View from the Edge

Reducing the Budget for Driver Development - Smart or Risky?

In this issue, CarriersEdge co-founder Mark Murrell discusses the idea of cutting driver training and development programs, and how that can impact a company's long term prospects.

The economy is in a weird place right now. The stock market and employment stats look really good, and most fleets report booming business, but there's still a lot of uneasiness. Across all sectors, big companies are sitting on stockpiles of cash rather than investing it, and in trucking there's uncertainty about what exactly will happen when the ELD mandate kicks in.

Not surprisingly, we're seeing fleets growing more cautious with their own numbers, cutting costs wherever they can to build a cushion against whatever shocks may come in the future. That's always a smart plan, but it's important to cut wisely.

One place that's often on the chopping block is driver development and training. Unfortunately, it's also one of the riskiest things to cut. Sure, it may save a few dollars today, but it prevents larger savings down the road, and can actually end up doing substantial damage to the company over the long term.

Lessons from Tech

To help illustrate why, let's look at an example of a similar situation in the past and see how it played out.

In the spring of 2000, when the dot-com bust happened, tech companies were getting hit from all sides. Private companies couldn't get funding and public companies were facing massive pressure to cut costs and keep the stock price up. Most of them did, chopping their R&D budgets (since the savings there are immediate but any resulting pain is deferred). Apple, however, was one of the few companies who bucked the trend. They didn't just hold the line on R&D, they actually increased it. It's important to remember that Apple back then was a much different company than today, focused on selling computers and generating about $8 billion in annual revenue with little or no profit. They were a small player and their stock was taking a beating along with the rest of the tech industry, so it was a bold move to double down on R&D investments when everyone else was cutting.

However, 18 months later that decision paid off. While most of the tech industry were just getting rolling with R&D again after the recession ended, Apple was way ahead. They launched the iPod (one month after 9/11!) and never looked back from there. With a series of disruptive, category-defining products over the ensuing decade they left the previous industry leaders in the dust. Apple today does $215 billion in revenue (more than 25 times what they did in 2000) and generates $45B in annual profit. Their profit, alone, is now nearly 6 times what their gross revenue was in 2000. By comparison, Microsoft and Intel (the once dominant players in the industry) stagnated for years and are struggling to remain relevant.

What does that have to do with the trucking industry, and drivers in particular? Well, in both cases we're talking about investments in building a better business for the future. Tech R&D may be about hardware or software innovation, while driver development is about improving the quality of service provided by drivers, but both are the heart of competitive advantage for their segment. And in both cases, you have to run at least as fast as the competition or you'll be left behind.

While the Apple example is kind of old news now, I see seeds of the same thing happening in trucking today. Some fleets are nervous about the economy and cutting the ‘easy' things like driver training and development. They're saving a few bucks right away, and they'll deal with the fallout later.

However, other fleets are taking a broader view and focusing more on improving the performance and overall quality of their drivers. Those fleets are expanding the programs they offer their drivers, and taking advantage of new technology and current best practices to make them even more effective.

When the uncertainty in the economy clears away, who do you think is going to be better prepared to capitalize on it?

Fewer, smarter investments

So if we don't want to cut driver development altogether, how do we at least cut the cost so we can contribute to savings for the business?

There are two primary ways to do that, and both are fairly easy to implement.

First, reduce the classroom training. It's expensive, disruptive and much of the time, ineffective. The ROI is really low, so get rid of as much of it as you can. Move it online and you'll get the same amount of training for a third of the price.

Second, focus on the areas where development programs will do the most good. That means less of the aspirational stuff, and more meat-and-potatoes things like regulatory and safety topics. Fines and violations cost way more than the training required to prevent them, so focus there and you'll save big money, quickly. Similarly, things like load securement and anti-theft programs will help ensure more cargo gets to the destination in good shape, cutting costs and improving the customer experience.

The Math Doesn't Change

It's also important to remember why you have driver development programs in the first place. Improving the overall quality of drivers means improving the service that gets delivered to customers, making it more efficient, safer, more reliable, and more profitable. Whether the economy is good or bad, the equation is still the same:

Better Trained Drivers = Better Quality Freight Delivery = More Profitable Fleet

When times are good people tend to overlook the inefficiency and focus on growing the top line. However, when there's uncertainty in the world it's critical to remove as much inefficiency as possible and streamline the operation. Driver training and improvement programs are one of the best ways to do that, and the smarter fleets are doing it today. It may seem like a ‘cost' but investing in quality always pays off. At the very least, you want to keep up with competitors that are already making those investments.

View from the Edge is a periodic review of best practices in risk management, driver development, and technology for the trucking industry, produced by CarriersEdge.

CarriersEdge provides interactive online driver training for the North American trucking industry. A comprehensive library of safety and compliance courses is supplemented with extensive content creation and customization options, full featured survey tools, detailed management reports, and the industry's first dedicated mobile app for driver training.

Other Views from the Edge