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Would paying drivers an annual salary or by-the-hour instead of by-the-mile help reduce driver turnover?
Driver turnover is a serious problem and there's no way to sugarcoat it . . . or is there?
Quote of the Day
"The achievements of an organization are the results of the combined effort of each individual."
-- Vince Lombardi
My Point
Can New Pay System Help Solve Turnover Problem?
By Marvin Shefsky
I read a study the other day that helps explain why the trucking business is plagued by one of the highest turnover rates of any industry in the country. It's no secret that over-the-road professionals want what every other professional wants out of his or her job: good pay, respect and a reasonable working environment (i.e., getting home more than once a month).
What caught my eye about this study, from researchers at the University of Arkansas who interviewed more than 300 large trucking companies, is that the crux of the problem is control. Carriers and dispatchers have it and drivers, even owner-operators, don't. Drivers have little control over the number of miles they drive. Sure, owner-operators at many outfits have the right to refuse a load, but what does that pay them? Zero.
The researchers point out that giving drivers more control over their finances by moving from a rate-per-mile system to paying an hourly or yearly salary could improve turnover rates, provided the switch was accompanied by tools that could accurately evaluate potential or current employees. In other words, borrow the annual review concept from the corporate world to keep and reward good drivers and terminate bad ones.
The industry's notoriously high annual turnover rate (somewhere north of 100 percent, depending on who is doing the counting) extracts a heavy financial toll on company drivers, owner-operators and carriers. According to statistics from the American Truck Business Services, it costs an owner-operator approximate $13,000 to change companies, including $6,500 in lost time while preparing for a job change and going through orientation and another $5,000 to get back up to speed (finding new customer base, new dispatch system, etc.). If that's not an incentive to stay put, I don't know what is.
Meanwhile, carriers shell out something like $8,000 on average to recruit a new owner-operator. Clearly, this is an expensive, wasteful game that neither side can afford to play, yet play it they do, day after day, month after month, year after year. You can read more about the University of Arkansas study and see more eye-opening statistics regarding owner-operators elsewhere in this newsletter.
I don't know if switching to an hourly or salary pay system for over-the-road drivers is practical or whether it would improve turnover rates, but it might be worth looking into, especially when you consider what the trucking industry's high turnover rate costs drivers and carriers alike. What do you think? The "Question of the Day" elsewhere in this newsletter asks that very question. You're the ones out there on the front lines battling the turnover problem. Give us your feedback. As we've said many times, we're all in this together, and the best way to turn the industry-wide turnover problem around is if we all pull together to solve it.
-- Marvin Shefsky, Publisher/CEO
