MT: Your revenues for 1999 will be about $80 million, which represents a 33 per cent growth over the last five years. Particularly impressive has been your company's ability to fuel that growth with ...
MT:Your revenues for 1999 will be about $80 million, which represents a 33 per cent growth over the last five years. Particularly impressive has been your company’s ability to fuel that growth with long-term contracts — a 10-year deal with Superior Propane for all its propane transportation in Western Canada; Canada’s first five-year transportation contract with Imperial Oil Ltd. recently renewed, and your 53-year transportation alliance with the United Farmers Co-operative of Alberta (UFA). What’s your secret to securing such long-term business at a time when many shippers have thrown long-term relationships out the window in favor of getting the lowest price today?
Fredericks: The reputation we have built up over the years as being a “people first” company, which you need to be in order to give extraordinary service. Superior and Esso came to us, we didn’t go to them. We focus on providing solutions. For example, seven years ago we provided a dry freight transportation solution to the UFA who were using no less than 15 carriers to move freight around the province. We provided a solution by becoming their sole freight carrier; up until that time we only hauled liquid products. This opportunity resulted in the formation of ECL Special Commodities Division, which is now a nation-wide van and flat deck carrier. The incentive for the UFA was an immediate 25 per cent cost saving, a profit sharing arrangement and of course the value-added intangibles that come with such alliances. It’s a good example of responding to a customer’s needs by looking at their problem as an opportunity whereas some companies may have looked at it as not being their focus and backed off. Back then, “thinking outside the box” wasn’t normal, today our people are geared for it.
Another recent example is a contract we signed with Amoco Canada to manage all their liquid hauling business in western Canada. Their strategy is to focus on what they do best so they in effect have outsourced their liquid transportation responsibilities to ECL. Mullen Logistics was chosen to look after the dry freight and heavy haul business.
MT: You mentioned that your success has a lot to do with being perceived as a “people” company. The very first line of your vision statement reads: “People first, plain and simple.” How do you turn that vision into reality on the front lines?
Fredericks: We’ve spent a lot of time over the last two years ensuring that our professional drivers understand that they are customer service representatives. In other words, their job encompasses more than hauling product from point A to Point B; their job is to make sure they service that customer in the best way they know how. We give them the responsibility to do more than just drive the truck. We’ve empowered them to make decisions that affect customer service. If they identify a problem or a way to become more efficient or better service a customer, they report it (there are suggestion boxes at all ECL locations)…And all the ideas submitted cross my desk. I then redirect them to the most appropriate person to handle them. When we started this seven years ago I used to have to put time deadlines for responses but I no longer need to because it’s so ingrained in our culture that when an idea comes in it’s responded to quickly. If you just pay lip service to such things, pretty soon the front line people get disillusioned.
MT:Sometimes companies are sincere in their desire to foster decision-making on the front lines but their corporate structure gets in the way. How are you making sure that doesn’t happen at your company?
Fredericks: We started the process of developing a flat organization two years ago by reorganizing the structure of our entire company. Our objective was to ensure the right people were in positions of authority and accountability with the objective of driving decision making to the front lines. On the trucking side we put one individual in charge of all our trucking operations whereas before we had general managers in charge of each trucking division. What that did was put the individual in a position that forced him to make sure he had good people reporting to him because if he didn’t he wouldn’t be able to get his job done. And those individuals he put in key positions had to make sure they also had good people working for them because their jobs were stretched as well. That way it forced decision making to the front lines. It really forced teamwork, which results in customer service. Prior to that Don and I were pretty much involved in the decision making; we were the decision makers. Since that time we’ve given the individuals that we put in the key positions accountability and responsibility to drive the businesses, and Don and I are in the background giving them the support they need to make that happen.
MT:That’s certainly a distinct departure from the “everything-goes-through-me” management style still very prevalent in our industry today, particularly with family-owned operations.
Bietz: That’s one of the inherent problems in the business. As a small- to medium-sized business grows it’s an illusion to think that as an owner you make all those decisions and do it properly. People don’t develop if all the decisions are made for them.
MT:Not only do you expect your employees to act like owners of the company you are starting to pay them like they are. The value-sharing plan you rolled out this January allows staff to share in the equity growth of the company from this point onwards on a 60-40 basis after certain benchmarks are met. That’s pretty rich for an industry of such tight margins as trucking, how do you justify the cost?
Fredericks: We look at it as an investment in the future as it’s our people that create the wealth for the company. If we can create an environment where employees feel like owners, the company returns will increase through productivity. Let’s face it a trucking company’s profit is defined by continuous improvement and minimizing mistakes. This is one more thing we’ve done to create an environment that encourages individuals to stick with us on the path that we’ve chosen to go…We really believe our future is based on how well we treat our people and how good we are at creating an environment that allows individuals to expand their talents. We do not see, at least in western Canada, too many other companies that have that philosophy. Hopefully for the sake of the industry this will change.
MT:Speaking of different philosophies, you certainly have taken a different tack on driver pay. Four years ago you decided to pay the drivers in Economy Carriers by the hour. Mileage pay has been the economic pillar of the for-hire industry for decades; what prompted you to head in such a distinctly different direction?
Bietz: The problem with traditional trucking pay scales whether in small companies or with larger union contracts, is that they are complicated and people don’t really know at the end of the day whether they are getting paid properly or not. We were also trying to cut down the administrative costs of doing payroll and at the same time make it simple. When you cut it right back to the basics, our economics on revenue revolve around revenue and cost per hour so pay by the hour for professional operators makes sense. And the drivers love it because they can see very easily if they put in eight hours they get paid for eight hours. This way they get paid for what they actually do. The biggest argument for companies not going to hourly pay is that they think they can’t control the hours that the drivers will work. But we promote efficiencies through the use of trip standards and measure that with on board computers, which are monitored on a daily basis. With those tools it works very well and it has simplified our payroll administration dramatically.
MT: Do you think that the driver shortage will force more carriers to abandon pay by t
he mile, which is increasingly falling out of favor with drivers?
Bietz: That’s hard to say but we’ve always felt that we don’t want pay to be an issue. If you want to keep good people you have to pay them for what they do. If they always feel like they’ve got to fight for what they’re earning, and that’s typical in parts of the trucking industry, then its difficult to get the best out of them. They’re always cutting corners, and cutting corners costs a lot of money in this business.
MT: Over the past decade, you’ve entered a variety of new areas such as environmental waste management, land reclamation, soil remediation and liquid product storage terminals. Other carriers, including past winners of the 50 Best Managed Private Companies Award, thought it a better strategy to focus their attentions on their core business. In retrospect, was diversification the best move for ECL?
Fredericks: We looked at how we could differentiate ourselves from the competition and still add value to the customer. Our strategy was to establish a group of inter-related companies using trucks and/or equipment as the common thread in order to create efficiencies, spread overhead costs, provide career paths and add customer value. This resulted in hazardous waste transportation, emergency response and environmental cleanups, soil remediation technology, oilsands washing technology and rail-serviced tankfarm and transfer facilities. Each of these businesses involves trucks.
In Alberta much of our business is related to the oil industry with the major oil companies, so this strategy works quite well. It gives our customers a “one stop” shopping alternative. For our group it has created great cross marketing opportunities. For example, if one of our environmental guys is visiting a gas plant and he sees an opportunity that we weren’t aware of on the trucking side, he brings it to our attention. This strategy has also brought individuals on board with different personalities, different intellectual abilities so it lends itself to our strategy to look to future opportunities based on intellectual capital. Our future is transitioning from being a 1970’s trucking company to one where “delivering responsible solutions” to transportation or environmental customers will be the focus. We may or may not need trucks and/or equipment to get this job done but one thing is certain: “people” will be our greatest asset in the truest sense of the word.
MT:How do you avoid being spread too thin and neglecting your core business?
Bietz: It’s a balancing act but a critical tool in our operations is the business planning process. We have a pretty well developed business planning process. When ideas come up for new ventures they have to be backed up with solid plans. We don’t do hip shot stuff. We did in earlier days but now we lay it out pretty carefully, justify how it’s going to work and predict results. We’ve really become pretty sophisticated in that regard.
MT: What will be the most important trends to impact the trucking industry over the next decade and how will you position ECL to take advantage of them?
Fredericks: We’re entering an era not unlike like the Industrial Revolution was in the 1800s, only it’s ten times larger and the changes are going to occur ten times faster. Ten years from now we’ll still have a good trucking company but our emphasis will be on intellectual capital, e-commerce and other space-age concepts. Within five years the decision-making process in business is going to be driven by people who are 35 years old or less. Our “people first” strategy is designed to encourage an environment that allows these types of individuals to thrive with us.
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