Owner-operators learn the basics of business at a seminar held by Partners in Business (www.partners-in-business.com), an educational program offered by Overdrive and ATBS. PIB, which is made possible by Freightliner and Castrol, consists primarily of an in-depth business management manual for owner-operators and seminars at major truck shows.
In the first six months of 2007, Sam Mobley of Lake Wylie, S.C., an owner-operator leased to Schneider National, grossed $1.27 per mile for all miles, loaded and deadhead, which he figures is a raise of 12 cents a mile – all while running fewer miles. He credits a great relationship with a savvy new dispatcher: himself.
Mobley, a 10-year Schneider veteran, was one of the first owner-operators to test the company’s new percentage-pay contract and online load board – hand-in-hand enhancements that became official in June 2007. Schneider contractors who choose percentage pay pick their own freight according to their own criteria, such as location, destination or rate per loaded mile. For example, Mobley delivered to Dayton, Texas, northwest of Beaumont, on a Tuesday, having already lined up a load out of Port Arthur on Wednesday.
“This is another tool that Schneider has to offer the owner-operator who wants to be more involved in what he’s doing out here, like me,” Mobley says. “It’s not for everybody, because you can’t just wait for someone to call you with a load. You have to keep yourself two steps ahead, so to speak.”
“It’s the closest thing to being an independent,” says Mike Bethea, director of operations for truckload contractors for Green Bay, Wis.-based Schneider. “They can dispatch themselves, pre-assign themselves, pick and choose their loads, and it’s all running in the middle of an asset-based network.”
On one level, Schneider’s new owner-operator plan – which all concerned admit is based partially on the Landstar model – is an example of a big company acting “small” by offering individuals a buffet of options, as described by Thomas Friedman in his best seller The World Is Flat: A Brief History of the 21st Century. But it’s also an example of the trucking industry realizing that pay is not the only tool for attracting, retaining and nurturing owner-operators. Choice in their loads and routes, business assistance and advice, healthcare options – all these are of increasing importance to owner-operators and therefore to the fleets that partner with them.
“You have to start out with the viewpoint that your independent contractors are business owners,” says Steve Gundale, senior corporate communications manager at Dart Transit, based in Eagan, Minn. “They have business needs, and you have to provide a favorable business environment for them, or they won’t stay. On the other hand, give them every tool they need to succeed in business, and you’ll succeed, too.”
Better finances, better performance
“Owner-operator pay packages across the industry, you can shake them out, and they’re all pretty close,” Bethea says. “But just increasing the revenue is not going to cut it. You’ve got to save on costs all the time. A 5 miles-per-gallon truck today, it doesn’t matter if he has 5,000 miles a week, he’s going to go broke.”
Many fleets are outsourcing such business advice. ATBS of Kittredge, Colo. – formerly American Truck Business Services – has more than 40,000 owner-operator clients and has partnered with more than 70 carriers to help their leased contractors manage their businesses better, says Angie Bruskotter, ATBS marketing director. “The way to help these owner-operators is not necessarily just to throw more money at them, but to show each one how he personally can be more successful,” she says.
Owner-operators with strong business skills are more reliable and serve customers better, Bruskotter says. They have fewer breakdowns, enjoy a higher quality of life and are less prone to jump fleets for an extra penny per mile.
They’re also safer drivers, says Rob Newell, vice president of recruiting and retention at Dallas-based Greatwide, an ATBS customer. “Safety is largely tied to frame of mind,” Newell says. “A driver angry at his dispatcher or worried about his taxes is a distracted driver, and he’s going to have an accident at some point.”
Bethea agrees that owner-operators who are “running desperate” quickly become liabilities, not assets. “Our owner-operators overall are very productive and very safe, but if a guy is having business trouble, we can see it in the maintenance condition of the truck,” he says.
While ATBS specializes in helping owner-operators, trucking companies can offer similar services through CPAs and other trusted financial advisers. And many trucking operations of all sizes offer education directly to owner-operators on business basics, such as tracking cost per mile. However, due to the various regulations mandating arms-length relationships between companies and their independent contractors, some experts believe it’s unwise for carriers to offer ongoing bookkeeping services using company personnel.
Choice and control
The initial hurdle for Schneider’s percentage plan, Bethea says, was convincing owner-operators the fleet was serious. “At first, folks didn’t believe it, because Schneider is notorious for being a private company and sort of guarded about its operations,” Bethea says. Giving contractors access to load boards sounded to many like letting the inmates run the asylum, but it’s been a great trust builder and has given a lot of already successful owner-operators genuine insights into the complexity of the operation, he says.
What began as a pilot program in June 2006 with about 40 contractors is now an official Schneider option with close to 150 contractors, or about 7 percent of the more than 2,000 owner-operators in the van fleet. “We actually have a wait list,” says Bethea, who doesn’t mind that a number of veterans have opted to stick with traditional mileage pay.
“It’s all about choice,” he says. “If you want to run miles, we’ve got you. If you want to run percentage, we’ve got you. Whatever you want, we’ve got a place for you.” A couple of owner-operators are even working schedules like that in Schneider’s “Home Run” program for company drivers, with 17 weeks off a year. “If that’s what you want, we can accommodate it,” Bethea says.
For years, Dart has offered its owner-operators dedicated, regional and local runs as well as the whole Lower 48, so that one trucker need never leave the South and another need never leave Chicago, depending on his preference. This sort of operation comes naturally to Dart, which began as a regional carrier, Gundale says.
Greatwide’s dispatchers are being trained to become “driving support leaders,” each one assigned to a small group of contractors. “Basically, they’re going to be responsible for the success of those owner-operators,” Newell says. “They’re going to understand what makes them tick, personally and professionally, and work to ensure their business success and their personal satisfaction.”
Each Greatwide owner-operator also will be compared weekly with his peers throughout the company, Newell says, to make sure he doesn’t fall behind the norm in any area – miles, revenue, costs, loads. All but about 820 of Greatwide’s 6,200 trucks are controlled by contractors, most of them one-truck owner-operators, Newell says. “We want to get the word out to our contractors, ‘You don’t work for us. We work for you. Don’t think of this as the corporate headquarters. Think of it as your support staff.’ ”
A healthy relationship
One of the big challenges in using owner-operators is that federal laws and regulations governing independent contractor status make it challenging to offer benefits. In most cases, however, it’s possible to offer perks like health insurance as long as you structure the program carefully and with the consultation of a knowledgeable attorney.
For example, Greatwide has offered its Greatcare program for two years. Through American Medical Life Insurance, Greatwide pays 80 percent of expenses, up to $25,000 per year, for a monthly premium of $350, or $750 for family coverage – “easily half what it might be otherwise,” Newell says. “We’ve tried to find something that minimizes the premium and maximizes the benefits.” Other Greatwide health-insurance options include an Allstate supplemental hospital options plan (or SHOP) and catastrophic coverage up to $1 million, with a $25,000 deductible.
So far, 600 Greatwide contractors have enrolled, about 15 percent of the fleet. Newell would like that to be 30 percent or higher. “You’ll never get 100 percent, thanks to spouses’ health plans and so on, but we still need to do a better job internally of marketing this thing – and by ‘we,’ I mean as an industry,” Newell says. “I don’t think owner-operators understand their health issues are a business issue.”
Greatwide’s exclusivity with American Medical Life Insurance ended last month, so other carriers are free to take advantage of the program. “That’s fine with me,” Newell says. “If I can help any owner-operators out there, even outside of Greatwide, I’m happy to do it.”
The carrier’s latest focus is on preventive health care. Last month, it launched its Drive and Thrive wellness program. Designed to help owner-operators adopt a healthier lifestyle through better diet, fitness and disease prevention programs, this program goes a step further by providing the owner-operator with one-on-one mentoring by a registered nurse.
Worth the effort
Litigation over owner-operator leases and programs that in many cases are well intentioned but technically flawed have dissuaded many trucking companies from trying too hard to recruit and retain independent contractors. But a good-faith adherence to the federal truth-in-leasing regulations in consultation with an experienced attorney greatly reduces your chances of being slammed with a lawsuit. And each time an owner-operator agreement survives a challenge, carriers get a clearer picture of what’s acceptable. Internal Revenue Service regulations and state workers’ compensation rules add to the stress.
In the end, however, many trucking companies find that the financial and operational advantages of using owner-operators outweigh the risks. But carriers must realize that owner-operators have needs that fundamentally differ from those of company drivers.
“The general attitude in the industry has been that these are drivers who just happen to own a truck, but they’re not,” says ATBS’s Bruskotter. “They’re small-business people, and they have to be treated as such.”
Tightening up your lease
Carriers often have the impression that any tiny provision in an independent contractor agreement can land them in court, but the reality is that risk generally falls into several broad areas, says Dan Barney, managing partner of Scopelitis, Garvin, Light & Hanson in Washington, D.C. Lawsuits filed by the Owner-Operator Independent Drivers Association and its members have focused on compensation, markups on chargebacks, escrow funds and forced purchases. In some cases, the problem isn’t so much what the carrier is doing as it is a failure to disclose its policies and practices sufficiently.
In a recent Truckload Carriers Association audio conference, Barney offered the following suggestions on steps to reduce the risk of litigation:
- Update your independent contractor operating agreement, or lease, to ensure you are following leasing regulations. Pay special attention to compensation, chargebacks, insurance and escrows. Minimize use of fees and markups, and be clear in your language;
- Update a leasing affiliate’s equipment lease-purchase agreement;
- Omit arbitration clauses or, if used, specify whether class arbitration is allowed. And
consider reducing the arbitration cost to owner-operators;
- Match practices to agreements’ terms;
- And finally, if OOIDA calls or writes, consult a lawyer immediately.