Part IV: Moving from Administering Human Resources to Measuring the Workforce Investment
What Employee Optimization Can Tell Managers
Managers in the trucking industry have invested in workforce management tools, but until recently most money was spent to manage human resources from an administrative point of view. The true power of employee optimization is its ability to show cause and effect. It identifies problems that cut into profitability and shows how investments in human resources pay off.
What Managers Learn from Labor Evaluation
Root-cause Insights: For example, recognizing that maintenance costs increased at an inordinate rate in one fleet operation, a manager sees that either that particular type of equipment needs to be replaced or the operators are using it improperly. Digging further into labor evaluation, the manager finds the root cause — a higher volume of the type of equipment assigned to a dedicated route that correlates to a change in incentive pay, which, unfortunately, promoted bad operational practices.
Predictive Measures: labor efficiencies can provide insight into the root causes of less than optimum asset utilization. For example, seeing that recruiting costs rose 10 percent in a recent period, a manager learns that when several new drivers were hired, the average skill level dropped and the average productivity fell 15 percent. Spending resources to improve the new hire introduction program can be weighed against the incremental recruiting costs of the new hires. Either way, the effect of additional new hires can be forecast better.
Return on Investment from Training: Measuring the effect of education is something everybody wants but few have been able to do. Using labor evaluation, a fleet can pinpoint the root cause, invest in training for both drivers and lower level management, monitor specific increases in quality or performance, and recognize the improvement in productivity. Most importantly, the results of training can be monetized for ROI calculation and justification.
Labor evaluation can show how assets and employees come together to drive performance. Interdependent variables and difficult-to-identify relationships are exposed by a balanced key performance indicator such as labor evaluation, showing how changes made to improve one area could have a negative impact elsewhere. Trends that individually are too small to be noticed are highlighted earlier because their cascading effect on total performance is recognized earlier. Executives throughout the organization have hard facts to help them analyze the effective contribution of the workforce and don't have to rely on anecdotal evidence.
A Simple Example:
Imagine a fleet operator that has full employment, sufficient customer orders to run the fleet at full output, and equipment that is in good operating condition. It's a positive outlook, but experience tells the fleet operations director that something is just not right. Margins are looking good, but given the opportunity, shouldn't they be better?
How can proper labor evaluation illustrate how the workforce is affecting profit potential? Let's consider some simple specifics for each element of labor evaluation:
Availability: Utilization is hampered by several items in the fleet. First, driver shortage accounts for a capacity shortfall of approximately 2 percent each period. Also, poor scheduling and hours of service factors causes an inordinate amount of downtime in a 24 hour period under the usual operations parameters.
Performance: Revenue is down somewhat. An insufficient number of available drivers to run the equipment often mean productive output is stalled at every phase of efficient utilization. The impact: lost productive time of approximately 5 percent.
Quality: Given the shortfall of productive hours, the supervisors attempt to make up the lost time by running at increased fleet performance. The result: quality begins to slip as time wears on, and production drops. The impact is a 4 percent loss of scheduled deliveries.
The Cumulative Impact: The labor evaluation value for the fleet is 78.2 percent — a far cry from what the operations director and his staff expected. Keep in mind, this is not meant to illustrate service failures, but to illuminate a decrease of full optimization-or potential gauged to 100%.
The takeaway is that this fleet converted only 78.2 percent of the potential for profitable output— potential that can never be regained. Effective use of driver and planning efficiency uncovers the data that fuels root-cause analysis and points to corrective actions. Likewise, labor utilization exposes trends that can be used to diagnose more subtle problems. It also helps managers understand whether corrective actions did in fact solve problems and improve overall productivity.
In my next and final installment in this 5-part series on how to achieve an effective driver workforce, I'm going to be laying out my call to action - what you should be doing today to ensure you're profitability tomorrow.