Return on retention: creating a budget that delivers results

In this tight-margin industry, fleet owners and executives have to regularly evaluate their budgets to maximize their return on investment. All things considered, a driver retention budget could be the most important investment you make.

Budgeting for profit centers like sales and operations is an easier decision than budgeting for cost centers like maintenance and other overhead items. After all, you want to place your bets in areas where the odds are in your favor.

Few companies will set a budget for driver turnover, however. As a major cost center, turnover contributes nothing to the engine of profitability. In fact, it does the opposite. Industry estimates show motor carriers spend $6,000, on average, for every replacement driver they hire to cover their costs of recruiting, training and other expenses. These costs add up quickly.

The American Trucking Association reported that large truckload carriers (those with more than $30 million in annual revenue) had an annualized turnover rate of 88 percent in the fourth quarter of 2017. To put a dollar to this, suppose a motor carrier with 100 trucks hires 88 driver replacements in 2017. At $6,000 per head, it would have spent $528,000. This amount does not include opportunity costs of turnover such as lost revenue from constrained growth.

Budgeting for retention

While turnover is not a worthwhile budget, motor carriers can and do generate high returns by investing in driver retention.

A retention budget shows a different kind of commitment than “one-off” strategies like buying newer equipment, adding a cookout, or conducting Facebook Live sessions from corporate headquarters.

Such activities may be useful, but carriers who are committed to moving the needle for driver retention are choosing their partners wisely to solve the most critical issue in the industry.

Choosing a partner

A retention budget represents a commitment to use dedicated funds to start a process of continuous improvement. Dedicated funds should not come from stealing away funds already budgeted for operations, safety, recruiting or other areas.

Dedicating funds for retention may not square with standard accounting practices, however, since they do not exactly fit an expense category on a P&L statement such as driver wages, benefits or administrative costs.

Retention is a strategic investment and as such, companies should expect that any company they partner with will have a track record of helping their clients beat the turnover odds.

As noted in a previous blog, Stay Metrics clients consistently outperform their peers in the trucking industry by more than 20 percent every quarter in driver retention.

These carriers are using our custom-branded online Driver Rewards program to engage drivers and build loyalty. They are also using our Driver Survey products to receive and act quickly on driver feedback and survey insights.

Planning ahead

A strategic retention budget will serve as the foundation for making future investments that will continue to drive better results. Just as you would not scale back a safety budget once investments have lowered accidents and CSA scores, a retention budget shows your commitment to making continuous improvements.

Considering you may already be spending $6,000 or more to replace a lost driver, there is money already on the table that could be invested in partnerships that will deliver returns by enabling you to keep more of your best drivers.

A driver retention budget could also be used for investing in key personnel to further your efforts, such as a vice president of driver retention or a driver mentoring program to help new drivers more quickly adapt to your culture.

We’re interested in your thoughts. If you were given a driver retention budget, what investments would you make to maximize your returns?


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