce can achieve this standard. FedEx Express’ corporate culture emphasizes the importance of treating its people with dignity and respect. This includes giving employees the liberty to do their jobs and the tools they need including training, to perform at their highest level with appropriate recognition and rewards for a job well done. FedEx Express believes that effective and timely training plays a critical role in not only attracting and retaining a highly motivated and productive workforce but also is an important factor in its ability to deliver superior value for the shareholders and service to the customers ( 2002).
Human Resources Management aims to attract, develop, motivate and maintain high-performing employees that add to the organization’s competitive advantage. The Human Resource Management is now considered as a strategic partner of a company’s management. The policies and strategies of the HR department must be aligned to those of the company in order to achieve a favorable standing in the market place. Strategic HRM aims to improve the organization’s performance through the improvement of the way the human resources (workforce) are being managed. The changes in the external environment of the business over the years have focused on the importance of the human resources in the achievement of the organization’s goals and objectives.
FedEx Express values its people and believes that a motivated and satisfied workforce is essential in providing quality service. The company believes that its people are one of its competitive advantages. FedEx Express’ talented, skilled and motivated employees set them apart from their competition. The company’s Human Resources Management strategies are specifically tailor-made to fit the company’s objectives and goals. The company promotes a working environment that is built on the “People-Service-Profits” principle. The HR policies and practices at FedEx Express are designed to focus on the well-being of its workforce by providing equal opportunities, competitive salaries and benefits, extensive training and career development programs, effective training programs and others. The workforce is a source of competitive advantage for FedEx Express.