Joe White
CEO-CostDown Consulting
Increasingly, trucking company owners and CEOs are establishing truck driver pay-for-performance (P4P) programs comprised of defined performance goals and bonus pay when goals are met.
However, P4P is part, and only part, of a bigger program called ‘performance management’ and truck drivers are part, and only part, of a trucking company’s total employees. When a performance management program (PMP) is incomplete in terms of content, employee scope or both; a trucking company has a much greater chance of failure.
The four cornerstones of a successful PMP are:
• Value-focused Job Descriptions
• Performance Goals
• Financial Rewards based on Goal Achievement
• Best Activities Training
Since truck driver pay-for-performance has received most of the recent press, we’ll instead explore the profitability opportunity trucking companies can receive from a PMP for management personnel using a VP of Sales position as our example employee.
A traditional job description for a VP of Sales has as its main focus revenue growth (after all, the word ‘sales’ is in his/her title). But is that the best focus? Is revenue growth the greatest value opportunity of the VP of Sales position?
Consider this…
Freight networks are dynamic and full of costly inefficiencies such as empty lanes, underrated freight and frequent delays. Additionally, a network’s customer portfolio can be dangerously over weighted allowing a handful of large shippers to dictate unprofitable pricing and operating conditions. The geographic reach of the network is also important as it affects home time, hiring regions and driver productivity.
Revenue growth by itself will not fix these issues. Unfortunately, the top sales employee in many trucking companies is often not assigned specific responsibility and goals for addressing similar network cost concerns even though that position has the greatest influence with the customer base.
An effective PMP begins with developing job descriptions that clearly define the responsibilities that provide the greatest value for specific positions within the organization. Even a job title by itself can suggest (and possibly misdirect) a focus of responsibility. If our VP of Sales was instead titled VP of Network Optimization and assigned responsibility for addressing specific network issues and revenue growth, might not he/she add more value?
Our retitled VP of Network Optimization’s revised job description and performance goals could include eliminating deadhead miles (sales for empty lanes), reducing driver detention, improving customer balance, increasing revenue, etc… Once value-based job descriptions and responsibilities are defined, the trucking company owner or CEO would then assign performance targets for those responsibilities and define the pay-for-performance bonus opportunity.
The final cornerstone of an effective PMP is ‘best activities’. A common industry example can be found on the driver side where many trucking companies have no idling policies and teach fuel-sipping driving techniques to support MPG goals.
A best activities example for our VP of Network Optimization might include working with the finance department to identify costliest detention points and developing cost summary business cases to bring to the customers. Another example could be securing Driver Manager approval before bidding on new traffic lanes to ensure network fit.
The goal of a PMP is to provide significant bottom line opportunity by narrowing the performance gap between current and optimal employee performance. This is just as important for the executive group as it is for truck drivers. By redirecting a department head’s responsibilities to increase the value he/she adds to the bottom line you are in effect redirecting the efforts of all the employees assigned to that executive. That provides a powerful opportunity for improved profitability.
PMPs should be developed for many middle managers also; especially those that have a significant influence on cost and profitability. The terminal manager and driver manager employee groups are of particular importance due to their influence on driver performance. Any employee that manages 20 – 50 drivers and makes literally hundreds of decisions a week that impact variable costs and profitability should be on a well-designed performance management program.
A PMP that lacks content will lack results. You can establish a 2,300 miles/week performance goal for drivers and offer quarterly bonuses when met but without driver training and coaching on how to improve productivity (best practices), results will fall short of expectations.
Likewise, a PMP that lacks employee scope will also lack results. Truck drivers may have very specific performance goals but if driver managers are not provided their own PMP with goals and financial incentives aligned with driver performance success, results will fall short of expectations.
Perhaps the most fundamental success factor of any organization is that the higher the employee performance, the more likely it is that the company will succeed. This holds true regardless of the size or type of an operation. Trucking companies that place serious effort into optimizing employee performance through use of a well-designed performance management program will be the most likely to succeed. Those that don’t – won’t.
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FMCSA PROPOSES MANDATORY ELECTRONIC LOGGING DEVICES.
April 2014, TruckingInfo.com – Feature
By Oliver Patton
After 28 years of proposals, studies, drafts, revisions, legal battles and technological innovations – not to mention an Act of Congress – federal regulators are close to requiring most interstate commercial drivers to keep track of their work hours with an electronic device.
The Federal Motor Carrier Safety Administration’s proposed electronic log mandate, published last month, addresses a broad range of issues but still must go through a comment period and faces possible legal challenges before it becomes final.
At the core of the 256-page proposal is the requirement that interstate drivers who fill out paper logs must eventually switch to electronic logs.
It also covers technical standards for the electronic logging devices, as they are now termed (or ELDs) and the supporting documents regulators need to confirm compliance. And it sets requirements to ensure that electronic logs are not used to harass drivers.
The agency will take comments on the proposal until about mid-May. After it reviews the comments and publishes a final rule, perhaps later this year, carriers will have two years to comply. Carriers that already have recording devices that meet current specifications would have an additional two years to bring their devices into compliance with the new specifications.
It remains to be seen how the various constituents will react.
While larger trucking companies generally support ELDs, they may have concerns about some of the technical details, the supporting documents requirements or the agency’s approach to grandfathering devices already in use.
Owner-operators have long opposed ELDs and may not be satisfied by the agency’s approach to harassment prevention.
The rule will apply to drivers who have to prepare paper logs. Drivers who don’t have to prepare logs may use the electronic devices but won’t have to. Drivers who use timecards will not have to use the devices. And drivers who use logs intermittently can stick with paper logs unless they use them more than eight days in 30 days.
Device details
The technical specifications spell out how ELDs should work.
The basic requirement is that the device record specific information – date, time, location, engine hours, mileage and driver, vehicle and carrier identification – and make it available to inspectors.
The driver must be identified by his full license number and the state where his license is issued.
The device has to be synchronized with the engine to record on/off status, the truck’s motion, mileage and engine hours.
The device will have to automatically record a driver’s change of duty and hourly status while the truck is moving. It also must track engine on/off, and the beginning and end of personal use or yard moves.
The agency is proposing that the devices use automatic positioning services: either the satellite-based Global Positioning System, land-based systems, or both.
Many carriers now have onboard information systems that warn the driver when he’s approaching his hourly limits, but the agency is not requiring that capability in its proposal.
The devices won’t have to print out the log, but may have that feature as an option. They will have to produce a graph grid of a driver’s daily duty status, either on a digital display unit or on a printout. This is the first time the agency has proposed using a printer, and it’s looking for comments on the costs and benefits of that approach.
The primary communications methods will be wireless web services, Bluetooth 2.1 or email. The backup will be wired USB 2.0 or scannable Quick Response code.
FMCSA is working with its state enforcement partners on a software system, eRODS, that will be the platform for transmitting and viewing the log data.
These requirements will be of particular interest to the enforcement community, which has expressed concern about how roadside inspectors will get access to the logs.
To guard against tampering, the device must not allow changes in original information about the driver’s records or in the source data streams that provide the information. It also must be able to check the integrity of the information.
Also, the device must be able to monitor and record compliance for malfunctions and inconsistencies.
The agency is proposing that the devices be certified by the manufacturer, and that certified devices be registered on the FMCSA website to make it easier for carriers to shop.
Harassment and more
The agency projects net annual benefits of about $454 million, based on an average annual cost of about $495 per truck for the device and services. It based its calculations on Qualcomm’s MCP 50 system, describing it as an appropriate example of the current state-of-the-art device, although it looked at other products as well.
Among the benefits are reduced paperwork costs for carriers – no more paper logs – as well as 1,425 fewer truck crashes and 20 fewer fatalities a year due to fatigue prevention, the agency said.
The supporting documents portion of the proposal eliminates the requirement that carriers keep paper that verifies driving time, since the electronic log takes care of that. It retains the requirement that carriers keep a variety of documents, ranging from bills of lading, dispatch records, expense receipts or payroll records.
The agency would prohibit carriers from using ELD information to harass drivers, and is proposing procedural and technical provisions to protect drivers from harassment.
For instance, the device must have a mute or low-volume capability so the carrier can’t interrupt a driver when he’s in the sleeper berth. And the driver would have to approve any changes the carrier makes in his data.
The agency plans to propose another rule to protect drivers from coercion by carriers, shippers, receivers or transportation intermediaries. This proposal, which is awaiting clearance at the White House Office of Management and Budget, will include ways for drivers to report coercion as well as penalties for violators.
Many trucking companies support electronic logging, and early reaction from the American Trucking Associations was generally positive.
“ATA supports FMCSA’s efforts to mandate these devices in commercial vehicles as a way to improve safety and compliance in the trucking industry and to level the playing field with thousands for fleets that have already voluntarily moved to this technology,” said President and CEO Bill Graves in a statement.
ATA Executive Vice President Dave Osiecki said he’s particularly pleased that the agency is proposing to allow paper printouts of logs, but not requiring their use.
The Owner-Operator Independent Drivers Association, which has long opposed ELDs, is taking a more cautious stance.
“The agency must address the serious safety issue of how (ELDs) are used to harass and coerce truck drivers into continuing to drive regardless of driving conditions,” said spokesperson Norita Taylor in a statement.
The group also is worried about some of the technical details and whether or not ELDs will improve safety, Taylor said.
“This is the first stage in the regulatory process for the agency’s latest attempt to craft a rule on this topic, and OOIDA and small business truckers will certainly be weighing in and providing comments,” she said.
Copyright © 2014 TruckingInfo.com. All Rights Reserved.
Many of our clients contract to government entities – which means additional scrutiny from the Department of Labor. If you have drivers that fall under the Service Contract Act, you are required to comply with the Fair Labor Standards Act. We have seen increased DOL audits with our clients, and more companies are using LoadTrek to create work plans and monitor compliance with established plans.
A key provision is the creation and monitoring of authorized break periods – and the rules that stipulate whether or not these breaks should be compensable.
Many employers assume that, when an employee stretches a 15-minute break to 25 minutes, the FLSA does not allow the additional 10 minutes to be treated as non-compensable time.
On the contrary, the Labor Department’s internal enforcement manual takes the position that unauthorized break extensions need not be considered work time, so long as the employer has expressly and unambiguously told employees that:
- authorized breaks may last only for a specific length of time;
- any extension of those breaks is against the rules; and
- any extension of those breaks will be punished.
Remember that many states impose rest-break rules of their own. Employers must also be aware of and comply with whatever the applicable obligations are.
For purposes of what is and is not FLSA worktime under Labor Department interpretations, it can be useful to view scheduled breaks as falling into essentially three categories:
- Meal breaks, which are typically noncompensable time
- “Short” rest breaks of “about 20 minutes” or less, which the Labor Department says are typically compensable time
- Break periods which are neither meal breaks nor “short” rest breaks, which might or might not be compensable time.
We recommend that routes are created with break times and locations built into the route. These break locations should have instructions that explain the nature and expected duration of the break.
By Steve Hardy, Dallas Fire Department
When you are on the road, sooner or later you’ll be one of the first to arrive at an accident scene. What should you do? What should you not do? Here is how you can help us, as emergency responders, save lives and minimize injuries.
Park safely and use your rig to shield the accident scene from oncoming traffic if necessary. Quickly place your flares or triangles – you don’t need a second accident. If you see bystanders who are helpful, appoint a traffic guard to slow and divert traffic.
Call in the accident. Report the location with highway number and mile marker or intersection. When you call in the accident, we need to know who to send, how many to send, and what type of equipment to send. How many people are involved? What is the extent of the injuries? Are people bleeding and breathing? Are they awake? How many vehicles are involved? How serious is the damage to the vehicles? Are there fatalities? These answers will tell us if this is a “heavy rescue” requiring another truck, if we need to send additional MICU’s, if we need to send the Chief or an EMS Supervisor, and if we need to preserve the scene for a police investigation.
Go to the patients. Are they awake? If so, talk calm and slow. Do not give them anything to eat or drink. Assess their orientation. Ask questions such as, “Who is the President?” “What happened?” “Where are you?”. Ask what hurts. If you need to hold them still, use both hands on both ears, and hold the nose even with the belly button. If a motorcyclist is involved, do not remove the helmet and do not move the motorcycle – unless it’s on the patient.
When we arrive, we need a place to park that provides a safe triage/treatment area. Tell us exactly what you found and what you’ve done. Ask us if we need you to do anything. If not, leave and get out of the way.
When we arrive, we will ask the patients questions to assess their level of consciousness. We are looking for concussions, and behavior that is inconsistent with our original assessment. We attempt to collect personal items in the vehicles and keep them with the patient as they are transported.
We are responsible for site clean-up – but we need to determine if this is a possible crime scene. Fatalities, road rage incidents, suicides, homicides, domestic calls, or assaults require police investigation, and we must preserve the scene until the investigation is done. We clean up spilled fluids, debris, and take care of any hazardous material spills.
Your first response to an accident scene is critical. Someone needs to be in charge of the scene until we arrive. Unless someone else is there who identifies themselves as a trained medical or law enforcement professional, we need you to take control.
Coca Cola Refreshments USA, Inc. faces a corporate responsibility challenge after Corpus Christi jury awards in excess of 21 Million Dollars in a cell phone distraction injury case heard in the County Court at Law No. 2 in Nueces County, Case No. 10-61510-2.
Two law firms came together to bring the cell phone distraction case to a jury after it was discovered in the lawsuit that Coca Cola had a vague and ambiguous cell phone policy for its delivery drivers, according to court documents. The jury was to decide whether or not Venice Wilson’s injuries were caused by a distracted Coca Cola delivery driver who was on a cell phone.
The law firms handling the trial, Hilliard, Munoz & Gonzalez through its lead lawyer, Bob Hilliard, and Thomas J. Henry Injury Attorneys, through its lead lawyer, Thomas J. Henry, discovered flaws in the Coca Cola management cell phone policy which allowed its employees to operate company vehicles throughout the United States while using a cell phone, according to court documents.
According to court documents, the jury heard overwhelming evidence of how Coca Cola knew of the dangers of using a cell phone while driving, including having a cognitive distraction of 37% while on a cell phone. The jury heard that Coca Cola withheld this information from its employee driver, in addition to the data on the numbers of deaths and injuries arising from cell phone use while operating vehicles, according to court documents.
When asked about Coca Cola corporate governance, Bob Hilliard, a lead trial lawyer in the case said this: “Today’s verdict I hope sends a message to corporate America that you can’t have employees on a cell phone and endanger the motoring public.”
When asked to reflect on the jury’s award, Thomas J. Henry of Thomas J. Henry Injury Attorneys, a national law firm, stated: “From the time I took the Coca Cola driver’s testimony and obtained the company’s inadequate cell phone driving policy, I knew we had a corporate giant with a huge safety problem on our hands. I also knew that taking on Coca Cola’s policy that affects hundreds of thousands of its employees would require assembling a trial team with the horse power necessary to fight and win. More importantly, I knew Mrs. Wilson deserved justice, and the rest of the motoring public deserved safer drivers; so, Bob Hilliard and I decided to put our law firm litigation teams together to shred Coca Cola’s policy.”
When asked if he thought the jury connected with him during his closing argument, Bob Hilliard said, “I knew looking into their hearts and minds, after hearing days of trial testimony, that they knew cell phone use while driving was deadly and harmful. The jury knew I gave them evidence to change Coca Cola’s policy, and I knew the jury would do justice, and they did. We now have a safer community, state, and country and now Coke gets to join, against their will, other Fortune 500 companies who volunteered to have a “no cell phone” use policy while operating company vehicles.”
by Leo J. Lazarus
For 25 years or longer, operating ratio (the ratio of operating expenses to operating revenue) has been a common measure of profitability and efficiency in the truckload transportation industry. Historically, most truckload carriers have established operating ratio goals ranging from 88% to 92% and have measured financial success based on this one simple indicator of profitability. From a return on investment perspective, this traditional paradigm of a specific operating ratio being profitable, regardless of the characteristics of the operation, is simply not accurate.
In my experience, a typical truckload operation is characterized by tractor utilization of 2,200 to 2,500 miles per week and between two and three trailers per tractor. The historical operating ratio standards of 88% to 92% are based on this typical operating model. Unfortunately, because of its simplicity, operating ratio does not account for the carrier’s comprehensive financial model, especially in situations where the operating model is significantly different from the “typical” truckload operation.
The general paradigm is that the lower the operating ratio, the more profitable and efficient the carrier. For example, a truckload carrier with an operating ratio of 85%, regardless of the underlying business model, is very likely to be considered more profitable and efficient than a carrier with an operating ratio of 89%. The risk with this common interpretation is that a number of critical variables about each carrier’s operation are not taken into account. If the two carriers serve different market segments, different length of haul levels, and different customer requirements, the 89% carrier can easily be even more efficient and more profitable than the 85% carrier.
While I believe a variety of operating and financial variables can impact the accurate interpretation and application of operating ratio, the two most important considerations are weekly utilization (productivity in miles) and the trailer-to-tractor ratio (capital investment). In specialized trucking operations, as is often seen with many dedicated and shorthaul fleets, the operation may have extreme trailer needs or utilization requirements outside those of the typical truckload operation. When a specialized operation requires an extremely high number of trailers per tractor (above average capital investment), the “standard” operating ratio is not appropriate for measuring or pricing the operation. Likewise, when a specialized operation can generate only 1,000 miles per tractor per week (below average productivity), the “standard” operating ratio is again no longer an accurate guideline for the operation.
For all truckload pricing and profitability benchmarking, the operating ratio expectation must be adjusted relative to the characteristics of the operation, particularly investment level and asset utilization. A carrier’s standard operating ratio expectation is likely to provide an accurate guideline for “typical” operations. However, for specialized operations, the correct operating ratio expectation could range from 70% to 93% depending on the requirements of the individual operation.
The most straightforward illustration of the risks of the operating ratio paradigm is seen in the common process for pricing dedicated fleets. All too often, carriers base dedicated pricing on a simple cost-plus approach. For example, the carrier may have a stated goal that all dedicated fleets must achieve an operating ratio of 88.0%. The carrier simply estimates the operating cost of providing the dedicated fleet then computes the revenue necessary to achieve the target operating ratio.
Using a static operating ratio goal and cost-plus approach to price every fleet, regardless of specific characteristics, will often result in one of two critical pricing mistakes. The potentially most costly mistake occurs when a carrier prices an undesirable opportunity too low. The most common mistake of this type would involve a low utilization fleet requiring a high number of trailers per tractor being priced too low. Not only does the underpriced fleet generate inadequate returns, but because of the low pricing mistake, the carrier also stands a good chance of being awarded a fleet that produces poor financial results.
The second mistake occurs when a carrier prices a very attractive opportunity too high, failing to provide competitive pricing for the business opportunity. A common mistake of this type might occur when a shipper requests a fleet of dedicated trucks and drivers but the entire trailer fleet is provided by the shipper, thereby eliminating the carrier’s capital investment in trailers. Carriers that do not adjust pricing and margin downward by the appropriate amount will be priced too high and likely miss out on this financially attractive opportunity.
Because a static operating ratio target is not accurate for all situations, a more sophisticated pricing approach is required. The most accurate way to establish the proper margin and pricing is to apply a more sophisticated, investment analysis approach based on the criteria of Net Present Value and Internal Rate of Return. Instead of a standard operating ratio serving as the primary guideline, the carrier should establish a minimum Internal Rate of Return for each operation and price the opportunity to meet or exceed the required rate of return.
With a minimum required return standard in place, the Net Present Value and Internal Rate of Return investment analysis techniques provide the ideal methodology for evaluating and pricing specialized fleet opportunities. These investment analysis tools will accurately account for the sensitive variables of investment (tractors and trailers) and productivity (utilization) then generate suggested pricing that adjusts the revenue and target operating ratio based on those unique characteristics. These techniques provide a comprehensive analysis of both the operating costs and revenues of the opportunity as well as the upfront capital investment required to undertake the specialized operation, thereby allowing the carrier to consistently price specialized truckload operations to provide the appropriate return on investment.
