Good Morning and Welcome.
This is a complete summary of the four posts on higher wage and its effect on driver retention. Thank you for visiting.
"Out in the West Texas town of El Paso, I fell in love with a Mexican girl..."
In the mid 2000's I acquired an El Paso, TX based trucking operation and spent much of my time early on visiting and getting to know my new customers across the border in Juarez, Mexico. Juarez is fascinating, hustling, bustling border city, full of all of the good and bad elements that come with the US-Mexico border. One evening over dinner and drinks at Maria Chuchena's with a customer(highly recommended, and don't worry about the chalk body outlines on the sidewalk, the drug cartels only aim at rivals, are relatively good shots, and are otherwise generally nice people). Jorge was the GM of a Maquiladora in Juarez, he was discussing hiring and retention issues in his plant with factory workers. For those unfamiliar with the term, Maquiladora is a generic reference for a manufacturing plant in Mexico, owned by a foreign (non-Mexican) corporation.
"Jorge" as we'll call him, was explaining his struggle with hiring and retaining factory workers. There are literally hundreds of large manufacturing plants in Juarez and the competition for workers has become fierce over the years. Originally chosen as a excellent location for bountiful, low cost labor, the plants were constantly battling the same issues with retention and recruiting that face trucking companies today.
Jorge described his plants initial approach to the problem, which was simple, made sense and all the executives were on board with the idea. Pay them more than anyone else. A lot more. Not double, not triple, but quadruple. Yes, four times what the other factories were paying. This was based on formula on the cost of idle plant time and how soon they could be running at full production, etc. This will stop the turnover. This will cut the hiring costs and we can increase much needed production. Why wouldn't this solve the problem? Surely the local labor force would be knocking the door down and lined up to work at the factory. I agreed, and was impressed with this bold plan, it sounded like an excellent idea. I was on the edge of my seat as I ordered another round for us as Jorge continued his story...
So it was announced on a Friday afternoon. The word spread quickly and echoed across
the rolling hills of Chihuahua and they came...And did they ever, not by the hundreds, but, by the thousands, to work at his plant. When Jorge was driving into work early on Monday morning, he saw the streets lined with people. His first thoughts were of the late, great Senor Villa and his revolution, and that the good people of Mexico had risen once again to claim their country and his plant.(Apparently, this is a somewhat realistic fear of the “haves” in this border city, and given their history, maybe should it should be...)
©MICHAEL KOMADINA 2012
Post Continued...
Good Morning and Welcome.
"Out in the West Texas town of El Paso, I fell in love with a Mexican girl…"
Continued from yesterday. We have a lot to cover on this topic, so posts will continue daily throughout the week...
So the new higher pay rates were a huge a success, the next few weeks were chaotic with training, but the plant was back at full production. There was a lot of back slapping and hand shaking as the executives were very happy. This higher cost of labor was fairly easy to absorb in the cost of the product, (when a production line sits idle because of lack of labor, as we all know, it's not good for anyone) and more importantly they were able to meet customer demand.
All was well for a few months. Jorge and his European superiors were pleased with the results. Although initially not pleased with the pay raises, the cost of turnover, the training costs, the lost production time that were eliminated with the new pay program, more than made up for the additional cost. They had invested millions upon millions in this strategic facility, and having expensive manufacturing equipment and real estate sitting idle was unthinkable.
A lot of the other maquiladora's followed suit, as competitors often do, raising pay and having different levels of success, but success, nonetheless. Although not competitors in the conventional sense of the word, the maquiladoras were competing for labor, which is a whole different ballgame. And a dicey ballgame at that. It does not follow conventional wisdom, it is not an issue you can throw money at, as it requires a new approach.
Then - slowly but surely and almost predictably, the new employees started to leave one by one over the next six months... Where and Why? I think you will be surprised.
Continued manana…
©MICHAEL KOMADINA 2012
Post Continued...
Good Morning and Welcome.
Thought of the Day - When one of your drivers comes to you stating he is leaving for more money, you give him a raise in an effort to keep him, how long does he typically stay?
"Out in the West Texas town of El Paso..." Continued
So, Jorge and his European superiors are enjoying the fruits of the new employee pay increase, production is running at almost 100%, customer demand is being met. Then, slowly, after a few months, one employee after another leaves. This was not a huge issue at first, as there is still plenty of new employees coming in the front door, as the trained employees exit out the back door.
The trend continued and within six months they were right back to where they started. 147% annual turnover.
The plant was running at 67% capacity. To add insult to injury, most of the maquiladoras in Juarez had raised pay levels, following Jorge's lead. Juarez, due to its isolation and dependence on the maquiladora’s, the city tends to operate in a vacuum. So the once steady of stream of new employee applicants had slowed to a trickle. What to do, what to do?
Let's summarize, shall we? Our friend Jorge has increased factory pay levels from an average of $1.05 an hour to $3.75 per hour,
had a short lived success with retention and recruiting, and was now right back to where he started. High turnover and low production due to shortage of factory workers. Now his current roster of factory workers were all at the higher pay level. Sound frustrating and all too familiar?
Jorge's tale of struggle and redemption, along with a thorough plan for your company can be found in our new publication - “90 Days to 75% Retention”.
©MICHAEL KOMADINA 2012
Post Continued...
Good Morning and Welcome. More Insight on a “Keynesian” Approach to Driver Retention. July 27th, 2012
“Out in the West Texas town of El Paso...” Summary and Conclusion
Let's summarize, shall we? Our friend Jorge has increased factory pay levels from an average of $1.05 an hour to $3.75 per hour, had a short lived success with retention and recruiting, and was now right back to where he started. High turnover and low production due to shortage of factory workers. Now his current rosters of factory workers were all at the higher pay level. Sound frustrating and all too familiar?
So, after a several months of trying different retention related incentives, along with the higher pay they scrapped the new pay plan together. Through a series of exit interviews with plant workers that were leaving at the higher pay level, they discovered why. 80% of those who left were not going to work at competing maquiladoras. They left and stayed home. They had made enough money in the 4-5 months they worked at the higher rate to take the rest of the year off, with an occasional odd job here and there that paid cash. When they ran out of cash they would return to the same Maquilladora or a competing one.
Is this the case with retention in our Industry? Has pay increased to the point where drivers only need to only work 9 months out of the year? If you review your driver files of newer hires and add up the number of months your drivers have actually driven in the past two years, I can almost guarantee that it's somewhere around 18 out of the last 24 months.
Jorge and his superiors implemented an almost punitive pay scale for this churning bottom 35% of his workers loosely based on a version of Keynesian Economic Policy (John Maynard Keynes was a brilliant 20th Century economist). The end result is that this reduction of pay on the churning bottom of the truck driver roster most trucking companies are burdened with, can be resolved with a complex formula to reduce wage for new drivers, not all new drivers, mind you, but drivers that meet the criteria in the "90 Days to 75% Retention" Book and DVD. This is part of one of the "Big 5" solutions and has proven to be successful time and time again. The “Big 5” are described in detail and the methods for application are available only in “90 Days to 75% Retention”.
The Keynesian (KAYN-zee-en) solution to wage and retention (employment) is ideal for our industry. Higher wages equal higher unemployment. It's easy for us to understand because our list of drivers, past, present and future are full of them and will be filled with perfect examples. Take a look, what is your average tenure of a driver who was hired in January 2012? Look at his work history, 2-3 different driving positions in the last year before he started with your company? Although trucking companies are not geographically isolated as the case in the Maquiladora's in Juarez, drivers themselves are limited however, by the very nature of the CDL. The CDL is not obtained easily, and the generally accepted norm for a "stand-alone" driver is two years experience. As a whole, outside of their CDL and an OTR driving position, 90% of drivers are limited to employment similar to minimum wage. In the sense that their employment at a higher wage rate is limited to, in most cases, employment as an OTR driver. Due to Federal regulations with verification of prior employment directly from previous employers, MVR's etc., they too, are in a restrictive occupation, where their past is very relevant. So the Maquilladora-factory employee example and the Trucking Company - OTR Driver find themselves in a similar restrictive environment. Applying similar techniques and seeing similar results applies to this discussion. In other words, where Maquilladora's competed for employees in a relatively small geographical arena, carriers compete in a restricted environment due to the fact that the number of experienced CDL holders are limited, so a similar vacuum exists...
The solution for this section of your drivers is explained in more detail, along with the pay method to apply to your company drivers, in "90 Days to 75% Retention" All drivers are different but they all fit into one of four categories presented in the book. They are: the "Fleeter", the "Driver Pro Tem", "The Yearling" and the "Advocate". Thank you for reading and have a good week-end.
© 2012 MICHAEL KOMADINA
The solution for this section of your drivers is explained in more detail, along with the pay methods and approaches to customize to your company, in "90 Days to 75% Retention" All drivers are different but they all fit into one of four categories presented in the book. The "Fleeter", The "Driver Pro Tem", "The Yearling" and the "Advocate". Thank you for reading and have a good week-end.
Jorge's tale of struggle and redemption, along with a thorough plan for your company can be found in our new publication and DVD.
Welcome to a Powerful and Productive Method for Driver Retention.
Presenting a step by step plan of attack on the core of every retention issue or potential retention issues within your organization. "90 Days to 75% Retention" effectively shows how to identify the weak areas and how to fix them in a measurable process.
There is a science and formula to successful retention
Presenting a step by step plan of attack on the core of every retention issue or potential retention issues within your organization. "90 Days to 75% Retention" effectively shows how to identify the weak areas and how to fix them in a measurable process.
There is a science and formula to successful retention
There is a solution...
"90 Days to 75% Retention" A Real Plan for Driver and Owner Operator Retention
"90 Days to 75% Retention" A Real Plan for Driver and Owner Operator Retention
$75 BOOK ~ $149 DVD & BOOK SET ~ $195 DVD & 5 BOOK SET
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This is also posted on our new Discussion Group on LinkedIN - "90 Days to 75% Retention" Please Join us for further discussion..
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