The Other Turnover Problem

Canpar Transport was a company back from the brink. Nearly a decade ago the old courier arm of CP Trucks was literally hours away from curbing its step-vans for good when a group of financiers and top executives crafted a last-ditch rescue plan that kept the company on the road. For their part, operations and sales staff made the most of the company’s stay of execution, and through the middle and late 1990s Canpar began to stabilize and thrive in a market known for big players and small margins.

Yet no matter how much effort the company put into redoubling its customer support effort, firing up snazzy new technology, or wringing out operational inefficiencies, it couldn’t seem to pinpoint the source of one perplexing problem: why it was so difficult to retain office staff and mid-level managers-the people who toil away in support of the glory-getters in sales and ops.

“The decision-makers here concentrated on what they thought was important to grow the business,” says Brent Neill, hired as vice-president of human resources at Canpar in 1997. They aimed their efforts at righting the ship financially and positioning the company as a business-to-business package carrier. Canpar managers had always fretted about turnover rates, but they resigned themselves to thinking that, unlike the other numbers they tracked, there wasn’t much they could do to change them. In the transportation business, a certain level of churn across the employee ranks is just an accepted cost of doing business.

But turnover is an insidious threat. Employee departures can have veiled effects on a company’s top and bottom lines, such as decaying customer satisfaction, worker morale, and company productivity. Then there’s the drag on managers’ time. And time is money. One rule of thumb states that if you make a mistake in hiring, and you recognize and rectify the mistake within six months, the cost of replacing the employee is two and a half times the person’s annual salary. In raw numbers, the wrong person earning $40,000 will cost your company $100,000. The wrong executive making $100,000 will cost $250,000-if you fix the mistake within six months.

Turnover is a cost few transportation companies can afford, let alone just accept. Neill, one of a handful of bona fide human resources managers working in Canada’s transportation market, decided to re-evaluate every job, every job description, every policy Canpar had toward hiring and retention. He looked outside the courier and trucking industries for ideas and compensation benchmarks. “Just as the critical financial and operational issues had been addressed,” he says, “the decision-makers here recognized that, like capital and new customers, the need to keep good people was important to grow the business.”

The irony for Neill was that Canpar had relatively low turnover among operations people and drivers-the traditional sources of recruiting and retention headaches. “One of my first jobs when I came here was to look through the microscope and find out why turnover among our office staff was so out of whack with what was going on in the rest of the company,” he recalls.

What Neill saw was a triple-helix of problems: a perceived lack of respect and appreciation, little opportunity for growth beyond a person’s current responsibilities, and low pay relative to what other industries offer for similar jobs.

“People who run trucking companies are passionate about trucking, and the key people around them are passionate about trucking,” he explains. “For them, everything else, especially aspects of the business that aren’t directly involved with moving freight or padding the revenue line, is on the periphery. But a controller, for example, doesn’t go to work at a trucking company because he shares that passion. His horizons are much broader. He’s looking for responsibility, for advancement opportunities, for job satisfaction, and for fair pay, typically in that order. If he doesn’t find those things at a trucking company, it’s not a huge leap for him to go find them at a small manufacturing firm.” The trucking company, meantime, gets two weeks notice and has to find a replacement, wondering why a decent, middle-of-the-road salary wasn’t enough to keep its employee.

When they consider pay and benefits for controllers, clerks, HR managers, etc.-so-called back-office managers and staff-trucking operations that benchmark themselves against other motor carriers do so at their own peril, says Stephen Harrington, manager of special projects at Cerno Research. The Toronto-based research firm conducted an exhaustive survey that shows how-and how much-trucking operations compensate their workers (sidebar, page 66). Today’s labor market represents a “killer paradox” for trucking operations, Harrington explains. Manufacturing is booming, and the demand for hauling goods is high. But new and qualified employees are hard to find and hold on to. That’s because the lure of higher paying manufacturing jobs has depleted an already shallow unemployed labor pool.

Cerno Research has surveyed compensation and benefits at manufacturing operations every year since 1995, giving the company a unique perspective on how motor carriers compare with other industries. “When we look at pay for workers involved with physically moving freight or keeping trucks on the road, there’s not much disparity between manufacturing and trucking operations,” Harrington says. “A forklift operator or a truck driver working for a manufacturer is paid about the same as what he’d make at a trucking company. But controllers, clerical staff, HR staff, payroll people, quality-control managers-their salary levels are not only higher across the board at manufacturing operations, they come out farther ahead on the benefits they receive.” For example, 50.6% of salaried employees in manufacturing are eligible for a pension plan. In trucking, only 22.1% are in the same situation.

But money and benefits aren’t what causes promising managers to leave the trucking business, says Barry Groves of Groves and Partners Int’l, a Mississauga, Ont.-based recruiting firm specializing in transportation. “Good people move for opportunity,” he asserts. “I don’t care whether you manage a national sales force or the secretarial pool. We just brought a top national account guy out of Federal Express and moved him to a small courier business. It was a lateral move financially. He wanted the chance to be a big fish in a little pond, and, perhaps, a very good chance for some form of equity in the company.”

The problem at many trucking companies is that talented people who want to grow professionally often become frustrated with corner-office roadblocks.

“You start out with Joe’s Trucking, a nice little outfit with 50 trucks, and you work up to the position of terminal manager,” says Groves. “That’s as far as you’re going to go. Joe’s the owner, and if he’s got a son coming along, you’re pretty much toast. So you move to Bill’s Trucking, with 100 trucks on the road-a bigger operation with more of a traditional corporate structure and business environment. That’s how ambitious operations people move up the ladder.

“Someone who wants more responsibility managing a business, however, isn’t looking at Bill’s Trucking for his next move. He wants to go to Industrial Tool & Stamping Inc., where he won’t be treated like another office worker but given the opportunity to become an integral part of the management team.”

Compounding the issue: the poor public perception of the trucking industry, which makes it difficult to recruit key office staff away from manufacturing or retail businesses.

“You have to work extra hard to get really promising non-operations people in the door for an interview,” says Bob Campeau, manager of human resources at SLH Transport in Kingston, Ont. “There’s no emotional tug that has them thinking about the trucking business. You have to demonstrate pretty quickly that you know what’s important to them and that you can provide it. You need to have your act together.”

According to Stephen Harrington, it starts by recognizing that, unlike truck drivers and terminal managers, you compete with a broad spectrum of industries for qualified managers. Knowing the key benchmarks for compensation and benefits among them is a good first step. “People aren’t going to join your company because you offer a better health plan, but they may choose not to join your company because you don’t offer those benefits,” he says. “You should know what’s being offered out there, and formally review your own company’s compensation plans at least once a year in case you start to outgrow some of them.”

For Canpar, stemming the turnover tide meant giving HR management a platform at the executive level-a tactic other trucking operations would do well to adopt, notes Barry Groves. “Hire a pro to handle HR, or at least give it solid top-level support,” he says. “A lot of companies-big companies-have a girl who can process résumés and call that the HR department. The general manager drops his normal workload to conduct interviews. What kind of message does that send? If you own a trucking company, the next hire you make should be the last one you ever handle yourself: a good HR person who can rightfully take over the job.”

And, as Harrington can readily tell you, the gulf between what HR managers earn in trucking versus their manufacturing counterparts is one of the widest of all. “The trucking median is $52,250,” he notes, “compared with $63,305 on the manufacturing side. That’s a 17% gap.”

Just in case you were wondering.

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