Marking 428 Sales Management

FedEx Compensation
Alignment
April 19, 2011

Hilary Wadsworth-hjw5023
Kevin Irvin- kci5006
Shawn Newlin- sgn5008
Ryan Thomson-rqt5017

Mary Prince- mkp5053

Case Summary
In June of 2000, the world renowned logistics and shipping corporation, FedEx, initiated
Project ARISE (Achieving Revenue and Information technology Synergies across the
Enterprise). The inward goals of project ARISE pertained to two major issues: the first was
concerned with unifying the sales and marketing groups for both FedEx Express (air) and FedEx
Ground (ground). The second, and most important issue, entailed developing a new
compensation plan for the account executives now that their focus was on two different services
(FedEx Express and FedEx Ground).
FedEx Express was the industry leader in U.S. air freight and consistently maintained
high revenue growth, all while dominating market share. In January of 1998, FedEx acquired
RPS, which would later become FedEx Ground, in order to diversify its delivery capabilities to
both air and ground.
The need for the integration of these two programs was, in principal, centered on
customer satisfaction and outlasting their main competitors. UPS, for example, dominated the
ground market, while FedEx dominated the express market. UPS did not have separate express
and ground systems; integrating here and following suit with its competitor would enable FedEx
to captivate part of UPSs ground market. Internally, combining these two departments would
prove to be more cost effective; from a customer standpoint, having to deal with two different
account executives was becoming quite bothersome and redundant. On top of this, having to sign
multiple contracts for each service was an annoyance as well. In order to combat these issues, the
sales and marketing forces of express and ground became their own entity and account
executives were then assigned; those that had only sold the express service now had to sell the
ground service as well.
After the successful sales and marketing integration of the express and ground services, it
became apparent that a new compensation plan was needed. Unfortunately though, it was not an
easy formula to solve. Each service represented a different weight value in conjunction with
revenues and total sales; determining how to compensate based off of these weighted values (on
top of bonuses and incentives) proved to be challenging. As a result, the previous compensation
plan incurred many negative reviews based around the differences in increased incentive and

index levels not proportionate to one another. In response to these problems, the FedEx
solutions team looked to engage a new updated compensation plan that would work positively
amongst both teams.
PRIMARY PROBLEM
How to determine the best account executive compensation plan for the integrated FedEx
Express and FedEx Ground services that is in accord with the goals of Project ARISE.
SECONDARY PROBLEMs
FedEx must determine how to properly evaluate the understanding and successes of the
new compensation plan along with a positive acceptance from both Ground and Express sales
teams.
RECONMENDATION AND SUPPORTING
To evaluate the effectiveness of adjusting the compensation plan, many factors must be
taken into consideration. As previously stated, the Fed Ex Ground and Express sales forces are
being integrated into one entity. As a direct result, problems have arose where Express account
executives still focus on Express accounts and Ground account executives still focus on the
Ground accounts. In response to this issue, solutions for FedEx should be to encourage more
cross-selling, and a first step in this process would be declaring activity quotas for both of the
sales forces. These quotas would require an Express account executive to make a certain
percentage of their sales to Ground accounts and vice-versa (FedEx). Also, there is a need to
create a more clearly understood compensation plan in order to give the sales force even more
incentives. With this new plan, bonuses can be used to further encourage cross-selling in order to
completely integrate the two sales forces into one.
To properly connect both the Ground and Express lines of FedEx under a single sales
team, a distinct compensation plan must be utilized. With Express and Ground both having
different initiatives, a unified plan would be based around average revenues and market share
percentages. The Express sector controls about 64% of the revenue and maintains a large market
share within FedEx. The Ground portion inputs much less revenue at 13% and also has smaller

market utilization (Godes). The correct compensation plan would take into account the
differences in revenues and account sizes for both Express and Ground.
To promote consolidation, selling the plan will be based off of a portion of Express
relative to the average revenue and a similar direction with Ground along similar lines of the
70/30 percentage plan. Account executives will be required to reach a target closing sale goal in
both sectors which will, in turn, force each executive to sell both Ground and Express. The
bonus index will be based off of account sizes and annual revenue; however, it will be similar
across the board in order to create a unified understanding of the system (Godes). This
compensation plan will allow for equal selling in both accounts and revenue sizes so that account
executives dont push for only large accounts. When looking at this compensation plan, many
evaluating factors are taken into account in order to measure the popularity and success of the
plan.
There are several key points and objectives that Jerry Beyl and his team should consider
when creating the compensation plan for the integrated sales force. First and foremost, Beyl must
promote cross selling between FedEx Express and Ground. Another top priority should be
creating an employee-wide awareness and understanding of the compensation plans
fundamentals and concepts. If employees have a keen knowledge of the plan, they will be more
adept at tracking and calculating their results, hence providing larger revenues for the company.
When executed accordingly, this new compensation plan will stimulate greater work
ethic from the sales force because employees will be able to quantify their personal company
impact more easily. That being said, Beyl must keep in mind that this new plan will serve as a
measurement of expectations from each individual employee. These aforementioned
expectations will be articulated and communicated through his plan. In turn, the new
compensation plan must be well defined and succinct. Although the organizational cultures of
FedEx Express and Ground are profoundly dissimilar, Beyl also needs to elucidate to the FedEx
sales force how essential it is to sell both services.
From a companywide perspective, the Ground and Express sales teams will react
positively to the new compensation plan. With this new plan, there will be less confusion
between the two departments. The two will be merged and, as a result, issues with sales,

management, administration, pricing, and operations will all be under the same department.
Also, customers will not have to contact multiple people in regards to their ground and express
mail. This will make it easier on the account executives because they will be in charge of a
particular customer with both ground and express mailing while understanding the benefits of
their different revenue levels.
By creating an integrated sales force, FedEx is opening the door to widespread company
expansion and immense revenue increases while simultaneously staying aggressively
competitive with companies such as UPS, USPS, and DHL. The changes instilled by this new
compensation plan, if properly implemented, will generate greater sales than incurred in previous
years.

References
Godes, David B. Sales Force Integration at FedEx(A-D). 506029. Harvard Business School
Publishing, October 14 2005. http://hbr.org/product/fedex-corp-structural-transformationthrough-e-bus/an/HKU098-PDF-ENG
"About FedEx Company Information." FedEx. FedEx Corporation , 2011. Web. 18 Apr 2011.
<http://about.fedex.designcdt.com/>.