The driver shortage has been a problem for a number of years. KAG responded early with a comprehensive campaign to deal with that problem. This month, KAG President and CEO Bruce Blaise reports on the promising results of those efforts and the outlook for the future.
Q: Let’s start with a simple question. Are we out of the woods on the driver shortage?
A: The industry as a whole is still deep in the woods on finding enough drivers. For KAG, the picture is much brighter. We undertook a major effort to ensure we would have enough drivers today and in the future. The result of that effort can be summed up in two words: It’s working!
Q: So, you have all the drivers you need?
A: I wouldn’t say that, but the trend is finally positive. Not that many years ago, we weren’t bringing on new drivers fast enough to replace the ones retiring or leaving for better opportunities at a time when the market was growing. It was frustrating that we worked so hard to bring in and keep drivers, but we were going backwards on total driver count. But in the last quarter of 2018, our driver team grew by almost 100. And in the first month and a half of 2019, the total grew by another 50 or so more. We are very encouraged with what we are seeing. It feels like we are building momentum.
Q: Why is this such a tough problem to overcome?
A: Because there are so many factors working against us. Lots of drivers are Baby Boomers who are taking well-deserved retirements. We wish them well, but there aren’t enough younger people to replace the retirees. Some of that is due to the fact that being a driver isn’t perceived as attractive as other occupations. Add to that the super-tight labor market. With unemployment as low as it is, employers are scrambling to hire quality people.
Q: But the things you’re doing to find and keep drivers is working?
A: We’re not ready to take a victory lap just yet, but our efforts are definitely showing promise.
Our success hasn’t been equal across all business groups. For drivers making shorter hauls, like our fuels business, we doing very well. We are still working through strategies to deliver the same results in the long-haul positions like chemicals, merchant gas and food.
A big problem is that there still aren’t a lot of new people coming into the industry. That means we mostly compete for existing drivers who often are enticed to change jobs by better pay and benefits. So, we created a pretty compelling, three-year compensation program to attract new drivers and keep them. We took our compensation rate and committed to increase it every year for three years. That has attracted new folks to KAG and, we hope, will keep them with us.
Let’s face it. When adjusted for inflation, driver pay has been flat to declining for years. It was time to provide our professional drivers the hope and assurance of a brighter future.
Q: And what happens after three years?
A: The compensation package is the keystone of our efforts, but we don’t want this to be a case of “golden handcuffs,” where someone stays on a job for the money but isn’t really happy as an employee. We are doing things to be the company they want to work for.
We now have formal check-ins with new drivers after each of their first three months and after six months on the job to help them get off to a good start. Each new driver is assigned to a mentor, a current driver they can rely on for guidance and advice. And we provided all of our terminal managers with the skills and knowledge they need to play their part in building a great work environment.
Q: All the things you’re doing have to be increasing your costs.
A: Absolutely, and we are so grateful to our customers for their willingness to support us in minimizing and recouping those costs. It’s been a real collaboration. Our customers understand this is a low-margin business and that we needed to increase rates to enable us to ensure the volume and quality of service they expect from KAG.
Customers also stepped up by helping us ensure that our drivers were working as efficiently as possible. Customers helped by putting processes in place at their facilities that minimized wait and turnaround times. That helps every driver make more trips every day.
Q: It’s a bit unusual for customers to be willing to accept higher costs.
A: We have always considered our customers as partners. That’s the way to build a mutually beneficial business relationship. And there’s another thing we are encouraging customers to do to continue to help us through the driver shortage: allow us to carry more of their loads.
We are capable of growing our volume in the areas where we are adding new drivers. The more volume we have, the more efficiently we can operate. That helps us control our costs, potentially mitigating future rate increases. That’s good for us and for our customers.
Q: Are other companies taking the same kind of steps you are to meet the driver shortage?
A: I assume they are all trying things because the driver problem isn’t over. Data for the next five years show no improvement in the general driver shortage. I am sure most are struggling to find and keep drivers, and that the situation will continue to worsen for them.
Q: Why have you been successful where they are struggling?
We were far ahead on addressing the shortage. We saw it coming and took action with a very proactive approach that included engagement with our customers in finding solutions. This has been a great example of how KAG isn’t a traditional carrier that just passes along costs. We worked with our customers as partners to find mutually beneficial solutions. We will keep up the momentum and I believe we will be able to maintain a full team of qualified KAG drivers.
For the customers who’ve helped us through this issue, I am sure it’s a good feeling to be aligned with a company that was on the leading edge of ensuring adequate capacity. More so than almost any other carrier, and certainly any tank carrier, customers will be able to count on KAG for the capacity they need.