Ray Haight is second-generation trucker; his parents ran a small four truck fleet operation, which worked for a local shipper into the U.S. market. Ray Haight was a driver and Owner Operator for 10 years logging over one million accident free miles prior to starting his own company, which serviced long haul lanes with both dry van and refrigerated equipment. In 1984 he started Southwestern Express Inc. based in London Ontario, which grew into a successful dry van and refrigerated 50-truck fleet. In 1990 MacKinnon Transport Ltd. was brought in as a partner and Southwestern Express moved from London to Guelph Ontario; in January of 2000 MacKinnon Transport Ltd. and Southwestern Express Inc. were amalgamated. Ray held the Position of President and COO until May of 2005; at that time MacKinnon Transport Inc. was a 275-truck fleet, warehousing and Logistics Company. Currently, he resides in Lambeth, Ontario where in addition to being Retention Coach at Truckload Carriers Association and co-founder of TCA inGauge carrier benchmarking platform he also finds time to lend his energies to many transportation industries related associations. Personal, Professional and Corporate Accolades: • Past Chairman of the Truckload Carriers Association • Past Chairman of the PTDI Professional Truck Drivers Institute • Past Chairman of NATMI North American Training and Management Institute • Past Chairman of the Industry Committee for Apprenticeship; Commercial Tractor Trailer Driver appointed by The Ontario Ministry of Training Colleges and Universities • Past Chairman of the Recruitment and Retention Human Relations Committee of the Truckload Carriers Association • Alumni of the UWO’s Ivey School of Business’s Quantum Shift Program • Winning team member of the Top 50 Best Managed companies of Canada for 2002, 2003, 2004, 2005, 2006, and 2007. • Winning team member of the Shipper’s Choice award for 2003, 2004, 2005, 2006 and 2007 • Winning team member of the Truckload Carriers Associations National Fleet Safety Award for 1999, 2001, and 2003. • Winning team member of the Over the Road Retention Award for 2003 • Winner of the Lee Crittenden Award for service and dedication to the Professional Truck Drivers Institute • Co-Founder StakUp Inc, an online transportation benchmarking service and the operating platform for the Truckload Carriers Association’s Profitability Program operating as TCAinGauge. • Creator of the Driver Retention Project Plan, a focused educational series that has resulted in reduced driver turnover in many fleets in the trucking industry. • Currently holds the position of Carrier Retention Coach an intracule part of Truckload Carriers Association’s Profitability Program

TCA Profitability Program (TPP) Retention Coach Ray Haight delves into all the costs associated with bringing on a new driver and estimates the total price each and every time a carrier does this. Other areas will also see cost reductions through reduced turnover, but this is one of the most obvious.

Efficient cost management means not spending money that does not need to be spent. When hiring drivers, it is necessary to spend money to place ads, hire recruitment services, screen candidates, and then train and onboard your new drivers. If the drivers you are hiring do not stay long, this money must be spent again to find a replacement. An efficient approach would spend the recruitment, hiring, and orientation money a lot less often. Spending that money just to repeat it all over again in less than a year for each driver is not an efficient use of limited funds. An efficient approach to managing these expenditures would focus on building an effective, responsive infrastructure to ensure that drivers, once hired, chose to stay longer with the company. Efficient cost management means reducing driver turnover.

Let’s consider some of the basic dollar numbers. Depending on the marketplace, the cost of recruiting a driver and helping him or her become productive can range from $6,000 to $12,000. For some markets, it could be a lot more. For the sake of this discussion, let’s be conservative and say that it costs $9,000 to recruit and onboard a driver. If Company A has 100 drivers and an 80% driver turnover rate, we are hiring 80 new drivers each year. With this rate and these costs, every year we will be spending $720,000 to hire drivers.

If our company has an operating ratio of 95% (gross profit margin of 5%), we would need to generate $14.4 million dollars per year to service that annual expense of $720,000. A high-turnover company can never be operating efficiently; therefore, it is much harder to get and keep clients to provide that revenue. It is a vicious circle.

By reducing our turnover by half each year, we would save $360,000. In turn, this would reduce the revenue needed to support this expense to $7.2 million. Bearing in mind the company’s improved efficiency with a lower driver turnover rate, we might even be operating at better margins and need even less cost-covering revenue. It just keeps getting better.

But be sure to keep the focus on recruiting and hiring quality drivers. The objective is NOT to reduce the cost of hiring an individual driver. The aim is to minimize the OVERALL cost of hiring all your drivers. It is acceptable to spend more per hire if the selection and retention is improved.

With these kinds of numbers, it is obvious that reducing driver turnover has the potential for substantial cost savings and improved profits. In our example, going from an 80% turnover to 40% saves $360,000 per year. These cost reductions drop straight to the bottom line as increased profits or new funds for business growth investment. Improving driver turnover has a significant, positive impact on business financial health.

Earlier in this section, we suggested an average cost of $9,000 to recruit and onboard a new driver. Your cost will be different, and you need to estimate your own costs. Start by making a list of the “costs” that apply to your situation. Here are some of the typical cost elements for you to consider when estimating your own cost of hiring:

NOTE: For costs listed as “annual,” the total must be divided by the number of “new” drivers per year to obtain what the “per driver” portion is:

Advertising (traditional)                       Annual expense

Advertising/awareness                        Annual cost re tractor and trailer decals

Web site cost, online app                   Annual expense

Dedicated phone lines                        Annual cost

Automated application systems          Annual depreciated costs (or fees), support, hardware, etc.

Recruiter salaries (internal)                Total annual salaries

Recruiting agents                                Total annual expense

Recruiting fees – Driver program        Bonus paid per driver referral

Sign on bonuses                                 Cost per driver

Manager/supervisor (oversight)          Annual cost – prorated if a portion of responsibilities

Interviewers (Safety)                           Annual cost – prorated portion dedicated to interviews

Referral/background checks               Annualized portion of salaries plus any per check fees

Driver history database services        Annual or per-check fees

Road tests                                           Cost per driver (fee if external, hours paid if internal)

Drug & Alcohol tests                           Cost per driver

Driver training/meetings                      Annual cost

Training the trainers’                           Annual cost

Orientation                                          Annual hours for staff involved

Orientation                                          Cost of any materials

Acclimation period                              Cost of gap to maximum efficiency / contribution

Driver file compliance                         Cost based on hours needed per driver

Mentors                                               Estimated hours per driver, converted to dollars

This list is a sample to help get you started. You may have others that apply to your recruitment processes and environment. For instance, your industry or region might require some very specific skills that go well above the typical driver training and orientation sessions needed to onboard an experienced driver.

We also know that lower turnover usually means a safer carrier. Which in turn means lower insurance expense, fewer accident claims, and less wear and tear on equipment with fewer drivers rotating through which means a higher residual value of rolling assets. Lower turnover means better turnaround of receivables through a better understanding of paperwork flow with seasoned drivers. Fewer service failures with less turnover means a stronger relationship with shippers and receivers.

Companies with lower turnover are more profitable companies. For you doubters, ask the heads of safety, administration, maintenance, and operations what the cost savings might be if they were in an environment of 50% less turnover than they work with now and then add these expenses into the cost of turnover. These numbers will likely far overshadow the $360,000 saved by Company A at 40% turnover compared to 80%.

Want to learn more about retaining your skilled workforce? I’m eager to talk with you.

Safe Trucking.

Regards,

Rjh

 

 

 

 

 

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Ray Haight is second-generation trucker; his parents ran a small four truck fleet operation, which worked for a local shipper into the U.S. market. Ray Haight was a driver and Owner Operator for 10 years logging over one million accident free miles prior to starting his own company, which serviced long haul lanes with both dry van and refrigerated equipment. In 1984 he started Southwestern Express Inc. based in London Ontario, which grew into a successful dry van and refrigerated 50-truck fleet. In 1990 MacKinnon Transport Ltd. was brought in as a partner and Southwestern Express moved from London to Guelph Ontario; in January of 2000 MacKinnon Transport Ltd. and Southwestern Express Inc. were amalgamated. Ray held the Position of President and COO until May of 2005; at that time MacKinnon Transport Inc. was a 275-truck fleet, warehousing and Logistics Company. Currently, he resides in Lambeth, Ontario where in addition to being Retention Coach at Truckload Carriers Association and co-founder of TCA inGauge carrier benchmarking platform he also finds time to lend his energies to many transportation industries related associations. Personal, Professional and Corporate Accolades: • Past Chairman of the Truckload Carriers Association • Past Chairman of the PTDI Professional Truck Drivers Institute • Past Chairman of NATMI North American Training and Management Institute • Past Chairman of the Industry Committee for Apprenticeship; Commercial Tractor Trailer Driver appointed by The Ontario Ministry of Training Colleges and Universities • Past Chairman of the Recruitment and Retention Human Relations Committee of the Truckload Carriers Association • Alumni of the UWO’s Ivey School of Business’s Quantum Shift Program • Winning team member of the Top 50 Best Managed companies of Canada for 2002, 2003, 2004, 2005, 2006, and 2007. • Winning team member of the Shipper’s Choice award for 2003, 2004, 2005, 2006 and 2007 • Winning team member of the Truckload Carriers Associations National Fleet Safety Award for 1999, 2001, and 2003. • Winning team member of the Over the Road Retention Award for 2003 • Winner of the Lee Crittenden Award for service and dedication to the Professional Truck Drivers Institute • Co-Founder StakUp Inc, an online transportation benchmarking service and the operating platform for the Truckload Carriers Association’s Profitability Program operating as TCAinGauge. • Creator of the Driver Retention Project Plan, a focused educational series that has resulted in reduced driver turnover in many fleets in the trucking industry. • Currently holds the position of Carrier Retention Coach an intracule part of Truckload Carriers Association’s Profitability Program