Some FedEx employees say layoffs are wrecking morale and chipping away at the famous loyalty that Fred Smith built
Earlier this month FedEx laid off more than 10% of its top managers.
The move came as a shock to some since FedEx's culture puts job security as a core value.
Some insiders see the layoffs as a failure of leadership and fear a lasting shift in FedEx culture.
More than a week after FedEx laid off 10% of its top management staff, at least one affected employee was still shocked.
"Every day I go through all the emotions from anger, denial, depression, shock, and acceptance — all over again," a laid-off director with 20 years at the company told Insider. They were one of the thousands of management-level employees let go in a move that is shaking the foundations of a company historically — and notoriously — averse to layoffs.
The pandemic was difficult for all delivery companies. A subsequent boom in e-commerce helped FedEx report historic quarterly profits. But, as package volumes faded, FedEx's profits started to erode faster than its competitors.
The same laid-off employee, who spoke on the condition of anonymity since they are still receiving severance from the company, but whose identity has been verified by Insider, called those booming months of 2020 a "false positive" that sent the team into growth mode. Service quickly degraded.
Insider spoke to 11 current and former FedExers following February's job cuts, six of whom left within the last year, two in the most recent round of layoffs. They were all granted anonymity since most still work for FedEx or in the industry.
FedExers have traditionally been fiercely loyal to the company and to infamous founder Fred Smith, who helmed the business for five decades and remains executive chairman of its board. Many still are.
But now, some also question if the company Smith built is changing for good.
People. Service. Profit.
Some call it a family; some call it a cult. "Drinking the purple Kool-aid" and "I bleed purple" are phrases thrown around in casual conversation with pride among FedExers. With 30,000 employees in Memphis (population 630,000), it's easy to feel like FedEx is the main character in the US economy when you're on the inside, the FedExers said.
That loyalty is largely due to famed founder Fred Smith, who's still revered inside the company. Many, if not most, FedExers still call him Mr. Smith, even after they leave. He gets the same reverence in meetings, too, even when everyone else goes by their first name.
"Mr. Smith was a visionary," said another former FedExer, who left in the last year out of frustration with the direction of the company.
Though he's held up as a generational American success story, rubbing elbows with Presidents and other titans of global business, FedExers say he has a reputation for caring about his staff at every level.
"He makes his employees bleed purple when he connects with them," said the same laid-off FedExer. That connection translated into the company's "People. Service. Profit," philosophy.
"If you treat your people well they will deliver the service that your customers want and then consequently the profits will come," another FedExer, who was laid off this month after eight years at the company, said. This credo led to a company full of "lifers" who spent their entire careers climbing the ranks. Sources said many of the FedExers impacted by the layoffs would be in that category.
Though the message is still ubiquitous, some people said things started to change around the 2008 financial crisis, when FedEx did a smaller round of buyouts and layoffs. Everyone took a pay cut that was never reversed.
Such a focus on loyalty led to a top-heavy workforce with plenty of people "coasting," said one current employee. And as the company's performance wavered, employee benefits and company culture did too.
"The erosion just kept happening," said one former FedEx who left the company in the last year.
FedEx declined to comment. CEO Raj Subramaniam said in his letter to staff announcing the cuts that the move was "extraordinarily difficult." Affected employees said they will receive two months' severance plus additional time up to 28 weeks according to their tenure with the company.
Mr. Smith steps back
Despite earlier layoffs and buyouts, some trace back a change in tone to 11 months ago when Smith officially handed over the CEO job to FedEx-lifer Subramaniam.
A few months after the 78-year-old founder left the c-suite, the company brought in consulting firm McKinsey to help its cost-cutting initiative. The tone of some internal communications changed from one of inspiration to one of accusation, several former employees said.
"I just think FedEx lost their way when they tried to go too big," one former employee, who left in the past year, said. Despite on-time delivery rates far below competitors, some sales staff at FedEx Express were told on a conference call to "sell through the pain," even though customers were furious, the former employee said.
Service improved when business slowed down, forcing new CEO Subramaniam to instead focus on profit protection with cost cuts in September, and eventually layoffs.
After the pandemic roller coaster and two quarters of cost-cutting — all in an environment where mass corporate layoffs are a near-daily occurrence — some FedExers say they saw the cuts coming.
Two people affected by the layoffs told Insider they were shocked and feeling the sting of not being afforded the deal colleagues got in past rounds of buyouts. This time felt "cold" and "arbitrary," they said, with added insult that some were not able to say goodbye to the large teams they led.
"There was no opportunity for people to raise their hands," said one affected FedExer. "It really threw people this go around. I really see this as a reflection of the change in senior leadership more than anything."
Inside the company, employees are doing the back-of-the-envelope calculations on the cuts still to come — Subramaniam promised $4 billion and cuts this fiscal year. And even some who still see the company culture as intact said this is a decisive moment for the company to prove it.
"There is still that emphasis that people are first at FedEx," said a 15-year FedEx veteran who left last year. "If there's more coming, that's where you could see a change in the attitude at FedEx."
Do you work for FedEx? Have thoughts on the future of the company or a tip? Reach out to reporter Emma Cosgrove email@example.com.
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