Sourcing Humans: Selection & Retention Practices at UPS
Company that Moves Small Packages in a Big Ways
What is it that makes great companies great? According to Petersen and Waterman (In Search of Excellence), Pfeffer (Competitive Advantage through People), Collins and Porras (Built to Last) and as well as the popular byline of many firms, the greatness within companies stems from people. From the organizational culture to the execution of concrete objectives, the company’s optimal management of its people can be the source of sustained competitive advantages. It is in this regards that UPS, an $36 billion firm with over 400,000 employees, all working to move at the speed of business as they execute the strategy of cost-effective, high-quality parcel delivery and related functions such as storage, package and logistical solutions (UPS 2005).
Though it seems all the ‘glory’ and popular press seems given to reporting on the comings and goings of the top executives, most of these same executives will readily admit the importance of the front line. Given the overwhelming importance and the basic operational functionality of entry-level staff positions, these types of positions merit special consideration in terms of how they are managed to contribute to the overall objectives of the firm, in particular, how these positions are recruited and retained are the key to UPS achieving its goal of operational excellence. Though this is an unskilled, non-exempt position that is generally part-time in nature, it is truly the business end of this well-regarded global company.
What can Brown do for you?
The world’s largest express carrier and delivery service was founded by enterprising 19-year-old Jim Casey in 1907 in Seattle, Washington as a result of the need for messenger and delivery services. In this era, telephones were scarce, the post office only delivered letters, and Casey’s mantra of Best Service and Lowest Rates bred success. By the time the 1930’s had rolled around, the company later to be known as United Parcel Service provided extensive service on the west coast and began to establish itself in the eastern United States as well. It was at this time that the familiar Pullman brown was adopted as the color of all fleet vehicles. Interestingly enough, as early as 1919, Casey felt that unionization was inevitable and invited the Teamsters into UPS. This early effort helped to create a cooperative spirit that helped ease tensions and build profits for both labor and management at UPS (Pfeffer,1998). This spirit helped avoid a nationwide labor stoppage until the Teamsters strike of 1997, an event that has been blamed more on certain personalities rather than actual poor labor relations (Birger, 2002).
Following the advent of World War II, UPS faced reduced delivery demands from retail establishments and began to expand its role to compete with the Postal Service for the growing consumer market of small package service. As a consequence of company growth and rising demand, UPS received FAA authorization to become its own airline in 1998. This created a vertically integrated company that continued to push for optimization in both operational efficiency and customer service.
The 1990’s saw the emergence of large-scale implementation of extensive modern supply chain technology. This continuously updated, cutting-edge technology along with UPS People provides the company with its competitive advantage. According to the company’s Web site, the commitment to outstanding service of UPS employees comes about because of two key policies: employee ownership and extensive training. Indeed, UPS promotes a strong internal promotion dogma as reflected in a recent speech by Lea Soupata, Senior Vice-President of Human Resources. In this speech addressing the topic of legacy leadership, she clearly states that one of the key drivers of UPS’ continued success is that it makes extensive efforts to identify future leaders of the company from among its current employees. As speeches can often present what readers want to hear, it is important to note that the promote-from-within policy holds very true for UPSthe average UPS manager has been with the company for 16 years and has held 7 to 8 different jobs. Several top company executives even started as loaders or drivers and literally worked their way up. The UPS culture drives the hiring and selection process to the extent that an entry-level employee has the potential to advance in one of the largest and most respected companies in the world.
Getting the Right Person for the Job
A popular cliché indicating the most important things in life declares that, far and away, the number one item is to marry well. Good hiring and selection processes are characterized by the same idea. to select well. Given the recognition of the value in selecting the right type of person for the job, it becomes critical to the organization’s success to retain these individuals. In a somewhat circular but applicable argument, one of keys to measuring and managing success in selection is to gauge and manage turnover and retention. Subsequently, the key to managing these starts with good selection.
To begin with, a suitable applicant pool must be accessed. Each of these companies are competing for the best of a segment of the workforce that is often characterized by being young, not fully educated or with education-in-process, physically healthy, and willing and able to work the less than full-time hours. A common hiring strategy for this sort of potential employees is both word-of-mouth and advertisements such as flyers notices in the college newspapers. In addition, UPS has applied additional innovative strategies in partnering with Welfare-to-Work recipients in key hub or headquarters cities. In this win-win arrangement between an employer and the employee, each respective company has an applicant pool provided by the government. Superficially, one might think that this applicant pool is less desirable than the typical college student yet an important consideration is that these would-be workers have the extra incentive of a soon-to-be-terminated current government-provided income. In addition, the powerful lure of secure employment with real career potential and health insurance benefits assists in motivating this workforce. From the respective companies’ perspectives, the government not only provides the applicant pool but also subsidizes training and other work-readiness preparations and provides UPS with a public relations bonus. The government is also a winner in that it has successfully co-engineered a Welfare-to-Work success story and now is well on the way to having productive, tax-paying citizens as opposed to cost units. Interestingly enough, quantitatively, UPS determined that the turnover of this group of employees was 10% lower with 70% retention, in comparison to 60% for all entry-level employees. (McCallum, 1999).
Another innovative selection process is evidenced by UPS’ partnering with the Kentucky Department of Education to form the joint venture of Metropolitan University. This Louisville-based school provides free tuition in several degree programs to employees at the site of this major UPS hub. By doing this, UPS gains access to a broader spectrum of its more typical applicant pool and provides a substantial benefit to employees. In addition, the state of Kentucky is ecstatic to be the first example of a strategic partnership in which they are able to raise the educational bar of its citizens as well as attract and retain key industries and businesses to have major operations in the state (Barry, 1998).
Managing the Masses and Keeping them Employed Effectively
As a consequence of seeing the extreme value in the selection and retention of the individual who will likely be a good performer, UPS has recently taken extra measures to manage this process. This is evidenced by an experiment in certain districts (large regional areas, generally clustered about a given state’s major airport city) that has created full-time Human Resource Specialist positions to take over hiring and selection. The HR Specialist also pays rigorous attention to both performance data and turnover statistics. In the Kentucky District, this is aptly illustrated by the additional formation of CERC’s (Co-chaired Employee Retention Committee) whose less-than-catchy but optimistic motto is, No one quits at UPS. This committee has seen tremendous success as evidenced by an 8% lower turnover than anticipated (10.62% vs. 18.46%) throughout the first half of 2002. Pillars of this program are that potential employees are given more information about what the job entails and are given extra opportunities to self-select out prior to hire. Additionally, there are dedicated efforts made to form and establish social networks, to identify and deal with potential quitters early, and to reward above-average performance (UPS Internal Data & Memorandums, 2002).
How you ship might also be a good place to work
In discussing the extent to which UPS has a high performance human resource management systems in place, this index serves as a good vantage point by clearly showing at least some of the key features that renders UPS a superior company from the perspective of human resource management. One such feature that distinguishes UPS from other firms is that there it is a very clear point of pride the strong belief in a promote-from-within policy in which it is very rare to hire in outsiders to fill any role above entry-level.
In conclusion, hiring and selection are two key drivers of many of the determinants of high performance human resource systems as described by Pfeffer. For example, a good selection process results in employees that have a better person-organization fit. Logic dictates that employees who enjoy a better fit, have lower turnover and, as consequence of this, these employees are more likely to be better performers and to be rewarded for their contributions. Research and experience bears out the findings that human resources can truly be a source of sustained competitive advantage for firms and like any successful relationship, begins with selection. The measure of selection success is not only evident in quantitative financial indicators but non-financial measures such as turnover and employee retention.
Works Consulted
- Barry, T. (1998, December 1). UPS, Kentucky Create their own College. Georgia Trend. Atlanta, GA.
- Bean, S. (2002, November – December). UPS Human Resources Specialist, Lexington, KY. Multiple Telephone Interviews.
- Birger, J. and Eskew.M. (2002, June). A Big Question for Big Brown. Money, (31), 6, pp. 49-51.
- McCallum, K. UPS. Business Paricipation in Welfare-to-Work: Lessons from the United States. Prepared for the Business Forum on Welfare-to-Work, January 20-21, 1999. London , England.
- Pfeffer, J. (1994). Competitive Advantage Through People. Harvard Business School Press: Boston, Massachusetts.
- Pfeffer, J. (1998). The Human Equation. Harvard Business Press: Boston, Massachusetts.
- UPS Internal Data & Memorandum. UPS. Various resources forwarded electronically and via facsimile. November 11, 2002.
- UPS. (2005, December). http://www.pressroom.ups.com/mediakits/factsheet/0,2305,866,00.html, UPS Company Website, Accessed December 3, 2005.