Texas Trucking Study Finds Successful Firms Pay Drivers More
Posted on November 14, 2013 in Telecommunications
According to the 2013 Texas Trucking Industry Study, the most successful trucking companies engage in a specific set of driver recruitment and retention practices compared to their less profitable and successful competitors. These practices are likely to play a role in their increased success and improved market position within the trucking world. By following the example of these leaders in the field of trucking and transport, smaller firms may be able to boost their profitability and achieve a greater degree of success in this competitive industry.
The study's findings were based on responses from 300 owners, CEOs and executives of trucking companies throughout Texas. To determine which trucking firms would be considered successful for purposes of the study, the Texas Trucking Alliance established a few basic criteria:
- The firm must employ at least 11 drivers
- It must have achieved at least 10% net profit for 2012
- It must have reported revenue growth for 2012
The hiring practices for all companies included in the study were evaluated and compared to determine any differences in the hiring strategies and recruitment techniques used by Texas trucking firms. The results indicated that companies that met all three criteria for success engaged in significantly different hiring practices from those in place at less successful firms.
Contract vs. Employee Drivers
Successful firms were more likely to hire contract labor than companies without their track record for success. The study showed that 86 percent of highly successful trucking firms used contract drivers to manage some or all of their transportation needs. More than three-quarters of these successful companies used both contract drivers and employees; this compares to just 30 percent of companies deemed less successful under the study's conditions.
Bonuses and Awards
The Texas Trucking Alliance study also found that more successful companies were more likely to offer bonuses and awards for their drivers. The financial incentives offered by successful companies include, but are not limited to, the following:
- Almost one-fourth of highly successful companies offered signing bonuses to new employees
- Driver recognition awards were offered by 67 percent of top companies
- Bonuses for accident-free driving were given by 62 percent
- Longevity bonuses were provided by over 50 percent of successful firms
The bonus programs offered by these firms may allow them to attract top drivers and to retain those drivers even in highly competitive market conditions.
Successful trucking firms were also more likely to provide benefits for their employees than other companies in the trucking industry. The study indicated that 57 percent of the trucking enterprises considered most successful provided some degree of health care insurance for their staff members. Approximately one-third of these companies offered a 401(k) retirement plan to ensure a more secure financial future for their drivers. These added benefits can be a powerful draw for drivers and may be a factor in the success enjoyed by these top trucking companies.
Driver referrals were considered useful recruitment tools by over 90 percent of the most successful companies; only 66 percent of other trucking firms considered referrals a useful recruiting strategy. Firms considered more successful were also twice as likely to reward drivers for referrals and paid an average of approximately $200 more for each referral bonus. These recruitment strategies may well be responsible for a portion of the added success enjoyed by these trucking firms in acquiring and retaining the best drivers on the road.
Added Competition for Top Drivers
One motivating factor for higher salaries, increased bonuses and added recruitment incentives on the part of trucking firms is the growing demand for qualified drivers in the labor marketplace. The trucking industry has shown signs of recovery in recent months, allowing many companies to resume normal operations or even to begin expansion plans for the upcoming year. During recent economic downturns, however, many drivers abandoned the trucking industry to seek work in other fields. As a result, the higher demand for qualified over-the-road truckers has led to increased competition for the available labor force. Firms based in and around Charlotte, North Carolina, for example, have had serious difficulties in finding takers for their available long-haul driving positions. According to an August 2013 article published in the Charlotte Observer, one issue is the aging of the workforce in the trucking industry. As older drivers retire, fewer young drivers are stepping up to take their place. This has led to serious shortages in the labor force for many trucking companies.
Shortages Expected to Get Worse
The Charlotte Observer article also noted that the trucking industry is currently facing an estimated shortfall of at least 25,000 drivers nationwide. If current trends continue, the American Trucking Associations have projected that these shortages could amount to almost 240,000 unfilled driving positions across the nation by the year 2022. For smaller trucking firms, acquiring the right drivers now and motivating them to stay can be of critical importance in maintaining both productivity and profit margins in upcoming years.
Funding Future Growth
For many smaller trucking firms, finding the right financing and funding arrangements can be challenging. This is doubly true in today's tight money credit market. Traditional lending arrangements are often unavailable for trucking firms without an established credit history and suitable collateral to secure loans and lines of credit. For many companies in the transportation industry, factoring is an alternative method of funding that allows rapid access to working capital and easier approvals than traditional credit sources.
Factoring in the Trucking Industry
Factoring is a method of financing that allows trucking companies to obtain payment immediately on invoices and financial instruments that will come due on a date in the future. For example, a trucking firm that held an invoice from a regular customer in the amount of $20,000 for services already rendered could sell that invoice to a factoring company for a portion of its face value. The exact percentage received on the invoice would be calculated based on a number of factors, including the following:
- The risk assessed that the invoice might not be paid
- The length of time before the invoice is due
- The terms of the agreement with the trucking firm
Once an agreement has been reached, the factoring company disburses the funds to the trucking firm and retains the physical invoices and the rights to payment on those invoices. When the invoices come due, the factoring firm collects the amounts owed on these accounts receivable to cover the principal amount given to the trucking firm and the percentage retained for profit and expenses on the part of the factoring company. Because factoring arrangements are not loans, they can provide real assistance in managing cash flow shortfalls and can be used to fund recruitment and acquisition of drivers and other necessary personnel to maintain profitable operations in the trucking industry.
Companies like 1st Commercial Credit specialize in providing the fastest and most cost-effective freight factoring services for trucking firms and other businesses. By opting for factoring arrangements rather than taking on added debt, trucking companies can quickly and effectively resolve their financial difficulties and remain competitive in today's ever-changing industrial, commercial and financial marketplaces.