A local Milk & Gasoline hauler in my area recently posted a petition on its website for drivers to voice their objections to the new proposed HOS rules pending in the FMCSA. In the petition it stated that if the new HOS take effect, then it’s going to increase the driver shortage for the industry while lowering the paychecks of current drivers. Of course, the petition says nothing about the already low wages of their drivers, or the fact that the company has 130% annual turnover rate.
For both managers and drivers we have all heard about how there’s a “driver shortage”. However, most trucking companies use “fuzzy math” to justify the claim of a driver shortage instead of looking at their turnover rates. Also, trucking companies have re-defined what every other industry considers “turnover” and “churn” in order to make their raw numbers look better from an HR standpoint. This article will look at how trucking companies have re-defined terms in order to claim a driver shortage to prevent changing the way they do business on the back-end (in the office).
After spending 20 years in Human Resource management, I was shocked by the way trucking companies define terms. Let’s start with how every other industry in North America defines “turnover” and “churn” according to the Society for Human Resource Management (SHRM).
Turnover is defined simply as people who quit within a year. If I have 100 people in a company, and 10 quit (leaving the company completely) during the year, then I have a 10% turnover rate. It doesn’t matter that I hire 10 people to fill their spots, just the act of leaving the company means turnover.
Churn is defined by the number of people I hire to fill vacancies due to attrition. Attrition is when people are promoted, retire, go out on worker’s comp or disability, or I fire; any reason other than quitting. If I have a company that has 1000 people, and 50 people are promoted, and I hire 50 people to fill the old spots, then I have a 5% Churn Rate.
My total turnover rate is Turnover plus churn. If I have a 10% turnover rate, and a 5% Churn rate, then my total turnover rate is 15%. This is a normal rate amongst 99% of companies in America. If total turnover reaches above 25% in most industries, then managers usually get fired. This is because it costs a lot of money to fill the vacant position; money in job ads, recruitment, interviews, background checks, and training/orientation.
Churn is difficult to manage. People retire, get sick or are fired all the time. The only way to manage churn is to not fill the open vacancy, usually by eliminating the position. Turnover on the other hand is very easy to manage. There will always be turnover as people leave to go back to school, because of family issues, or they were just offered a better position somewhere else. For most industries, this number hovers around 9%. However, the number of people who leave because they hate the company or their supervisor is something I can manage. Whenever I’ve interviewed for a position (and something I always recommend to others), one of my first questions is “What is your total turnover rate?” That tells me a lot about a company’s dedication to its employees.
How Trucking Re-defines Turnover And Churn
Trucking takes a view on turnover and churn that is almost completely contradictory to industry norms within the Society of Human Resource Management (SHRM).
For trucking, turnover is also defined as people who quit, but these numbers are almost always tossed out and traded for “churn”. Ask any recruiter for a company’s “turnover rate” and they’ll start telling you about “churn” factors.
For trucking, “churn” is simply defined by the number of people that quit to go to other trucking companies, because the “grass might be greener”. If people quit to leave the industry entirely, if they quit because of family issues (which includes home time issues), if they are fired, or if they retire, those numbers aren’t even considered. There’s a myriad of other “classifications” that typically aren’t considered in the raw turnover data.
The only purpose I can see of “re-classifying” these numbers is to make them look lower than they really are. One can easily see how these numbers can be skewed with such re-definitions.
Why Data Sets Are Important
For the rest of American industries, it’s important for everyone to be counted in total turnover rates. If a lot of people are getting fired, then I want to know where we’re going wrong as a management team. If a lot of people are quitting because they’re going back to school, I want to know what other industries I’m in competition with. For Managers and Executives, as well as Social Scientists (including Economists) typically the rule is: “The more data, the better”. However, in trucking, so much data is excluded there is (for example) no way to know how many people have a CDL but left the industry entirely.
We often hear the ATA (American Trucking Association – an Industry lobby) say that there’s a driver shortage. How do they get those numbers? They simply take the amount of freight that they have, versus the number of drivers they have available to move that freight. For example, in 2011 the ATA saw a 4% growth in truckload freight, but only a 1% growth in new drivers, leaving a 3% shortage (according to their math). Multiply that by 13 BILLION tons of freight moved by truck in 2011, and 3% is a lot! It makes sense on the surface, but add in all the data that’s not factored in – such as the number of drivers that were drivers but left the industry, or the SHRM measurement of Total Turnover rates, and that 3% shortage could have been more than made up for. Without the data, we’ll never know for sure. We can make a “guesstimate” that with most companies sporting over a 100% turnover rate, just reducing the turnover by 3% would make up for the difference.
For the rest of America, Human Resource Managers are made and broken on Total Turnover rates that are defined across industries. In Trucking, there usually isn’t even a Human Resources Department. By the Trucking Industry re-defining “churn” and “turnover” in it’s own unique ways, then it’s not that hard to see how the claims of a “driver shortage” just doesn’t add up statistically, at least from the viewpoint of lost potential.