The typical tenure of a S&P 500 chief executive is just under eight years. In the FTSE 100, it is just under six years.
Bear those figures in mind when considering that Fred Smith, the founder and chief executive of the logistics giant FedEx, will have notched up more than 50 years when he steps down at the beginning of June.
In an age in which the expression ‘legend’ is over-used, Mr Smith, 77, can genuinely claim that status.
For FedEx can, as Mr Smith said in the announcement, claim to have “changed the world”.
Image: FedEx has 570,000 employees across the globeAmong innovations now taken as commonplace in the logistics industry, FedEx can claim a number of firsts, including inventing tracking numbers that would allow customers to check the location of their package; being the first in the industry to use hand-held computers and bar codes that enabled delivery drivers to share tracking information; and launching the industry’s first website enabling customers to process shipments online and track the progress of their package.
AdvertisementMore than that, the company’s very raison d’etre was a world’s first, namely the creation of an overnight express delivery service.
It was something Mr Smith dreamt up as an undergraduate at Yale University, where his peers included future US president George W Bush and John Kerry, later to become US Secretary of State under Barack Obama.
More from BusinessIn 1965, he wrote an economics paper examining how goods were transported across the US, highlighting how companies relied on trucks or passenger aircraft to do so. At the time, it was difficult to get a parcel delivered from one location to another in under two days and Mr Smith argued that there was room for a dedicated logistics business that could carry items in a dedicated fleet of aircraft flying overnight, using a ‘hub and spoke’ network.
It has since gone into business lore that Mr Smith’s economics professor, Challis Hall, only gave the paper a ‘C’ grade because he did not think the idea would work.
Image: FedEx operates a network of 70 aircraft, 25,000 vans and 6,500 trucks across Europe alone. Pic: APBut Mr Smith himself denied that in an interview in 2018 with the Wall Street Journal: “Today that paper is kind of famous, and it’s because of a careless comment I once made. I was asked what grade I got on it, and I stupidly said, ‘I guess I got my usual gentlemanly C.’
“That stuck, and it’s become a well-known story because everybody likes to flout authority. But to be honest, I don’t really remember what grade I got. I probably didn’t get a very good one, though, because it wasn’t a well-thought-out paper.”
Nonetheless, Mississippi-born Mr Smith did not give up on the idea, even though on graduating he joined the US Marine Corps.
Before long, he was a platoon leader in Vietnam, where he served two tours of duty and earned a Silver Star, Bronze Star and two Purple Hearts.
He has often spoken of his wartime experiences and recalled in a 2014 speech: “Everything that went into FedEx that made the business that it is today relates to what I learned in the Marine Corps, and I’ve always been grateful for that education and for those I’ve served with.”
Image: Fred Smith is seen in 2004. Pic: APThose lessons included precision, co-ordination and the importance of both being able to work together as a whole while smaller parts of the business could be capable of operating independently when necessary.
In 1971, on leaving the Marine Corps, he set up FedEx with $4m he had inherited and a further $80m he had raised from bank loans and from investors prepared to back him. The name Federal Express was adopted because Mr Smith thought it sounded patriotic, while its colours were those of the scarlet and gold of the Marines and purple from the Purple Heart.
The business, based in Memphis, Tennessee, officially launched on 17 April 1973 with 14 small aircraft delivering 186 packages to 25 different cities from Rochester, New York, to Miami, Florida.
But it lost $29m during its first two years as fuel costs rocketed after that year’s oil price shock.
It was at this point, according to myth, that Mr Smith saved the company – with investors refusing to put up more money – with money he had won on the blackjack tables in Las Vegas.
Image: A FedEx driver delivers a package to a New York deli. Pic: APThat turns out to have been another exaggeration, too, as Mr Smith told the broadcaster Charlie Rose in 2008: “I went to Vegas with a few hundred dollars and the man I was flying got me a credit line of about $1,000 – and I won $25,000.
“The myth is that that man made the payroll for the company. That’s not true at all. Although I won the money, we owed so much more money than that, it would have been a drop in the bucket.
“But it symbolically probably was important.”
It proved to be a turning point and, in July 1975, FedEx became profitable for the first time.
It began using bigger cargo planes in the late 1970s and expanded into Europe and Asia in 1984. A year earlier, it had become the first US company to achieve $1bn in sales within a decade of its launch without having done any mergers and acquisitions.
Today it has more than 570,000 employees around the world and has a stock market value of just under $60bn.
Image: FedEx is now worth $60bnManaging that vast enterprise now falls to Raj Subramanian, currently the operations chief of FedEx, who has been with the business for 31 years.
His chief challenge will be dealing with burgeoning competition.
FedEx has been accused of losing its way in recent years. Its traditional business model of transporting large volumes of goods over long distances and dropping them off at an office, factory or retailer differs from the needs of online retailers, which require someone to collect goods from them and deliver one or two items at a time to individual addresses.
FedEx is regarded by investors as having handed some of that market to UPS – while its partner in a lot of e-commerce work, the US Postal Service, is struggling financially.
More recently, the bigger threat has come from Amazon, which has evolved from being a customer to a competitor.
FedEx’s decision to cut ties with Amazon in 2019 was a calculated risk. It meant saying goodbye to $900m worth of business but was based on a view that the growing e-commerce operations of other retailers, like Wal-Mart and Home Depot, who have not set up their own delivery operations, would be more than enough to make up for it.
Time will tell whether that turns out to be an accurate assessment.
Either way, it ought not to affect the legacy of a man who once said of the marines he served alongside: “They were the finest group of young men you could ever have – courageous beyond belief – and the memory of that is with me every day of my life.”