Bill Kerr: Package delivery is pretty much the only economic indicator you can gauge by looking out the window. Of course, interpreting the data isn’t always straightforward, but it’s clear that since early 2020 volumes have ballooned, topping 21.5 billion deliveries in the United States, according to the Pitney Bowes Parcel Shipping Index. The delivery business is at the heart of the supply-chain crisis, and it faces a tight labor market for drivers and warehouse workers. But it also employs legions of non-frontline workers, including IT, design, and communications specialists. How is this side of the operation faring in the post-Covid economy, and how is it responding to the sweeping changes transforming the market?

Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Bill Kerr. My guest today is Mike Lauderdale, Vice President of Human Resources at FedEx Services, the delivery giant’s shared services group. The 13,000-person division handles everything from sales and marketing to IT and e-commerce for FedEx’s 600,000 employees worldwide. We’ll discuss the workforce challenges of supporting a global logistics and transportation operation. We’ll also talk about how FedEx Services has weathered the pandemic and what the Great Resignation has meant for recruiting and retention. And we’ll talk about remote and hybrid work and the role of environmental, social, and governance—or ESG—commitments. Welcome to the podcast, Mike.

Mike Lauderdale: Hey, thanks for having me.

Kerr: Mike, why don’t we start with a little bit of your background and how you came to head up HR at FedEx Services.

Lauderdale: I started in our Express World Hub on non-conveyables when I was in college. It was great pay, and it was paying my education, and I had health benefits. And this was 1985. I ended up in IT in the late ’80s, early ’90s and spent the last 30-plus years in probably every aspect of IT you could think about. And then, during some jobs that I had in IT, I worked closely with HR and others, especially around leadership development, organizational effectiveness, things like that. And a couple years ago, I got a call from our chief HR officer who reported to our chairman, saying, “Hey, I’ve been looking for somebody like you. Maybe you’d be interested in coming to HR.” We have a lot of people in HR that didn’t have HR traditionalist backgrounds, which makes us very connected to the business.

Kerr: And has it been a conscious choice to deliberately source from IT into HR, or is it across multiple functions?

Lauderdale: Across multiple functions, though we have people from sales and solutions, from IT, from marketing. I just hired somebody that has been in marketing, IT, and HR, and now she heads up our growth and learning, DEI, and other related functions.

Kerr: So a wide input stream into the HR function.

Lauderdale: Right. I used to say you could come here and train to be a nurse, because we used to have nurses in the hub. Now I think we contract that service out. But you can make a career and have five different careers while you’re at FedEx in different functions, because we are very focused on the whole person and what you can do, not just your one vertical.

Kerr: Mike, maybe you can position FedEx Services for us. Everyone on this podcast listening will know FedEx, but what’s the specific role of FedEx Services?

Lauderdale: Right. When people think of FedEx, they typically think of FedEx Express, which was where we started 49 years ago as Express. But through the years, we’ve had different operating companies that focus on what are the best for them. So you have Express, Ground, Freight, you have FedEx Office. FedEx Services is the backbone for all the other operating companies from a back-office perspective. So we have the sales team, the marketing team, solutions, the IT team, and a lot of the back-office functions. So accounting, sourcing, certain financial functions, things like that. So it’s basically all the staff-type functions. We also have customer experience and the packaging services lab, so we also have some frontline customer functions as well.

Kerr: So Mike, can you talk through how Covid-19 and the spike in e-commerce has affected your operations?

Lauderdale: Sure. It’s interesting. Like most companies, going into the pandemic, we didn’t know what was going to happen. But as usual, FedEx was on the forefront, even with the pandemic; we were on the forefront on getting emergency supplies out there. So PPEs out there, and then the vaccine—we were the first to help transport the vaccines out there. Even most recently with the shortage on baby formula, we’ve been the ones working with the government to bring baby formula and get it delivered throughout the U.S. But even on the supply-chain side, whereas you saw companies shutting down—so you had commercial airlines, where a lot of freight travels on the bellies of commercial airlines, and when commercial airlines weren’t traveling, they had to come to a company like FedEx.

Kerr: Whether it’s the baby formula or one of the earlier crisis points, what’s typically the biggest challenge in these moments for you?

Lauderdale: We mobilize really well. It’s the culture of FedEx. The biggest challenge is pulling all the players together, because you don’t necessarily have the traditional infrastructure you could rely on, like I said, about the commercial airline. We used to work with them to help freight. Well, they weren’t available to do that. So how do we use our own resources? So the biggest challenge is really mobilizing and targeting the solutions that we could deliver within FedEx. From a FedEx Services perspective, it’s helping make sure the technology’s there. So with our new FedEx Dataworks entity, we were really on the forefront on monitoring. We used a lot of our data analytics to help track delivery, track vaccines, help with the healthcare side. So all aspects of the business changed, adjusted.

Kerr: And in particular with the current supply-chain crisis, are there innovative solutions that have been surfaced up or efforts to recruit more workers? How are we trying to approach that particular challenge?

Lauderdale: Back to data. It’s all data scientists, data analysts, really looking at it. How can we have better tracking on that? We had already released SenseAware and some of our other related tracking technologies—especially that we used heavily in the healthcare industry already. How do we capitalize on what was there? We have a lot of data. So through our new Dataworks division, we were able to use it and target it. Across all companies, data scientists, data analysts are really popular right now. That’s the hot thing. If I was advising somebody going to college, go to be a data scientist or a patent attorney. Those are probably the two hot things right now. And so we really just started targeting resources to that so that we can really make sure that we are ready to not just move the package from point A to point B, but understand. Mr. Smith said, all the way back to the early ’70s, information about the package is as important as the package itself. It’s just as true today, almost 50 years later, is knowing what we know about the package and then how we can help things that are in transit, things that are in motion.

Kerr: Fred Smith being the Founder of FedEx.

Lauderdale: Yes, I’m sorry. I take it by default everybody knows who Fred Smith is. Yes, Fred Smith, the Founder of our company. He’s still our Chairman.

Kerr: Mike, top of mind of many leaders right now is the tight labor market, what some have called the Great Resignation. How has that affected FedEx Services in particular?

Lauderdale: Everybody is reassessing life. Two years of lockdown makes people reassess life. They’re changing. They’re changing jobs. They’re looking at the opportunities, in-demand jobs. So I may have been a, I don’t know, a developer two years ago, and I’ve started honing my skills to be a data scientist so that I can really target something that’s a higher-paying job. We’ve seen retirements go up, because people are reassessing life. Let’s understand what’s going on. But the biggest thing is people seeing the opportunities are out there, and how do I gravitate toward those opportunities? So the labor market is much tighter. There’s more demand for labor. There’s definitely more demand for skilled labor, for IT people, for a certain type of marketing people. Even salespeople—we’ve even seen a lot of changes with our sales team. But the biggest demand I really would say is around the revenue science, the data analytics, and certain IT functions.

Kerr: So how, then, as an HR leader, coming from the IT background, now in HR, are you approaching this labor market tactically? What’s your strategy for getting people in the door, and then also retaining workers so that they don’t leave and go to other opportunities?

Lauderdale: Right. One thing, I mean, everybody thinks compensation. There’s a trend right now with companies, including us, to be more transparent on what people pay. Benefits are another aspect of it. How you work is very important. So one of the things that I championed—because we were in the middle of the pandemic when I came over into HR—and I said, “When we get out on the other side, I want to change the way we work.” So we did an intense research program, pulling in people from all of services, so from all aspects of services, to look at how we work. And then we did basically a customer-driven design approach and launched what we call “Purple Flex,” which is the flexibility of working. Because I knew that coming out of it, people were going to say, “Hey, I could hire somebody in Poughkeepsie or Peoria, because that’s where the talent is, and not have to move.” I also look at how much good talent you lose. When somebody is a military spouse, or their spouse or partner gets transferred, you often lose that talent. It’s like, why do you have to lose that talent? Why does everybody have to gravitate towards the center? So within Services we launched Purple Flex to where we have, everybody’s hybrid, so even if you’re near an office, you don’t necessarily come to the office every day. We got rid of offices and desks from the officer level all the way down to the individual contributor and said, “If you’re coming together, you’re coming together intentionally. You have an intentionality of, we’re coming together to collaborate.” We call them team days. We’re going to have team days to collaborate, to work together, to do whiteboarding sessions, things like that. You may be doing a team building or a meeting, something along those lines. We also have anywhere workers. So I’d say probably 85 percent are hybrid. You have some people that are what we call “central.” You have to be there every day, packaging, lab, and package recovery, we need you there. So you have to actually be there. That’s a smaller percent. And then we probably have 10 percent to 11 percent that would be anywhere, meaning they live in Poughkeepsie, Peoria, Parsippany.

Kerr: You don’t put a regional zone around your offices. When you mean anywhere, it’s anywhere in the U.S.?

Lauderdale: It’s anywhere within, I would say within the 48 continental United States. When you’re posting a position, we look and say, “Can this position be anywhere?” I mean, a full-stack developer. We don’t have to have a full-stack developer in Memphis, even hybrid, so they can come into the office. But you may want an auditing function. You might want an auditor to be near one of our locations. And it may not even be near one of the FedEx Services locations. You may say, “I really want an auditor near Indie, because they’re going to be working in conjunction with the Indianapolis hub,” something like that. But we’re very intentional when we’re hiring to make sure we look at the position and say, “What type of position is it? Do you need them at a location? Or can you post anywhere?” On the flip side, we’re really learning a lot of people want to come. I hired recently somebody in our team. I said, “You can post it anywhere.” She lived in the Carolinas or Virginia, but she said, “Well, I want to move to Pittsburgh, because I want to be at least near one of the facilities so that I can go in and connect with people when I want to.” So we’re also seeing that. And also with the younger people, younger people are like, “Well, I want to come in and want to collaborate with people. I want to say, if we’re going to have team days, I want to be available to do that.” So they may gravitate more to a hybrid scenario versus being anywhere. So those are things, your original question was about attracting talent. That’s one of the things. It’s like compensation, benefits, and the way you work, the flexibility of working, because that’s where, when we have lost talent, which I always say, I don’t want anybody to leave FedEx. I’ve been here 37 years. I want everybody to be here 37 years. But when we see we have lost people, we have attrition—which we do have really low attrition, but it’s upticked some—that it’s compensation is one, flexibility of work is one, and then sometimes people just want a change.

Kerr: One of the first questions that comes up with a work-from-anywhere strategy is compensation, and does compensation vary across locations?

Lauderdale: It does. We’ve always had a compensation strategy that was localized. Now, if you’re in West Memphis, Arkansas, and you choose to move to Seattle, we don’t necessarily give you a natural bump in pay. We just look at, are you still appropriately paid for your market?

Kerr: Second question that is typically tied to remote work is the ability to maybe shed some of the office space, downsize some of the CapEx and the real estate. How are you experimenting with those kinds of decisions?

Lauderdale: Oh, that’s the biggest thing. First off, we realized through this whole activity that we’re hoarders, that we collected a lot of stuff over the last 20, 30, 40 years. We have donated so many staplers, papers, folders, everything to local charities and schools. We are consolidating—like in the Memphis area, we’re consolidating. We had people in our main Services campus in Collierville, but we had other people at our Express headquarters, but we had Express people needing to move in. We’re almost doubling our capacity in our Services campus—from about 3,000 to 5,000-plus—that that will be their home base. In other locations outside of Memphis, we had leases or something that the sales team may gravitate toward and use. And we’re looking at some of those leases and saying, “We don’t really need them.” We could rent a common space on demand and be more cost effective. Our main Services campus in Collierville—which is a suburb of Memphis. We also looked at this cube farm, as so many companies have, and said, “We need to tear down a lot of this cube farm and create collaboration space.” Because if your idea of coming in is intentionally to collaborate, you want more open space and ways to work together. And what we’ve seen as we open the campus back up and people have started coming in, that’s what they’re doing. They’re going to big conference rooms, breakout rooms. Some people are going to use a cube because they need to get out of their house—"I’ve got a dog that barks at everybody that walks by, and I need thinking space.” So you have people that still rent. We went total hoteling. We launched a hoteling app. You reserve your space, you can reserve it on demand. It’s been amazing to watch, but we’re still in the middle of cleaning out. And the stuff—we’ve cleaned out the stuff we’ve found. It’s great for historical, as we build an archive of FedEx history, that’s great. But other stuff we found, it’s like, lots of holiday decorations in storage rooms.

Kerr: Mike, one other tactical question here is a lot of the tensions around the hybrid remote work end up falling on managers. And as you move ever more toward this model, is there a way that you’re trying to support or undergird the managers that are responsible for these very diverse teams?

Lauderdale: Yeah, it’s interesting. Our performance management system in Services, it’s called “Coach Forward.” It’s all rooted in coaching. What we found during the pandemic is the manager to IC [individual contributor] connections increased by 10 percent to 15 percent. What we found is, it was interesting to say, “Hey, I see Bill every day, I say hi to Bill every day, because he sits right outside my office. But then when he was remote through in the pandemic, and we’re all separate, I have to intentionally call Bill. I have to connect to him. I pull him up on video, which we didn’t do before. We used to, if you called him, you talked on the phone. So now I see Bill.” So employees are telling us that I’m more connected to my manager. I’m getting more coaching, more feedback on how I work. The second thing is, overall from a company perspective, we’ve dove into enterprise business agility. And in an agile world, it’s your scrum masters, your product owners, it’s leads on that team that drive things. So the manager really does become more and more of a coach and not playing a role on the team. Hybrid and remote work has, as the surveys have told us, connected them more and lets them have deliberate conversations.

Kerr: More intentional about it. Mike, this is a great segue into thinking about where you see the skills requirements going. First off, changes over the last few years in terms of what FedEx Services is trying to staff for, and then also as you think about the trends in front of you, what’s the vision as toward how you need to change the staffing model ahead?

Lauderdale: That’s a great question. I’ll start with IT, because it’s where I came from. So what we’ve done, working with the IT team, is looked at verticals and say, “Okay, software development is a role, architect’s a role, cyber is a role.” So what are these important roles’ verticals? Which, under those verticals, are lots of job descriptions. So under software developer, you have several job descriptions. But looking at the vertical. And the way we’ve done talent acquisition, recruiting up until now is, I’m aligned to Bill, and so-and-so’s aligned to Susie. And you did recruiting, talent acquisition, for that leader. Now we’re shifting and saying, “Let’s start recruiting for these skills and for this vertical.” And it may support Bill, Susie, and Betty’s organization. They may all have full-stack developers. So how do we switch the model, and instead of recruiting for the org chart, we’re recruiting for the role? We’re piloting this with IT first, but it will apply to marketing, finance, accounting—all the other organizations. Sales, we kind of already do it that way, because you have different sales, a sales account executives by segment. So we already kind of do that with sales now, but it’s going to be fascinating to watch. Culturally, it’s going to be different for leaders, because they’re going to have to collaborate and say, “Oh, well, I interviewed Joe, and I really like Joe. I want him for my team.” And it’s like, “Well, Joe’s skills are really better served for the mobile technologies team than it is the scanning technologies team.” So it’s going to be a cultural shift for the leaders in IT as much as the talent-acquisition people on my team.

Kerr: And Mike, you’ve already confessed that you have a hoarding problem over there, so labor hoarding may be the new one you have to battle with from that.

Lauderdale: Exactly. We go from hoarding things to hoarding people.

Kerr: Christmas decorations to top talent.

Lauderdale: Oh my word. And Halloween, tons of Halloween decorations. I don’t get it. But tons of Halloween.

Kerr: Along this line, a lot of organizations are trying to think about getting away from always full-time employees being the hiring model, more contractors and freelancers. In this skills-focused hiring that you’re envisioning, how do you anticipate that alternative work models featuring?

Lauderdale: Yeah, actually FedEx Services has been probably an early adopter in that space. We often talk about core and context—what are core skills that we want to maintain, and then what are context skills? And so we use a lot of vendor partners today for things that 20 years ago we would’ve hired an FTE for. So we already have a good FTE vendor mix. Sometimes we go probably heavier on the vendor as we try something out. You’ll go, and then you’ll go in full force, and then you’ll pull back and go, “Oh, maybe I don’t want that architect role to be with the vendor,” or “I don’t want senior-level customer service to be with the vendor. I want to keep that in-house.” We continue to evaluate what’s the right mix, what’s the right FTE-vendor ratio mix that we want to maintain?

Kerr: Mike, let’s move back up to some higher topics, some bigger trends that many companies are working with. The first one I’d like to talk about is diversity and inclusion. So can you tell us about your commitments in that space and how that has changed with your hiring practices?

Lauderdale: Yeah. DEI—diversity, equity, inclusion. And now we’ve added “O” from the actual that DEI creates opportunities—but we have four pillars around DEI. One is our people. How do we recruit, retain, attract, and develop our people? Which is core to who we are, core to our culture. Second is our education engagement. Once we get you into FedEx, how do we continue to educate you and equip you throughout your career? The third one is our community, customers, and suppliers. How are we connecting with our communities, our customers, and suppliers? And the last is our story. How do we project out the stories of our team members? That’s probably the one we need to do more of. We do a good job of it internally. We could probably do better externally talking about the people. From recruiting and retaining, we’re already very connected in a lot of the big programs, whether it’s the Black MBA or attracting within the LGBTQ community or Hispanic community. We also have what we call “Business Resource Teams”—BRTs is what we call them within—which is focused on Black professionals network, women in leadership, multiethnic leadership community. We tap into those groups to also help with recruiting outside of recruiting, because we like to go to colleges. We have a really strong intern program called “College Connections,” where we have close to 200 interns every year that we bring in. We’re going to start a year-round College Connections program just to, again, tap into the diversity of when students are available.

Kerr: That’s great. And thank you for introducing the opportunity aspect into that for us. The other one that I wanted to engage around is the environmental, social, governance goals. ESG. FedEx has made a commitment to be carbon neutral by 2040?

Lauderdale: Yes.

Kerr: And so you can talk to us a little bit about the implications for operations and employees, and you as an HR leader.

Lauderdale: We made a big commitment to say we’re going to be carbon neutral by 2040, which includes we’re going to reduce our parcel delivery fleet to fully electric by 2040, which includes we start having to move... It’s one thing to replace an airplane, which is a big effort, in and of itself, but all of the trucks that are out there, all of the parcel delivery trucks that are out there to go fully electric? That’s a big commitment. I’m proud of us doing it.

Kerr: But you mentioned a little bit earlier the local jurisdiction, and FedEx by its nature is going to touch every single jurisdiction of all shapes and sizes.

Lauderdale: Right.

Kerr: Do you ever get pushback about these initiatives? And then how are you responding to some of those localized pushbacks?

Lauderdale: We have a government affairs office in D.C. headed up by Gina Adams, awesome leader for government affairs, because we work to help change the opportunities and the things—even the trailers, the size of trailers, where we’ve been championed to extend the size of trailers because it can reduce the amount of trucks that are on the roads today. So those are the things we work, not only with the federal government, but the local jurisdiction. And to tie it back to a question you asked earlier on the talent and skills, if you think about, we’re now looking at robots—robots to deliver packages or robots in the sorting facilities or even electric vehicles. The people that work our fleet maintenance team, they’re used to working on traditional vehicles. Okay, now how do you service an electric vehicle? That particular role is in the opcos [operating companies]. But even within FedEx Services, we have to think about, how do you build robotics and that type of technology? One thing I’m proud of is FedEx Services, back to DEI and being in our community, we’ve been a sponsor of First Robotics, which is a Google [program], but working with high school students who have an annual competition on building robotics and doing robotics. We’ve been committed, involved. We have IT leaders that are actively involved in those types of programs. And that’s the skills you’re going to be looking for tomorrow.

Kerr: Mike, final question here. As you think ahead, five, 10 years, a bit further horizon than where we spent most of this podcast, what’s the big thing that you are focused on? What’s the vision for the workforce you’re crafting?

Lauderdale: We are a very tenured organization. Like I said, I’ve been here since 1985. That’s long. We’ve got a lot of people that are in the 30-plus or… So 10 years from now, those people are going to be gone. And so, who’s the new workforce we’re training today to take that place? I remember the first time—this is going back 20 years ago—we hired somebody from college, straight out of college. And at the time, we printed every label, either hand wrote or printed every label. And we were going to introduce what was called—it’s fedex.com today—but at the time it was an application you loaded on your desktop to print a label. And they said, “We’re not going to give printers to everybody. They could just print it on paper.” And we’re like, “You can’t print it on paper. What if they take that label and copy it on the copy machine and all this?” And she was looking at us, I mean, she’s 20-something years old, looking at us like we had lost our heads, like, “Well, you can put controls around that.” That’s the type of thinking we need, because people need to come in and challenge our traditional way of thinking to help us get to the next 50 years of success.

Kerr: Mike Lauderdale is the Vice President of Human Resources at FedEx Services. Mike, thanks so much for joining us today.

Lauderdale: Yeah. Thanks for having me

Kerr: We hope you enjoy the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you get your podcasts. You can find out more about the Managing the Future of Work Project at our website hbs.edu/managingthefutureofwork. While you’re there, sign up for our newsletter.