Want job security? Look for work as a driver recruiter at a truckload carrier.
Annual driver turnover rates are rising at truckload haulers, hitting 79 percent at large companies in the second quarter of 2011, the American Trucking Associations said, ratcheting up demand for truck drivers and increasing recruiting costs.
That’s a big leap from 39 percent in the first quarter of 2010, though a smaller increase from a 75 percent annual turnover rate in the first quarter of 2011.
And although the rate is still below the 100 percent-plus turnover rates common in the mid-2000s, driver retention is becoming an increasingly costly problem.
A driver shortage alone would be bad enough; high driver turnover rates mean carriers must hire drivers again and again with no net gain in employment.
Over time, that costs trucking companies and, eventually, shippers, big money. Truckload carriers are spending hundreds of thousands, if not millions, of dollars a year simply to replace truck drivers who leave and maintain a steady work force while ensuring a stable and sustainable supply of capacity for customers.
Here’s an example. Say a large truckload carrier spends $5,000 to recruit each driver (an amount cited by one such company). With 2,500 drivers, and a 79 percent turnover rate, that carrier will spend nearly $10 million a year to replace the 1,975 drivers who turn in their keys annually. Over five years, the carrier would spend close to $50 million and hire almost 10,000 drivers — if its turnover rate and recruiting costs remain stable, which isn’t guaranteed. By bringing its annual turnover rate down to the 39 percent industrywide average the ATA reported in early 2010, that company could save $5 million and hire 1,000 fewer drivers a year.
And there are other, indirect costs of high driver turnover, not the least of which is the kind of lost revenue opportunity that occurs when a driver quits on a Friday, leaving a carrier scrambling to fill a seat and pick up a shipment Monday. Repositioning equipment? Cutting into another driver’s hours? All cost money.
“Driver turnover clearly diminishes your ability to generate revenue,” said Joe White, CEO of CostDown Consulting, a Grayson, Ga.-based firm that specializes in driver retention programs. “It’s not just that $5,000 per driver; it’s the lost revenue opportunity. You’re effectively operating at 75 percent of your capacity.”
It’s hard to imagine a business where that kind of expense and that level of turnover would be considered acceptable — except trucking. And for many truckload carriers, $5 million or $10 million spells the difference between a profit and a loss.
Sidebar: What Should Shippers Do?
With operating and equipment costs rising in an uncertain economy, driver turnover and retention are issues carriers and shippers ignore at their own risk. Not only is a carrier’s profit at stake, but also a shipper’s supply lines and budget.
Truckload carriers exerting newfound pricing and capacity discipline have an opportunity to fix this chronic problem and create a more sustainable, profitable business model that would allow them to keep more of the money driver turnover siphons from their bottom lines. Those carriers need to grab the chance to rethink long-term strategies for hiring and keeping drivers.
“The key is for companies to make a severe change in the way they do business now to the way they will do it in the future,” said Richard Snyder, director of recruiting at Crete Carrier, Lincoln, Neb. Those carriers that are first to do so “will win big.”
Crete Carrier, the eighth-largest U.S. truckload company when ranked by revenue, according to SJ Consulting Group, has about 4,800 drivers and “an industry-low turnover rate,” Snyder said, though he declined to release the figure.
“How many drivers do we hire a year? Not enough,” Snyder said. “I wish we could bring on 15 to 20 percent more. We are willing and able to grow, but only by recruiting drivers that meet or exceed our qualifications.”
Truckload carriers also need to learn from less-than-truckload and private fleet counterparts with much lower turnover rates, show shippers they have a vested interest in a stable driver pool, and, perhaps most important, convince drivers they’re serious about giving them reasons to stay rather than dart out the door.
Old Dominion Freight Line, a $1.4 billion LTL carrier, has a 10 percent driver turnover rate. “Our road drivers don’t handle freight, they spend more time at home and their compensation is better,” said David S. Congdon, president and CEO of the Thomasville, N.C.-based company. “We attract drivers from the truckload industry. Home time is one of the most important factors.”
“Most carriers have opportunities to improve retention,” White said. “A lot of companies don’t put the effort into retention that they put in recruiting. They’ll say, ‘I’ll treat the driver with respect.’ Today, that’s just the price of admission.”
Sidebar: Planning Better Driver Retention.
Although most carriers have a recruiting director, White said, they often don’t have someone specifically charged with improving retention, despite the grinding cost of churning turnover. “You need to think of your driver employment strategy as a funnel,” he said. “The wide end is recruitment — you want to bring in as many drivers as you can. The narrow end is retention — you don’t want to let many out.”
What carriers need is a comprehensive driver employment strategy, said Bert Johnson, senior director of human resources and driver recruitment at Con-way Truckload, Joplin, Mo. “If you have a driver working for you for years, that driver is going to deliver on time and be more safe. You’ll get all the benefits of retention.”