Driver compensation

Another convention session dealt with one company's experience in building an entirely new driver compensation program that paid drivers differently, based on performance. The chief goals of the program were to: reward the highest producers without rewarding the lowest, attract strong performers, and provide incentives for drivers to improve performance.

The program centered around measuring driver performance and basing driver pay on a scoring system, said Barry McGrady, IT vice president with Floyd & Beasley Transfer, a Sycamore, Alabama-based truckload carrier operating in 48 states with some 180 power units. “It worked very well.”

The scoring program, begun at the fleet in 2005, has resulted in reduced driver turnover, improved on-time performance, and increased driver productivity. Another big plus was a major improvement in compliance with the company's fuel optimizer.

Buckets

The scoring program addressed the need to give drivers a pay hike by measuring driver performance in a number of “buckets,” and then scoring them in four pay scales, McGrady explained. The four buckets comprise average weekly revenue generated by the driver, compliance with the company's fuel optimizer, accidents, and violations. Each bucket has a different weight, but the total adds up to 1,000 points.

Drivers scoring more than 925 points are in the top group at 38 cents per mile. The others drop two cents at 36, 34, and 32 cents per mile at the score break points.

Scores have been aggregated over a six-month period and determine the drivers' wages for the next six-month period.

The idea is to score driver productivity in terms of meeting revenue goals. The target set by Floyd & Beasley Transfer is $3,750 per week.

The first thought is that a driver might not be able to influence this number, but experience has shown that drivers can, and do make, a difference, said McGrady.

He observed that most often, drivers are scored on miles, but that is not what a fleet should be doing. Rather, a fleet should be looking for the maximum revenue for the minimum miles.

Compliance

Floyd & Beasley Transfer uses Expert Fuel as its fuel optimizer. It is a software tool that locates the most practical route available for trucks, balancing time, distance, fuel level, and prices.

Before its new driver compensation program, compliance was running around 58 to 62 percent for the recommended fuel stops. But with the advent of the productivity payment program, compliance jumped to better than 90 percent.

Accidents are scored as ratios of incidents per miles traveled for each driver. Violations are also scored by miles, but both driver and vehicle violations are included, since the driver ultimately is in charge of the vehicle.

Ranking

One benefit that was not considered was the ranking of the drivers from top to bottom in overall contribution to the fleet's bottom line. However, this pays off in many ways, said McGrady.

He noted that one hidden plus is the allocation of new equipment, a process that used to tie up senior managers for days. With driver revenue ranking, the process is completely automatic and can be completed in minutes.

By way of illustration: if there are 25 new tractors, they go to the top 25 drivers, and their trucks go down to the next 25, and so on.

The overall effect of the company's new driver compensation program has been “dramatic,” McGrady reported. Where 16 percent of drivers were in the top tier at the start of the performance-based pay program, now 54 percent are in the highest earning group.

What's more, turnover is right around 30 percent, but that is mostly contained in the bottom groups. The net result is that the fleet is keeping its top-earning drivers.

McGrady said the program is run entirely from a relatively simple Excel spreadsheet, most of which is populated automatically from back-office management software, so it takes little maintenance.

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