“Whatever you do to enhance your company’s reputation will yield excellent financial returns,” FedEx founder and chief executive Fred Smith told attendees at the J.D. Power customer service conference late last year.

Smith is a rare chief executive who not only believes in the power of corporate reputation but also understands how it works and FedEx—The Holmes Report’s Company of the Year for 2003—is a rare American corporation that has incorporated best public relations practices into the culture of the company, not just the PR department.

“There’s no better example of dedication to corporate reputation than FedEx,” writes Wall Street Journal reporter Ronald Alsop in The 18 Immutable Laws of Corporate Reputation—an assessment that’s hard to dispute when one looks at the history of the company as a pioneer in the overnight shipping sector or its recent transformation into a much broader transportation company.

“Corporate reputation is a management discipline at FedEx,” says Jerry Olszewski, who manages the FedEx account at longtime agency Ketchum. “It’s a critical success factor that’s considered in every business context you can imagine—the customer experience, employee satisfaction, globalization, delivering shareholder value. It’s a philosophy woven into the fabric of the company and it’s viewed as a never-ending challenge to continuously improve, to sustain a ‘most admired’ reputation over the lifetime of the company.”

One of the most common obstacles to effective reputation management is that in many companies the various communications functions tend to report in several different directions. “The reputation management process is like a mosaic that I help bring together in a cohesive fashion,” says the company’s corporate vice president of worldwide communications and investor relations Bill Margaritis. “I galvanize the investor relations, employee communications and public relations departments to operate under the same game plan.”

Says Alsop, “It’s important that all of those groups report to Margaritis to achieve consistency in internal and external messages. What employees see on the internal FXTV network should align with what FedEx founder and CEO Frederick Smith is telling an interviewer on CNBC.”

The alignment of internal and external communications is of paramount importance at FedEx because the company’s reputation is defined not by advertising campaigns or press releases but primarily by day-to-day experience of the brand. 

Says John Lollar, manager of corporate public relations, quoted in The 18 Immutable Laws, “We’re not like Coca-Cola, where people buy the product off the shelf or in a vending machine and don’t see a Coke employee. With FedEx, you always see a face representing the company. Many people see their FedEx guy every day.”

As a result, FedEx is one of the few major U.S. corporations that practices what this newsletter has called “DNA branding,” the building of a corporate reputation from the inside out, with a brand that is a natural extension of corporate culture. The company understands that its reputation is impacted by every encounter between employees and other stakeholders, and it acts accordingly.

Margaritis reports to an executive vice president, but he has access to Smith whenever he needs it. According to Alsop, the CEO “sees the global corporate brand and FedEx’s sterling reputation for service as its most treasured assets.” Smith and Margaritis have evangelized within the company on behalf of reputation management “so well that virtually every FedEx executive and manager speaks about his job in terms of its impact on corporate reputation.”

Says Olszewski, “FedEx understands the transformational power of organizational alignment.  It focused on delivering an outstanding experience ‘from workplace to marketplace.’ It’s a company whose people are a daily, personal representation of the brand. Employees operate on the principle of ‘whatever it takes.’ When the workplace produces this kind of dedication, the marketplace can’t help but notice.”

Like other DNA brands—Southwest Airlines comes to mind—FedEx celebrates stories of ordinary employees who go the extra mile to live up to the brand promise, employees like Darren Docherty, a senior manager in Minneapolis who drove three and a half hours to personally deliver a heart catheter that had been misplaced in the DedEx system, getting it to its intended destination just in time for emergency surgery.

It’s no accident that the majority of these stories focus on customer service.

“We put the customer at the heart of everything we do,” says Smith. “We have institutionalized this focus by making a positive customer experience one of our core values. It’s our DNA. It’s absolutely, positively what we’re all about. We measure every point of customer contact, from beginning to end of the customer experience. When I say measure, I mean we ask our customers about all of it—not just ‘Did you get your issue resolved?’ but also ‘Did our service rep greet you in a friendly manner?’”

But Smith recognizes that the company needs to pay attention to all its stakeholders. “We try to deliver a positive experience not only to our customers but to our other audiences as well: our employees, our shareholders and our communities,” he says. “By dealing consistently with all our audiences, we develop long-term relationships based on trust and rooted in loyalty.”

FedEx doesn’t take the development of those relationship on faith. It measures the success of its public relations efforts relentlessly.

“The company measures reputation on a variety of attributes to determine its weak spots,” Alsop says. “For example, it has earned high marks for the quality of products and services and for its emotional appeal but received lower scores for such factors as vision, leadership, and social responsibility. On all three counts, the company believes its performance exceeds the public’s perceptions.” So it took action to close the perception gap, redesigning part of its website to provide more information on social responsibility and encouraging CEO Fred Smith—who created the overnight delivery business almost single-handedly—to talk about his vision in speeches.

Smith, by the way, rarely gives a speech without referencing the outside recognition his company has received. Recognition from external sources such as Fortune and the Reputation Institute provides FedEx with important benchmarking information, and lets management see whether core messages are getting through to stakeholders

FedEx finished among the top 10 in Fortune’s list of America’s Most Admired Companies and its list of the World’s Most Admired Companies, was among the 100 Best Companies to Work For in America and the 50 Best Companies for America; according to a Reputation Institute/Harris Interactive study, FedEx has one of the 10 best corporate reputations; Business Ethics ranks the company as one of the 100 Best Corporate Citizens; and it has been recognized by Information Week for innovation, by United Way for its philanthropic efforts, and by J.D. Power & Associates for customer service.

One of the keys to the company’s success is that it manages its reputation proactively. Says Alsop, “Corporate executives frequently meet with editorial boards to promote FedEx’s strategy of complete transportation services.” And when reporters lose the plot, there’s a “truth squad” that provides proof points that correct inaccurate stories.

The company invests heavily to build its brand, spending $200 million for the naming rights to the Washington Redskins’ new football stadium, working with Amazon.com to deliver the latest Harry Potter book to readers on its first day of availability, securing product placement in movies. And it’s not afraid to take risks: allowing its name and logo to be featured prominently in the Tom Hanks movie Cast Away, in which a FedEx flight crashes into the Pacific, leaving Hanks stranded for four years on a desert island.

“The movie proved to be a box office hit and earned Tom Hanks an Oscar nomination,” says Alsop. “All of the attention put FedEx in the limelight too. In the end, the company considered the movie a boon to its reputation because it depicted Hanks as a FedEx pilot obsessed with delivering customers’ packages on time and in perfect condition. He even rescued one waterlogged package after the plane crash and delivered it on his return to civilization.”

Says Margaritis, “The movie showed that FedEx employees treat every package as if it’s the golden package. We do business in more than 200 countries, and Tom Hanks’ international appeal was a big plus for us.”

The company is similarly proactive—and internationally minded—in the corporate social responsibility arena.

The company has a broad corporate philanthropy program that encompasses volunteerism as well as cash and product donations. It works with the American Red Cross to provide a quick response to disasters around the world, using its logistics and transportation expertise to provide complimentary shipping and storing of emergency supplies, as well as to assist with trained volunteers and financial support.

It is a sponsor of Safe Kids Walk This Way, a nationwide program that advocates child pedestrian safety; it helps ORBIS International provide eye care and treatment to people in developing countries, using a converted aircraft as a “flying eye hospital” where its international medical team performs eye surgeries for the needy; it gave over $12 million to local United Way organizations in 2003; and thousands of FedEx employees participate in March of Dimes’ Walk America.

It also provides humanitarian assistance when possible, so when a deadly earthquake struck El Salvador, the company flew donated clothing and other supplies to the Latin American country. It also flew pandas from China to Washington’s National Zoo. Such activities are part of the company’s social responsibility efforts, but Alsop says, “FedEx was also well aware of the public relations value of such deeds with the many government officials it must deal with as it seeks to expand its international business.”

Olszewski agrees. “A strong corporate reputation has been an invaluable asset as FedEx enters emerging global markets,” he says. “Corporate reputation often precedes a company’s products and services in the marketplace. In the case of FedEx, that reputation creates a backdrop of trust and reliability that only enhances the products and services. Drawing on the distinct advantage of its reputation, FedEx has been able to successfully enter emerging markets and then sustain its business presence over time—20 years in China, for example.”

The company manages its reputation globally, focusing on the same message of reliability and customer service in every market, but it appreciates local nuances too.

“Reputation management is global proposition,” says Alsop. “Reputation strategies must be tailored to fit different cultures. For example, FedEx has determined that social responsibility drives reputation more in Europe than in the United States. And in Japan, financial performance and leadership count more heavily than social responsibility and emotional appeal.”

The investment in reputation has facilitated not only international expansion but also changes in the company’s service offerings. 

“FedEx has always embraced change,” says Olszewski. “Since beginning operations as an air express company, it has transformed its business model by creating a networked portfolio of companies that provide low cost ground transportation, interregional and regional freight service and most recently acquired Kinko’s expanding its retail presence in the U.S. This willingness to change, to reinvent itself ahead of the needs of the marketplace, has further solidified its reputation as one of the most respected and admired companies in the world.”

The company’s strong relationships have made change not only possible, but relatively trouble-free.

Says Smith, “To be able to change effectively, you have to have a high degree of trust and outstanding communications capability. When we got into the ground business, we didn’t want our employees at FedEx Express to feel threatened. So we put a tremendous effort into communicating with them. I got onto our corporate television network. I gave speeches. I went on road trips. We talked to them in e-mails and publications. Anything to make them feel they were part of the change and explain why we were changing.

“We’re doing the same thing with [recently acquired] Kinko’s. We didn’t walk in there and say, Okay, guess what: A lot of people are laid off. We managed it cautiously. You have to spend that time and effort to communicate why change is necessary. If you can put that into a culture that knows change is inevitable and an opportunity, not a threat, then I think you have the potential to have a company that can grow to a very large size.”

A final example of best practice at FedEx is the 10-year relationship between the company and its agency of record, Ketchum.

Says Olszewski, “Partnership is the single word you’ll hear us both use to describe the relationship. It begins with a shared sense of purpose. FedEx is playing an indisputable role in creating a truly global economy. It’s fast and it’s stimulating. Beyond the work, there’s an almost intuitive connection between FedEx and Ketchum teams.

“We unlock every resource of our respective organizations for each other, we challenge each other as peers, team leadership can come from either place and we have totally candid conversations about accountability. When all of that happens in the spirit of mutual respect, it’s a winning formula.”
Ketchum and FedEx have won numerous awards for their work together, but more important, the public relations efforts have made a consistent contribution to advancing corporate strategy and achieving business results.

“FedEx lives the corporate reputation model that we’ve all talked about for many years,” Olszewski says. “A CEO and senior management team who see a direct link between a good reputation and good business; who walk the talk in their interaction with employees, customers and communities; who have committed the resources necessary to build a sustainable reputation; and who measure it from a multitude of perspectives—holding themselves and the company accountable for the results.”

Federal Express will be honored as The Holmes Report’s Company of the Year at our annual SABRE Awards dinner on May 12 at the New York Sheraton.