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MISALIGNED INCENTIVES: WATCH FOR THESE BLIND SPOTS WHEN MEASURING MANAGERS

Published on October 23, 2024

“People respond to incentives, although not necessarily in ways that are predictable or manifest.”

The quote above, from 2005’s Freakonomics, highlights one of the challenges faced by fleets trying to build effective management teams and processes: incenting the wrong things, whether overtly or indirectly, can not only minimize the effectiveness of those incentives, but in some cases actually work against the fleet’s best interests.

When we evaluate participants in the Best Fleets to Drive For® program, we consider multiple different levels of effort. We look at how fleets manage their drivers, but we also look at how they manage the people who manage those drivers as well. Since those are often the people drivers interact with most commonly, it’s important for fleets to have a strong program for developing, managing, and measuring the performance of those people, just like they develop, manage, and measure drivers.

And it’s here that we find blind spots that have the potential to create real problems for fleets.

Let’s look at two specific areas to see what the potential problems are, and what the Best Fleets are doing about them:

Fleet managers: Productivity vs safety

Four years ago, for the 2021 edition of the program, we added a question about how fleets measure their fleet managers:

“Does the company include any driver-related metrics when evaluating dispatcher or fleet manager performance? If so, please provide details”

The first year we asked that question, we were surprised to see that the most common response was “No, we don’t include any driver-related metrics when evaluating fleet manager performance”.

That struck us as odd, since a fleet manager’s job is basically all about drivers.

The second most common response was that they measure productivity. Fleets called it various things – mile or revenue production, % of available hours worked – but it all came down to how much the driver was working.

That’s better than not including any driver metrics, but it still creates a problem. Drivers are invariably measured and bonused on a variety of metrics that include productivity along with safety, fuel performance, and numerous other data points coming from the telematics or scorecards. As a result, they manage their activities to balance all those things – produce miles, but not at the expense of fuel performance, regulatory compliance, inspections, customer service, etc.

However, if the fleet manager is measured solely on the productivity of the driver, there’s a big disconnect in what each of them is going to care about. The incentives are misaligned.

That blind spot of misalignment will inevitably create friction within the fleet. Drivers are being told by safety to focus on several different metrics, but operations tells them to just run miles. Drivers get conflicting stories and can’t be sure what the fleet really cares about. Eventually, driver sentiment turns to “yeah, they say they care about safety, but they don’t” or “they have a great bonus, but you never get it because ops is on you to just keep running” – both of which are comments we’ve seen from driver surveys in the past.

The good news is that it’s not an insurmountable problem, and the Best Fleets have found creative ways to make sure everyone is on the same page.

In addition to measuring fleet managers on the productivity of their drivers, the Best Fleets also include metrics on driver safety performance, retention, and other things reflecting a more holistic view of what’s happening. This year, we saw fleets measuring driver satisfaction and home time in addition to retention. Some do 360º reviews with drivers where they get to provide direct feedback on the performance of their managers. The most creative also look at whether fleet managers keep drivers up to date with training, how engaged they are in company activities, and whether they’re referring other drivers to the fleet.

In those fleets, drivers get the same clear message from both safety and ops: productivity matters, but safety and job satisfaction matter just as much. Friction between departments is reduced, and overall satisfaction goes up.

Recruiting efforts: Speed vs success

Shortly after we started collecting data on fleet manager performance management, we also started looking at how carriers approach driver recruiting:

What metrics does the company use to measure the success of recruiters and recruiting efforts?

This one proved just as interesting, but in a completely different way. It highlighted another potential blind spot for fleets: focusing on activity rather than results.

When we first started asking this question, most fleets were focused heavily (or exclusively) on measuring activities – calls answered per day, number of new hires per month, time to complete the hiring process, number of new hires showing up at orientation. All of these were about filling the funnel and bringing more people into the fleet.

Very few looked at whether those new hires actually succeeded at the company. Fleets didn’t think about metrics that considered how long it took for drivers to fully ramp up, how productive they were after a year, or even if they were still around after a year.

Of course, that leads to problems. If recruiters are incented to hire more people, more quickly, without being held accountable for the success of those people, the fleet can easily end up with a lot of the wrong people coming in the door and churning quickly. Not what anyone wants.

Over the past few years, though, we’ve seen the focus change among Best Fleets. Now, fleets are looking more carefully at how well new hires are performing, what the success rate is at 3, 6, and 12 months and using that data to refine the recruiting process.

The most proactive fleets involve drivers directly in the process, asking for feedback on the whether the job matches expectations, what can be improved about how it’s marketed, and anything that can make onboarding better.

When you focus more squarely on the results of recruiting efforts, rather than just how much activity is taking place, retention rates improve, and fewer drivers need to be hired. It’s a very different way of thinking, and it can be tough to maintain the discipline of it with so many outside forces pushing fleets to hire more drivers more quickly, but fleets are starting to see the benefits of the approach.

As we get started with interviews for the 2025 edition of the program, in a year where workforce stability and cost effectiveness are more critical than ever, it will be very interesting to see how fleets are adjusting and refining their incentive programs for managers and recruiters.