Watch Now

Retention: the benefits, the costs, and why drivers are switching jobs

( Photo: Shutterstock )

Even with a unique schedule at the Truckload Carriers Association annual meeting, in which the same program with the same speakers is offered multiple times to avoid people missing important discussions, you’d be hard-pressed to attend every session on driver retention at this event near Orlando.

It’s obviously the topic of the day/the week/the month/the year. The emphasis in the discussion generally has been on retention, avoiding the costs of having to replace already trained drivers as they walk out the door to a different company or a different career in an economy with 4.1% unemployment.

As Phil Wilt, the president and COO of American Central Transport said, “I had heard about a driver shortage for the 12 years I’ve been in the industry. It’s finally arrived.” Wilt was on a panel with Lana Batts, the co-president of DriverIQ, about driver turnover. Its reassuring title about recruiting and retention trends: “It’s not just you.”

In a separate session led by Megan Younkin, the director of consulting at People Element, the focus was on where in an organization the responsibility for retention lies. Her answer to the question of who should be responsible for driver retention was blunt: everybody.

“How do you build that kind of culture if you don’t already have it?” she asked. “How can everybody in my organization have an impact on the way my drivers are feeling?” The title of her session was “A Holistic Approach to Incentivizing Retention.”

In both presentations, a list of the reasons cited by job-changers in the presenters’ respective surveys was offered, and it was as might be expected. Compensation was at the top, but with a number of non-financial reasons cited after that: lack of communication, poor relationship with managers, lack of home time, and the general category of treatment and respect. It was also noted that this list would have been largely the same five or six years ago.

Retention programs have costs. The problem, as Younkin said, is that the payoff is down the road and the costs are up front. Can it be justified as an investment that has a return? “We may need to put a stake in the ground with a number that spells out just how much we’re going to save,” Younkin said.

Creating incentives also can perversely create disincentives. For example, Younkin said that going to a per-hour pay rate to help avoid the problem of detention costs frustrating drivers could mean that a driver might get to a depot and be willing to get toward the back of the dropoff/pickup line on the grounds that “I’m paid hourly.”

The list of unintended consequences and disincentives was lengthy. Be sure that individual gain is not being incentivized at the cost of organizational success. Watch for incentive programs that pit departments against each other. Avoid one-size-fits-all programs that work for one department but not another.

But most of all, view every department as having a role in driver retention, Younkin said. For example, if the operations team has a pay package that is tied to some degree on driver retention, “I am going to look at every call and email as an opportunity to build a relationship,” Younkin said. “I will see it as an opportunity, not a distraction.”

Younkin discussed the cyclical nature of driver shortages, and how the high turnover numbers of the present followed a recession marked by high unemployment and low turnover. The question: what do you do if the economy ‘tanks’ again?”

Simply hanging on to drivers then is not necessary, she said. But all efforts should not cease. “That is when you need to look at shifting your focus to retaining top performers,” Younkin said. The goals on what constitutes success can be shifted, and fleets that did that “had better retention when they came out of the recession,” she said.

Dropping a program with the idea of bringing it back later is difficult. Joey Hogan, the president of Covenant Transportation Group, and the second panelist alongside Younkin, said ending a retention effort because conditions have changed is “a dangerous zone to be in. They are hard to restart. It takes a lot of work and a lot of effort.”

In the panel where Wilt made his comments about the driver shortage finally arriving, DriveriQ’s Batts said her company’s latest survey showed that the number of people who believe that turnover would rise had risen from 23% in the fourth quarter to a little under 40% at present. The number of people who said it would decrease stayed the same at a surprisingly high 35%, but possibly they are reacting to the fact not that the driver shortage may ease but that companies are taking aggressive steps to combat driver loss. “Signing bonuses are up, starting pay is going up, and driver pay is going up,” Batts said.

What is the cost of turnover? Using various figures, Batts said the average cost of turnover per driver is more than $11,500. Taking turnover rates and the size of the truckload industry, she estimated that total turnover costs to the truckload industry is now running about $8.8 billion per year. “There’s no competitive advantage to anybody to be spending that kind of money,” Batts said.

Batts said the irony is that she considers the trucking work force to be rather stable, with 50% of drivers in her survey at their firm four years or more. The problem is the small, ever-volatile number on the bottom of the scale where there is constant turnover. And that ties in with other data presented at the TCA meeting that showed anywhere between 1-5% of trucks are laid up at any given time as a result of driver shortages, a figure that looks small but has significant costs attached to it.

Witt said it has been frustrating that drivers rarely look beyond payment per mile in defining compensation. “I wish we could get to a point where they are looking at total compensation,” he said. “What is the value of a good benefit plan?”

And expressing that value needs to be honest. For example, a startling reason for turnover in the DriveriQ survey is the gap between expected compensation and actual compensation.

That’s another one where repairing that problem comes back down to two words heard frequently throughout the two sessions: communication and education. Whether it’s training the full staff about a company-wide dedication to driver retention or educating drivers about the total value of their compensation package, the roundtables made clear: it isn’t going to happen by itself.

For Batts, the biggest figure she cited in the macroeconomic, structural inability to hold on to a stable driver force is the comparison of the average salary in the present compared to what would have happened if it had kept up with inflation from its 1980 level, which was at the time when trucking was being deregulated. Had it kept pace with inflation, the average driver salary today would be more than $111,000. “That’s not going to happen,” she said. “But when we say, what happened to the labor pool, what would happen if we could offer these kind of wages?” Instead, Batts said, her surveys show that an average pay level of $75,000 would “start to make some kind of dent.”

One tool for recruiting drivers heavily used of late has been signing bonuses, but it’s controversial. At the Wilt and Batts’ presentation, one audience member who had been in the health care field said signing bonuses during times of nursing shortages–which are frequent–created friction with other long-time staff members who didn’t get such compensation. And it was noted in both panels several times that the drivers most likely to take a signing bonus–which are averaging about $7,000 now–are the ones who might be quick to later grab a bonus somewhere else and not stick around. Still, in this market, they don’t appear to be disappearing.

Another new development, according to Witt: trucking companies getting in the training game instead of waiting for CDL schools to produce a needed work force. He noted that his company does not do that. “But now some companies are taking them out of the CDL schools and finishing them off,” he said “It’s a big departure. We all need drivers, and we’re going to have to invest. We want to get them before they learn bad habits.”

John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.