Fred Smith

Get done faster, go home earlier, exact same pay.

Up until that point, the sort had been a nightly disaster, and suddenly it ran like clockwork.

Workers raced to beat their previous times and planes left on time or even early.

Charlie Munger loved this story.

And, you know, his comment on this was never, ever think about something else when you should be thinking about the power of incentives.

The lesson here hits hard.

People don't follow mission statements.

They follow their personal incentives.

If your incentives point the wrong way, that's where people are going to go.

Federal Express succeeded because every incentive pointed toward the same goal.

Get the packages there overnight.

Through every crisis, Smith stuck to what Sergeant Jack had taught him in Vietnam, take care of your people first.

But personal loyalty wouldn't scale to thousands of employees, so Smith created the Federal Express credo, people, service, profit.

We consider the effects on our people first, recognizing that if we take care of our employees, they will deliver superior service.

Only by making a profit can we ensure our continued existence.

The order mattered.

People first, not profit.

When Federal Express finally turned a profit in July 1975, just $55,000, after years of losses and hundreds of millions invested, Smith's first move was paying bonuses to everyone who'd stuck around.

When times got tough, executives took pay cuts before touching frontline workers.

Federal Express created a no-layoff policy and promoted from within.