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Tight Steering At UPS

A Case Western professor says "people work exceptionally hard at UPS."

May 29, 2004
Related Topics: Compensation Design and Communication, Recruitment, Staffing Management
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At UPS, nothing a worker does is too insignificant for study and improvement.

    In an effort to boost efficiency and productivity, the world’s largest package company--which last month reported solid fiscal first-quarter growth, with revenues rising 23 percent to $6.98 billion and net income increasing 158 percent to $330 million--scrutinizes every move a delivery route driver makes. For example, they are instructed to get the ignition key out as they walk back to their trucks and to position it with the serrated edge down, thus eliminating a second or two of fumbling to start the engine.

    It’s this kind of tight control and micromanagement that sets UPS drivers apart from those at FedEx Ground. While UPS drivers are supervised employees driving company trucks, FedEx Ground drivers are independent contractors.

    At UPS, drivers are rarely hired from outside the company. Most begin at UPS in lower-pay jobs such as part-time package handlers, then put their names on waiting lists for coveted, high-paying driving jobs. The wait can take four to 12 years. The average job tenure for a UPS driver is more than 16 years.

    UPS spokesman Dan McMackin says flatly, "Our drivers don’t leave; they retire." Or they get promoted. McMackin began as a part-time worker, got a driving job after seven years and ultimately became a spokesman for the corporation.

    Jim Rebitzer, chairman of the economics department at Case Western Reserve University in Cleveland has studied employee-based systems and companies that pay by piece rates, as FedEx Ground does. The latter method tends to stifle innovation, he says.

    "People work exceptionally hard at UPS," Rebitzer says. "Part of the reason is that if you do well, you get promoted to driver, and as a driver you can make a lot of money. These drivers, if they do well, also can climb high up in the hierarchy."

    FedEx drivers may earn a little more in base pay, but the entire UPS package is more valuable, Rebitzer says. What UPS gets in return for its high expenses in payroll and benefits are drivers who are steeped in company culture and methods.

    That may give UPS a long-term advantage, he says. "Maybe UPS gets other benefits, more company-specific knowledge. Those hidden benefits may come up at some point in the future and bite the FedEx model."

Workforce Management, December 2004, p. 14 -- Subscribe Now!

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