TruckExec

Driver Shortage: Operating Strategies for Trucking Companies during a Driver Shortage

A new webinar has been added to CostDown Consulting's website library that overviews what trucking companies should do to offset the impact of a driver shortage.  Here's the link:

 

 
 

 

Post-Recession Revenue Plan

Outside of short term survival, the biggest risk to a trucking company operating in a recession is how it is positioned when freight levels return. 

 

Recessions create a magnetic-like attraction between trucking companies anxious to secure additional revenues and shippers anxious to bid their business to lock in low rates for long periods of time.  As a result, truckers looking for top line solutions to bottom line problems bid too low for too long.

Here’s the question CEOs should ask themselves that best frames the issue:  “When the economy rebounds and capacity tightens - how much available fleet will I have uncommitted to capture freight at higher rates?”

The economy and related freight levels will improve gradually and that creates a dangerous temptation – fill up all the idled trucks as soon as possible.  Success with this strategy will only keep a trucking company’s rate structure low during the anticipated upcoming boom years of under capacity and higher rated freight.  

 

The solution is to have a formal revenue plan and the fist step in developing that plan is to map existing freight businesses on a timeline that includes how many trucks are associated with each piece of business and when those contracts expire.  That will provide insight into how much capacity will be available at specific times in the future.

 

Bid new business carefully, particularly when it comes to a time commitment.  For longer term contracts, continue to bid aggressively but insist on adding a truck tonnage escalator to your annual CPI increases that kick in when freight levels exceed a certain ceiling.

 

Finally, bid out your uncommitted capacity in layers with each layer providing higher revenue per mile.  If, for example, over the next year-and-a half you forecast 175 trucks will be available, offer the first 75 at $X/mile, the next 50 at $X + 5% and so on.

 

Our economy will bounce back and when that happens, trucking capacity will be in high demand.  After months, possibly years of depressed earnings, reducing the temptation to grab as much freight as possible as quickly as possible will require a lot of discipline.  Truckers able to muster that discipline will be rewarded with years of possibly record breaking profitability thanks to the insight of their CEOs and their commitment to long term revenue planning.

 

-- Joe White -- TruckExec Publisher / CEO-CostDown Consulting

The Trucker's Lament: "I've Cut all I can Cut - What Next?"

Truckers around the county have reduced staff, cut costs and eliminated all but the most necessary of capital expenditures as they prepare for a prolonged and painful recession marked by tight credit, reduced freight and excess industry capacity.

 

Profitability as the primary operating goal has been replaced by survival as many – too many - of our industry’s once financially sound Truckers lament: “I’ve cut all I can cut – What Next?”

 

For most, the answer to that question can be found in an opportunity few Truckers have yet to capitalize on – improved employee, fleet and cost performance through development of an effective Performance Management Program.

 

Before outlining the four steps required to develop a Performance Management Program, let’s understand the targeted benefits of such a program.  Imagine the positive impact on your operations if everyone in the organization improved individual performance by an average of just ½ - 1 percent.  What would happen to your bottom line if key performance areas such as Laden Mile, Driver Productivity, MPG and Maintenance Cost per Mile all improved by just ½ - 1 percent?  That’s the mission of Performance Management, to elevate the performance of your employees in those key areas that most impact profitability.

 

A Performance Management Program is a program that uses performance goals, defined activities, performance monitoring and mentoring, and financial incentives to improve the baseline performance of employees and thereby improve bottom line results.  Put another way – you provide employees the goals, tools, direction and reward necessary to elevate their performance.

 

There are four basic steps required to develop an effective Performance Management program.

 

STEP 1 is identifying Key Performance Indicators (KPIs) and establishing individual performance goals for each.  KPIs are the areas of your operations that most impact profitability such as those listed above (Laden Mile, Driver Productivity, etc…).  

 

STEP 2 in developing a Performance Management Program is to Define the Activities employees should incorporate into their daily routines that will ensure they make their goals.  It is critical to the success of your program that the most effective activities are identified and standardized across the organization. 

 

STEP 3 is Monitoring and Mentoring.  Companies managing elevated employee performance need the ability to quickly identify who in the organization is having problems making goals so that they can provide support and coaching.

 

STEP 4 is providing Financial Incentives.  Unquestionably, employees are motivated by money and providing a reward for goal obtainment is the most effective motivational tool in a Performance Management Program.  Keep in mind, employees that make their assigned goals have improved individual performance over prior period and thereby improved bottom line results.  Financial incentives are funded from a portion of the savings goal obtainment generates.

 

Performance Management is not a new concept nor is it just for lower-level employees.  CEOs of large companies, regardless of industry, often have employment contracts that provide significant bonus opportunities for meeting specific goals.  The success of linking financial reward to goal obtainment to increase profitability has long been recognized and embraced by the business community. 

 

These same companies often integrate their Performance Management Program into their Business Plan by defining employee KPIs and making assumptions about what percentages of those goals will be met.

 

Surprisingly, most trucking companies have not established a Performance Management Program.  I say surprisingly because as an industry we are quick to embrace technology and provide driver training to increase performance and cut trucking costs but somehow have failed to recognize the huge bottom line potential of providing field management employees pay for performance opportunities.

 

Trucking in a recession is difficult yet after all of the cost cutting is done, we can’t lose sight of the fundamental fact that our day-to-day operations are run by Terminal Managers and Driver Managers.  Each one of them makes literally hundreds of decisions every week that impact the cost and profitability of our organization. 

 

Doesn’t it make sense to provide the employees that actually manage our business the goals, direction, resource support and financial incentive to help and encourage them to excel?

 

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If you would like to learn more about how Performance Management can improve the financial results of your trucking company, visit our web library and view CostDown Consulting's PowerPoint training presentation:  Bottom Line Improvements through Performance Management. 

 

--Joe White - -TruckExec Publisher/ CEO CostDown Consulting

Teamsters: Prevention and Preparation

 

With the November election placing Barack Obama in the Oval Office and increasing the Democratic majority in Congress, we are virtually guaranteed that the Employee Free Choice Act will soon become law.
 

The Employee Free Choice Act will require that if a majority of a company’s employees sign authorization cards, the company must accept the union.  Current law provides that secret ballots first be held to determine if a majority of employees want to join the union.
 

Secret ballots frequently result in ‘wins’ for the companies as individual employees are free to vote their true conscience, without fear of peer scrutiny or public scorn.  General consensus is that loss of the secret ballot will allow unions to spread rapidly throughout trucking and other key industries.

There are two strategies truckers need to develop in response to the threat of Teamster Unionization: Prevention and Preparation.

Prevention deals with the actions you take today to improve the odds that your drivers will not want to sign authorization cards.  Preparation deals with identifying and protecting critical aspects of your operations from unproductive work rules that may come as a result of unionization. A brief overview of each strategy follows.

Prevention

The good news for many trucking companies is that prevention strategies overlap ‘driver friendly’ retention strategies so some of the required actions may already be in place.  A sound Prevention Strategy focuses on countering the promises Teamsters typically make during the recruiting campaign.  A few examples include:

        
Teamsters promise higher wages: 

o        Maintain competitive wages, medical benefits, 401K contributions and bonuses.

o        Communicate often to your employees on just how competitive your compensation is.

        
Teamsters promise to protect their members:

o        Have published policies and enforce them fairly amongst all employees.

o        Provide a forum for employee complaints to be discussed and acted upon where necessary.

o        Make sure disciplinary action and discharges are investigated and administered fairly. 

o        Establish performance goals for employees that are achievable but consistent and hold everyone to the same standards.

        
Teamsters promise to favor and protect seniority:

o        Develop a system where senior drivers receive additional benefits while not jeopardizing work or earning opportunities for junior drivers.  One of the disadvantages of unions is that junior drivers are often forced into frequent layoffs and consistently receive the worst loads and equipment.

o        Offer promotional opportunities by seniority where possible such as Driver Trainers, Driver Mentors or Dispatchers.

Preparation

Regardless of how comprehensive your Prevention Strategy is, you need to prepare for the possibility that your drivers may someday vote in a union.  A Preparation Strategy is designed to identify all the areas of your operations that need protecting in the event of unionization.   Examples include:

        
Work Rules – Teamsters will want to define how loads are dispatched, how equipment is assigned, etc…

o        Look at current procedures for assigning work and equipment to identify those that must be protected.  For example, new trucks every year should go on two-shift operations to minimize after hour breakdowns and allow for managing lease constraints on odometer miles.  Therefore new trucks can only be assigned by seniority if senior drivers bid those runs.

o        Identify work rule changes that could improve productivity and make them now; before they have to be negotiated.

        
My Work – Teamsters will attempt to claim all work assigned to the company as theirs.   

o        Establish a separate (new corporate identify) brokerage company without assigned driver employees and build a history of freight being tendered directly to them and then brokered out to your company and others.

o        Keep records of load exchanges with other companies (both union and non) to benchmark and protect how much work is exchanged.

        
Eligible Members – Teamsters will want to include all your employees into their bargaining units; including dispatchers.

o        Emphasize and increase the ‘supervisory content’ of your office staff, especially in the areas of discipline and directing their work to increase the likelihood that they will not be eligible for unionization.

o        Explore outsourcing dock jobs and clerical work currently being performed by low wage employees or part timers.

o        Reexamine your owner-operator strategy.   Owner-Operators are non-employees and in theory, not subject to unionization.

        
Protected Employees – Teamsters will fight all disciplinary and discharge actions grieved by their members.

o        Once unionized, it will be hard to get rid of unproductive or unsafe drivers.  Do it now.  Replace lazy and unsafe drivers.

o        Work on a progressive discipline schedule for your company and implement it before unionization. 

When developing your Prevention and Preparation Strategies, there is one simple fact you need to keep in mind.  Unions exist because companies treated their employees unfairly and paid them poorly.  When developing your strategies, make sure you keep your drivers interests in mind.

 

-- Joe White -- TruckExec Pubisher/CEO CostDown Consulting