In manufacturing circles, “lean” is a familiar concept. It has been adopted widely in the North American manufacturing industry starting about 15 years ago – though the concept is much older – and most modern production plants around the world employ some or all of its core principles.
One of the main principles in lean manufacturing involves identifying and eliminating the seven wastes in the production process, which include waiting, overproduction, over-processing, unnecessary motion, excess inventories of components and unnecessary transport and handling. Identifying and eliminating these wastes help a production facility drive out hidden costs and become more profitable.
Many of these manufacturing wastes exist today in the trucking industry. Detention time, out-of-route miles, roadside violation inspections and excessive maintenance delays are just a few examples that quickly can erode productivity.
It was with a nod to lean manufacturing that Roehl Transport decided to take a fresh look at its own processes in 2011. The Marshfield, Wis.-based carrier – which provides dry van, refrigerated, flatbed and dedicated services – long had offered traditional safety bonuses and other incentives for its drivers. Roehl began to explore pay for performance for its employees, and the culture of innovation among the company’s management team had executives wondering how to improve on the concept.
“It’s all about the idea of continuous improvement, good change and progress,” says Greg Koepel, Roehl’s vice president of workforce development and administration. “We already were predisposed with the idea of pay for performance, so it became a matter of how we could do it better and make sure our best performers are getting the top pay.”
In many performance-based pay programs in the trucking industry, driver compensation systems are related to time on the job, often taking effect only after a driver has been employed for at least a year, with additional pay increases on subsequent anniversaries.
“We didn’t like that approach,” says Koepel. “Someone who is relatively inexperienced could be a high performer, and why should they have to wait five or six years to experience the highest pay levels in the organization? If they are performing at a high level, let’s offer them a pathway to a high level of compensation as well.”
Developing a new plan
With its philosophy that the people that do the most and the best work should reap the rewards, Roehl introduced its Your Choice pay plan to its drivers in the third quarter of 2011 with a soft launch, then fully implemented the program in January 2012.
At its core, the Your Choice pay plan measures drivers in six main categories:
- On-time service
- Roadside inspections
- Preventable costs
- Fuel efficiency
Drivers earn points for good performance and are deducted points in categories for missed appointments and incurring preventable costs. Each quarter, the points are totaled, and the driver falls into one of 10 mileage-based pay levels, measured to the thousandth of a cent, based on the performance points they’ve earned. The delta between the lowest and highest pay in the Your Choice program is 10 cents per mile.
[related-post id=”99088″/]An additional cent per mile is available for accident-free performance. “This is real-time,” says Koepel. “If you are performing right now, we want your pay to reflect that. If you aren’t having an accident, we want to pay you for that safety now rather than waiting for some lagging period of time to say ‘You did good – here’s some money for that.’ ”
At the end of each quarter, drivers can move up or down one pay level based on performance. This helps eliminate what Koepel refers to as the “yo-yo” effect that otherwise would create wide fluctuations in pay from quarter to quarter.
[related-post id=”90719″/]As a retention incentive and driver recognition tool, the lowest mileage pay rate increases slightly each year a driver completes with Roehl, maxing out at a 3-cent increase after the 15th year of service.
“Performance is not something that just happens to you – it’s something you choose to do,” says Koepel. “If you choose to perform at a high level, you will get rewarded at a high level. That’s why we call it the Your Choice pay plan.”
One unique aspect of Roehl’s performance-based pay program is the built-in “braking” mechanism that doesn’t automatically move a driver to a lower pay level if they have a bad quarter. In the Your Choice pay plan, a driver would have to accrue two consecutive “down” quarters before their pay is adjusted to a lower level. A driver never will go below the minimum mileage pay established for his or her years of service.
Drivers at the 7 or 8 pay level are in the “Silver Club,” and drivers at the 9 or 10 pay level are in the “Gold Club.” These clubs provide an additional braking mechanism with a three-quarter look-back at performance. “If a driver in the Gold or Silver clubs stayed within a certain level of performance during that time even if they had a down quarter, it won’t have any influence on them,” says Koepel.
[related-post id=”93060″/]As part of the Your Choice pay plan, drivers can earn points for doing jobs that other carriers don’t consider part of the process, such as tarping a load, sitting at a border crossing and clean inspections. In the productivity measurement category, drivers can earn points for loaded and empty miles, live loads, drop-and-hook events, congested ZIP code deliveries and detention time.
“Very often, the only productivity measurement most companies use is miles,” says Koepel. “We recognize that there are a lot of things that drivers do on our behalf that either constrain their productivity but are an important requirement of doing the job, and we want to be able to recognize that activity.”
Likewise, items in the preventable costs measurement category are deducted from a driver’s overall score. Those include cargo claims, damaged equipment, jump starts, tire damage and tows.
Since adding the fuel efficiency measurement category to the Your Choice pay plan, Roehl has seen significant cost savings as drivers are more aware of how their fuel consumption can play a role in their compensation.
“We have had a steady improvement, and while we recognize some of that is equipment-related with new fuel systems and add-ons, we also give credit to driver behavior,” says Koepel. “We believe that our program is promoting that effectively.”
There’s an app for that
To improve driver involvement in the Your Choice pay plan, Roehl has rolled the program into its MyRoehl app for mobile devices, allowing drivers to look at their Your Choice scorecard, which shows monthly performance.
“We close out the month and crunch the numbers, and then the drivers can see the tracking built into the view on a graph,” says Koepel. “They can calculate what they need to reach the next pay level even in the middle of a quarter.”