Organization Design in Action Conference Proceedings
AMOD's 1997 Practitioner's Conference, held in Baltimore on September 14-17 at the Clarion Hotel drew a lively group of new and current AMOD members. Over the 2 I/2 days of the conference, participants had an opportunity to hear about successful organization design practices, network with presenters and other AMOD members, and review and purchase the latest publications in the field of organization design. The setting for the conference, the Clarion Hotel, is considered one of the grand old Baltimore hotels, with a magnificent view of the city from atop Mt. Vernon Place, a European-style Square in the midst of the city, and one of Baltimore's "best" old neighborhoods.
As in past years, there was a pre-conference workshop on the Method and Practice of Organization design. This year the workshop was led by Janet Gray, a Senior manager at Ernst & Young. The session was held the Sunday before the conference, with nine people attending. It covered the basics of organization design, including:
- organization types
- comparative design features and benefits
- common applications of organization design work
- basic approaches to organization design
This year's conference format was different from former AMOD Conferences, and from most other professional conferences. It did not consist simply of a series of presenters on specific organization design topics. Rather, this conference was "redesigned" as an action-learning workshop in which the audience got actively involved in the "stories" of the design of three very different companies: Federal Express, Owens-Corning, and Thomas Lighting. Each of these "stories" highlighted different components of organization design, including strategy, structure, systems and process.
For example, the Federal Express story highlighted their successful strategy of designing and redesigning the organization on a continuos basis to meet changing market needs. In addition, Federal Express learned to lead the market with world-class distribution systems. On the other hand, the Owens Corning story highlights process and structure in its transformation to market teams. The Thomas Electric story highlights the role of structure in helping it meet new market demands. The last day of the conference was a demonstration of a very powerful simulation called the Neon Buzz Company, followed by an impromptu open forum among conference attendees on organization design topics of interest to the group.
For those of you who did not attend the conference, we've provided abstracts of each "story" and/or session.
The Federal Express Story – Testament to the "Designed" Organization
The Federal Express story was told by the staff of FedEx's Organization Planning team, led by Phil Smith, AMOD's Past President of 1996. This team has been together for over ten years at Federal Express in Memphis, orchestrating and living the design story we heard on September 15. The three presenters, Phil Smith, Dennis Reber and Barbara Garner, told the Fedex story from Birth to the Present, and into the Future. They emphasized how each turn in the Federal Express strategy resulted in important organization structure and systems changes that helped to continuously strengthen FedEx's competitive position over the last twenty-five years.
The story was structured on the FedEx life cycle: starting with the early years (1972-78), through the eras of domestic growth, international growth and expansion, and the growing role of technology in the future of FedEx. At each juncture, the presenters conducted an exercise with the audience, placing us in Fred Smith's shoes, asking us to develop FedEx's strategy and structure in response to the business environment facing FedEx at the time.
Here we will relay the first half of the story in detail, focusing on the first 12 years:
The Early Years: 1972-78
It became clear very early on in the story that FedEx is a consciously designed organization, primarily by Fred Smith, the founder, President and Chairman. During the first part of the story, the presenters spent a significant amount of time on the life events, personality and leadership style of Fred Smith and impact on these on the remarkable success and early failures of FedEx. The effectiveness of Mr. Smith's personality and leadership is being recognized in 1997 not only by AMOD's Crystal Apple award, but with the first Peter Drucker Strategic Leadership Award.
Phil, Dennis and Barbara described a man who was born into a family of entrepreneurs and risk-takers. Fred Smith inherited his family's creative genius, which started to show itself in the Yale term paper he wrote about centralizing package delivery!. He volunteered to fight in the Vietnam War, enlisted in the Airforce, became a fighter pilot, and was awarded two Purple Hearts and other medals for bravery. In 1971, he came back to his home town of Little Rock ready to make a difference in society. He started working in the family business (his father had become a wealthy man) but didn't find the challenge he needed.
This could have been a nice, but typical story of someone devoting himself to working in the service of others. Fred Smith had a different idea:
Why not buy a fleet of small jets, retrofit them for small package payloads and build a single hub in the center of the country where packages could be sorted overnight and delivered the next day?
In 1971, with inheritance money and venture capital, Fred Smith acted on his crazy idea and incorporated. He purchased some small aircraft, retrofitted them for cargo, and opened Federal Express in Little Rock, Arkansas. During the majority of these years, Federal Express served the corporate market as an overnight package carrier, using small aircraft that did not compete with commercial airlines. And, it was not until 1976 that the company made a profit!
It was during these years that FedEx made its mark with innovations such as:
- the first Courier Pak
- Drop boxes
- customer store-front locations
- Standard air product (2 day)
The vision of People, Process and Profit as organically connected in the Federal Express business began to take shape with Fred Smith
Organization structure reflected a simple, functional model that provided for flexibility and creativity, with Mr. Smith staying very close to all aspects of the business. For example, he decided that it was essential to own the aircraft, so Fred Smith bought the airline company he was using. The Federal Express advertising theme became "Federal Express - A whole New Airline for Packages Only!".
The Domestic Years (1978-83)
During this era, FedEx, like other US businesses, was facing several economic, social and business trends that would have daunted a less creative company. These included the Mideast Oil Embargo, growing Japanese and German competitiveness in the US market, slowdowns in productivity growth and real wage growth, airline deregulation, shift toward a service economy and focus on service management, and the appearance of personal computers. While all of these are important factors, two of these were especially important in shaping the direction of the company:
- the deregulation of the airline industry created a pivotal opportunity for Federal Express. Airline deregulation allowed the company to use large commercial-size aircraft, permitting large-scale cargo volume.
- This made it possible to create centralized, automated call center in Memphis, Tennessee, it's current location. The new role of personal computers made the centralized call center approach possible.
At this time. Federal Express developed these first-time innovations:
- Call centers opened
- Overnight letter was introduced
- first, almost fully-automated Super-Hub was built
- 10:30 am delivery
- first Business Centers
Speed and volume were key in shaping the company's strategy and structure. Extensive use of automation for centralized, highly efficient hubs resulted in an organization structure that focused on supporting distribution and customer service. As such, the hubs became a major focus for organizational resources.
The foundation for FedEx was in place. Later years (1983-94) were focused on international expansion, with the purchase of the Asian Flying Tigers airlines, and on continued efficiency, speed and increased volume. Some important organizational design changes included:
- Installment of additional hubs in Chicago, Alaska and California
- opening of Asia Pacific and Middle East headquarters
- Automated sorting system
- Downsizing of non-essential businesses acquired in the late 1980's
- Opened the Air Ground Terminal and Transportation Division
The structure of the company was characterized by expansion of distribution systems, both in kind and in efficiency, supporting a strategy of globalization, speed and extraordinary volume of over 2 million packages.
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