Is tenure-based driver pay coming to an end?

by James Menzies

MISSISSAUGA, Ont. –The days of tenure-based pay increases for professional drivers could soon be over, as more carriers look to reward their most productive drivers instead of the ones who’ve simply been there the longest.

That was the assessment of Tom Kretsinger Jr., president of American Central Transport and guest of the popular How They Did It portion of the most recent Driving for Profit seminar. Kretsinger, who also serves as chair of the Truckload Carriers Association, said his company now uses driver scorecards and adjusts the pay of each of its drivers every six months based on their performance.

“Our costs are going up faster than our rates and we call that margin squeeze,” Kretsinger said. “It’s not sustainable. What is the answer to that? The only logical answer is, you have to get more productivity out of what you have. We noticed some of our worst drivers were our highest-paid because of tenure and some of our best guys were the lowest paid because they hadn’t been with us for long. We went to pay-for-performance, where our company drivers’ pay resets every six months based on how they perform. As an industry, we’ve always treated all drivers the same and they’re not the same. Some work harder than others, some get better fuel (mileage) than others, some are safer and some are more professional and show up on time.”

Drivers at ACT can earn between 36 and 45 cents a mile, depending on their performance. Kretsinger acknowledged drivers who’ve seen their pay rolled back for poor performance haven’t been happy, but added “If a guy goes from 40 cents to 36 cents and leaves us, that’s probably a good thing for us.”

It may seem harsh, but Kretsinger said drivers should be paid for what they contribute.

“My 45 cent (per mile) drivers are more efficient and make me more money than my 36 (cent per mile drivers),” he reasoned.

The competition for good drivers has ramped up since the end of the recession. Kretsinger said the CSA enforcement regimen now means all carriers are being more selective in who they hire. ACT has found some success in rewarding its top performers but it has employed other solutions as well.

ACT used to require driving experience within the past year, but it now considers hiring drivers who’ve been out of the seat for a while. Through its ReACTivate program, ACT will assign professional drivers with experience – but none in the past year – to a mentor for a period of two weeks to determine if their driving skills are still adequate. It has found many of these former drivers have retained their skills and gone on to be “great” drivers for the company.

It also has focused recruitment efforts on military veterans, however Kretsinger said there’s been little interest among returning soldiers.

“We can’t seem to find an interest (among) those folks,” he said, adding they may not be inclined to go out on the road just after returning to their families from a stint overseas.

Missouri-based ACT is a family-run company, built by a family of transportation lawyers. Kretsinger Jr. is a third-generation lawyer.

His father, Tom Sr., in 1972 purchased the trucking company his father founded some 46 years earlier, renaming it American Central Transport.

Truck News editorial director Lou Smyrlis, who moderated the discussion, pointed out the irony that traditionally risk-averse lawyers would start a risk-prone business such as a trucking firm. But Kretsinger said there are some lessons he learned in the legal field that translated well into trucking.

“Law teaches you to be forward thinking,” he said, “to hear both sides of an argument before you make a conclusion. It teaches you to go after facts. It teaches you sometimes to be able to take a position you may not personally agree with because it’s the best position to take at that time.”

But Kretsinger did admit the family of lawmen turned businessmen did endure some conflict.

“The minute my dad became a businessman, he hated lawyers,” Kretsinger joked. “And I was a lawyer many years after he became a businessman, so he really didn’t trust me the first few years.”

The younger Kretsinger brought to the company organizational skills.

“We had no filing system,” he recalled. “Things like that, lawyers worry about.”

Today, Kretsinger still applies lessons learned as a transportation lawyer to the running of the business.

“I look at my business as a castle; I need to build moats around it. I see all these things that can attack it,” he said. “Risk is getting different.”

Today, Kretsinger said, legal risks are everywhere. In the US, this includes the growing attack on the owner/operator business model.

“In America, a lot of government people want to do away with owner/operators, they want to make them employees,” Kretsinger said.

Risk also comes in the form of increased regulation and from special interest groups. Kretsinger cited as an example an Equal Opportunity Employment Commission ruling that it was illegal for Old Dominion Freight Lines to dismiss an alcoholic truck driver.

“What would a defense lawyer tell you about putting alcoholics in trucks?” Kretsinger asked. “What would EOEC say? Let him go to rehab and be nice to him. It comes down to safety versus fairness.”

The rapidly changing regulatory landscape means it’s more important than ever for trucking company executives to network, Kretsinger said.

“Networking is becoming a survival skill,” he said. “You can’t sit in your office by yourself and have your people butter you up…if you’re a leader of a company, you need to be out there gathering information.”

Despite all the challenges the industry is facing, Kretsinger is optimistic the stars are aligning in trucking’s favour, which will benefit carriers and drivers alike.

“The shipping community has been pretty good at playing us off each other through bids, and we have a lot of sport truckers in this business; they don’t make money they’re just playing for fun,” Kretsinger said.

“When the going’s good, you better get it. I think it may be coming and drivers need it. We are subject to supply and demand and so are they. If truckers don’t make money when the times are good, they’re probably not going to make it.”

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