The true cost of turnover comes in at almost $11,000 per hire

Image: Shutterstock

Image: Shutterstock

Although capacity has risen dramatically in the past six months, one fact remains unchanged: there is a shortage. However, that shortage is not a general driver shortage. It is a critical shortage of quality drivers. Survey any random group of carriers and drivers, and this fact will be reinforced very rapidly.

It is hard to change human behavior, and the invisible hand of supply and demand. Trucking companies, small, medium and large faced a sense of urgency in 2018. They knew this (perhaps) once-in-a-lifetime freight market would not last, which motivated most to add trucks, and try their best to fill those trucks in the later part of 2018.

Combining that with higher driver compensation, the supply of available drivers increased, and unseated truck percentages dropped for many in the TCA Profitability Program. We can reasonably assume that similar actions affected the entire truckload market, and as a result there has been a downward pressure on rates. Driver turnover rates have remained relatively unchanged. For those in TPP, we are seeing an overall average of 74% for December and January.

So, to translate this, driver availability has increased, while turnover has remained high for the market.

For a moment, let’s flip the script. Instead of having to chase new drivers to fill recently unseated tractors, what if you, in turn, used your capital to focus on retaining the quality drivers you covet. Over the course of three separate Best Practice Group meetings during 2018, we had members complete an exercise whereby they attempted to determine the true cost of a new hire. Going beyond referral bonuses and direct compensation, we had each member account for these indirect and direct expenses in this exercise:

  • Travel and Meal expenses for recruiting team

  • Recruiting advertising

  • Orientation travel and meal expenses for drivers

  • Recruiting and Retention staff compensation

  • Recruiting lead capture and management software

  • Driver screening and medical expense

  • Driver training in-class

  • Driver training in cab

  • Opportunity cost of decreased productivity (compared to fleet average) during acclimation and orientation period

  • Recruiting’s share of fixed overhead

The results? Although we had outlier results during this exercise (43 submissions), with a low of $3,780 and a high of $18,200. The vast majority of the results fell in a tight range between $10,000 and $12,000 per hire, and an average of $10,900 total expense per hire.

After carefully reviewing the detailed line items in this exercise, the results were deemed credible by each and every company. I was not surprised by the results of this exercise. When urgency and cognitive bias takes over, it leads people to make irrational decisions, and sometimes simply adopt the strategies of everyone else in the market.

What of you re-deployed that capital to increase the standards for new and existing drivers? As a result, raising the quality, and profitability of each driver (and their compensation in return)? What if you re-deployed that capital and your recruiting team exclusively on retention? What if you adopted the contrarian approach? It can be done, we have companies in TPP doing this today, and in a very profitable manner.