Traditionally, over-the-road (OTR) truck operators’ pay has been calculated on a base mile rate (cents per mile) or as a percentage of shipment revenue, but that has to change, according to Beth B. Carroll, managing principal for the Prosperio Group, a sales compensation consulting firm serving transportation and supply chain companies.
Prosperio held a press conference at the ATA Management Conference & Exhibition to discuss trends in driver pay programs, particularly the contributions that pay for performance can make to improving driver satisfaction, reducing turnover and attracting new entrants to the job. “Incentive pay for performance programs are here to stay,” Carroll told the audience. “They are becoming more common and will be essential.”
Several factors are making such programs more practical and more effective now, including the implementation of key performance indicators (KPI’s), more and better technology, driver monitoring systems and slightly higher margins for fleets, she noted.
Carroll recommended that fleets take a “Target Total Cash and Total Rewards” approach to driver pay, blending some sort of guaranteed base pay rate with additional income opportunities based upon performance. It is more attractive to drivers to be told that they can expect to make a total of $50,000 on average with up to an additional $10,000 than it is to be told you pay 48 cents per mile, she explained.
“It is basic human psychology,” Carroll added. “I am not sure the industry can survive without some kind of base pay guarantee [for drivers.] Of course, fleets need to be sure not to set the guarantee so high that it does not allow them to run profitably, and minimum standards must be met to get the guarantee.”
When it comes to adding an incentive program to a total compensation package, it will take some customizing and planning, she noted. Developing and administering a successful performance incentive program involves:
- Deciding what performances are most important to your operation and how you are going to measure and report them
- Deciding how you are going to reward drivers for meeting and/or exceeding those expectations
Rewards don’t necessarily have to be cash, Carroll said. They might be a higher per mile pay rate for the following month, or points that can be used toward something the driver wants, or even status within the company. What works will vary from operation to operation.
No incentive plan will be successful, however, Carroll cautioned, if certain basic human needs concerning work are not met first. The basic needs of autonomy, mastery and purpose form the foundation upon which you can add an incentive program. Without those, drivers will continue to move from fleet to fleet, looking for the best signing bonuses. ATA and other industry organizations are doing a good job addressing the need for purpose, she added.
One of the key problems for drivers is that there is no career path, Carroll told Fleet Owner. Status within the company (recognizing silver-, gold- and platinum-level performers, for instance) can be a substitute for career advancement, she said.
Prosperio is conducting a survey concerning driver compensation programs during the ATA conference to gather data about current industry practices. Fleets are invited to participate online.
- Posted by Page Siplon
- On October 23, 2014
- 0 Comments