Training delivers results to Federal Express. (Cover Story)

Quality. Most companies are not born into quality. They marry it rather late in life. Often the match falls somewhere between an arranged marriage and a shotgun wedding. Some companies sneak up on quality with a few statistical process control courses. Others enter through the side door of quality circles. Still others make frontal assaults by going for the Baldrige.

But not Federal Express. It has been a quality-conscious company since its birth 18 years ago as the brainchild of its founder and chairman, Frederick W. Smith.

An admitted fanatic about quality, Smith says, "Quality was really part of the culture from the outset. I think it came from the fundamental recognition that in providing time-definite transportation, quality was really all that we were selling." (For more on Smith's views on quality, customer service, and training, see the interview, "Right From the Top, Right From the Start," starting on page 28).

By time-definite transportation, Smith means what the rest of us know as "when it absolutely positively has to get there."

The idea of selling guaranteed overnight delivery grew out of a paper that Smith wrote while at Yale. Reputedly the paper earned only a C grade, but the idea, which developed into Federal Express Corporation, went on to earn a place in modern distribution history.

In the United States, overnight delivery was the perfect service for a generation raised on instant gratification. The company now has so much of the U.S. market in fast delivery that FedEx has become one of those x-ended, illegal-to-use, business verbs (like xerox and fax) that imply speed.

How are we doing?

In 1990, FedEx won the Malcolm Baldrige National Quality Award, becoming the first large service company to do so. Along the way it solved a problem that has stumped many a service company in pursuit of quality: how to measure customer satisfaction.

Every day the company applies 12 "service quality indicators," to the day's work. (See the box on page 29.) The SQIs, as they are known, are things customers hate to have happen to them and their shipments. Each item has a numerical value from one to ten, determined by customers' views of how frustrating it is. For example, a missed pick-up or a damaged package earns ten points while a right-day late delivery earns one point.

Federal Express measures customer satisfaction with the help of a computerized tracking system called COSMOS. It collects and analyzes daily performance data from around the world.

Each time a shipment changes hands between pick-up and delivery, its bar code is scanned into the tracking system. Couriers carry hand-held computers, called SuperTrackers, to scan bar codes and record other information that goes into the daily SQI rating. COSMOS will record a late delivery even if a package is only a minute late. That "failure" is reflected in the total customer service rating televised to every Federal Express location every day.

The SQI measures service failures instead of successes because …