Truck Driver Pay During Shortage

Driver Shortage Impacts Pay

Truck driver pay for performance programs are flying fast and furious and truck driver pay is THE hot topic at the 2014 ATA MC&E conference . You can’t walk by a single group of attendees without hearing them bring up truck driver pay within 15 minutes of the conversation starting.

The Psychology of Incentive Pay

But there should be far more to these discussions than “are you giving a 2 cent or 3 cent increase this year.” The psychology of incentives has been studied for several decades with Alfie Kohn firing a definitive shot across the bow of any executive seeking to speed his or her ship toward profitability using incentive compensation, in his 1995 book “Punished by Rewards .” However, there are many other works that have examined the connection between pay-for-performance and employee intrinsic and extrinsic motivation and retention, such as “Is it Worth it to Win the Talent War” and “Drive ” by Daniel Pink . The evidence is far from conclusive either way, but we do know for sure that human beings do not go to work for purely altruistic motives.  They work to earn money.  Period.  Full Stop.  If they happen to actually enjoy their job, then this is an added bonus…icing on the cake.  For the vast majority of blue collar laborers in the United States any discussion of intrinsic vs extrinsic motivation is just philosophical navel-gazing done by scientists who’ve never had to consider if they should pay the electric bill three months late in order to be able to pay the mortgage and get new school shoes for the kids.

Could Truckers be Intrinsically Motivated?

So what is to be done when considering pay-for-performance programs for truck drivers? This is a pretty thankless job, and a very challenging one also.  It’s dangerous and boring at the same time and creates numerous challenges for maintaining any kind of satisfactory home life.  Drivers do the work to be paid a fair wage.  So the first part of the discussion needs to focus there.  What is a fair wage and how much risk should the driver take versus how much should the company take?  What can be done to ensure drivers can budget for a minimum amount of income on a regular basis?  Drivers are not high-end sales people who can bank an extra $50,000+ from a great year to cover a lean year the next.  Regular, predictable pay is critical. This can be done by ensuring there are enough miles for everyone and communicating a realistic expectation on “target total pay” or by actually providing some kind of minimum guarantee.  If you go down the minimum guarantee path, you will need to rely more heavily on your management systems to ensure poor drivers are not being retained when you would rather if they left.  Your compensation plan will no longer do that for you.

Two Psychological Mistakes to Avoid in Truck Driver Pay

From an incentive or pay-for-performance perspective, there are some known psychological factors that have been thoroughly tested and can be drawn upon to ensure your incentive plans do not go awry.

First…humans accept productivity increases far more quickly than they will accept rate decreases. This is true for any role…sales, truck drivers, operations, accounting, etc. Telling someone you expect them to do a little more to make the same amount of money goes down easier (I didn’t say “easy”…just “easier”) than telling them you are cutting the rate of pay they have been getting.  If you’ve ever told a sales rep their commission rate is being cut, you will know how well this goes over.  Likewise for cutting a driver’s base rate of pay, or any other employee’s salary.  As a general rule, compensation consultants seek to avoid these conversations and instead focus on ways the company has made it possible for the driver to gain more miles, or sell more products, or move more loads, as cause for the increase in the expected level of performance.

To make this work from an incentive perspective, you must have tiers in your program. If you pay a flat rate, you have nothing to change other than the rate.  If you have productivity tiers, you can keep the rate of pay the same, but nudge up (or down) the productivity tiers as the situation warrants.  You need to have a lever OTHER THAN the per mile rate to adjust.

Second…humans will take a bet that has only upside far more often than they will take a bet that has only downside, even if the end result is the same.  This is referenced at the end of SuperFreakonomics  by Levitt and Dubner. This is a significant caution for any trucking company seeking to motivate drivers by using a declining points system.  Under these approaches, drivers start with a certain number of points (say 100) and can only lose points based on bad behavior.  A truck driver’s pay or other rewards are then determined based on the number of points he or she has left at the end of the period.   From a psychological motivation theory perspective, tells the driver the only thing he or she will experience is nothing (no change) or a punishment.  There is no upside, no reward, and no ability to redeem oneself with good behavior.   Humans need a chance to win.  They need to gain, to move up, to score points, to add to the till, and to accumulate (anything).  It’s how we are wired from our earliest days.  When you only take away from us, we resist and resent and fight for the status quo.  We don’t cooperate or aspire to higher levels.

While there are many ways to create pay-for-performance programs for truck drivers that work well, these are two approaches which have been proven ineffective and even detrimental to human motivation.

Freight Broker Commission Rate

Selling Your Sales Compensation Plan to Management