Incentive Programs to Fit Your Operation
One of the most basic concepts in business, psychology and elsewhere is to incentivize desired behaviors. The sales and marketing end of the beverage business relies on numerous incentive programs, both internally with staff, and externally with retailers, but fewer than one-third of the fleets BE profiles have any sort of incentive programs for their drivers.
Of those fleets with incentive programs, most are focused on safety alone, with just a few addressing fuel economy or other direct operational costs. While safety should be the highest priority for any fleet, and is an important element of driver incentive programs, it is more of a long-term, corporate-culture goal, than controlling a fleet’s direct operational costs, which can be measured, managed and affected day in and day out.
In numerous studies, it has been shown that driver skill can have as much as a 30 percent impact on fuel consumption. With fuel being one of the single largest operating costs for most fleets, fuel economy should be a top metric for any driver incentive program. Not only does fuel economy have the biggest impact on the bottom line, but it’s also one of the easiest operating statistics to measure.
Today’s engine computers and fuel dispensing systems can deliver accurate fuel consumption statistics in near real-time, but a fuel economy incentive program can be effective even with far less technology.
One of the frequent reasons given for the lack of a fuel economy incentive program is that some fleets have the logistical need to move drivers from truck to truck on a frequent basis, preventing the attribution of a truck’s fuel consumption to any one driver. While this complicates the process somewhat, it doesn’t preclude a fuel economy incentive program. Whether motivated solely by bragging rights, or by a monetary spiff, the metric for the program can be based on improvements to a fleet-wide average measure fuel economy, or a competition between operating divisions for the biggest improvement.
With tires ranking as the top maintenance cost for most fleets, this is another area where a driver incentive program can cut operating costs. Whether measured driver by driver, or across the entire fleet, improvement from a baseline cost of unscheduled tire repairs can earn the individual driver a higher ranking, special logo-wear, or a cash bonus; or on a fleet-wide basis, a bigger budget for the annual company picnic. Get your tire supplier involved to give the driver with the best tire performance a free set of tires for his car. The key here is that with just a bit of imagination, incentivizing the drivers to keep tire costs in check can deliver significant bottom-line results.
While safety incentives may not deliver a daily measurable return, a truck accident can easily make up in cost what it lacks in frequency.
According to a study commissioned by the Federal Motor Carrier Safety Administration (FMCSA), the average cost (in 2005 dollars) of a commercial vehicle crash was just over $91,000. For non-fatal injury crashes, that number jumps to more than $195,000, and for a fatal crash, the average is $3.6 million per crash. Even if a fleet only experiences one major crash every few years, the cost easily can exceed the savings derived from fuel, tire and other operating cost incentive programs, so this is why safety promotion should be a key element of any driver incentive program.
Many beverage fleets have well-developed safety programs, but again, fewer than one-third of the fleets we’ve profiled incorporate any positive driver incentives in those safety programs.
Out of necessity, most of the safety programs include negative incentives for unsafe operation and/or preventable accidents, with elements ranging from remedial training, to suspension, to termination, but this amounts to closing the gate after the horse has left the corral. A truly effective safety program will prevent unsafe operation and accidents before they occur, and positive incentives will achieve that goal far better than negative ones.
According to a research project conducted by Transport Canada, “The effectiveness of incentive programs in reducing accidents is often remarkably high. Reductions of 80 percent or more have been reported. Benefit-cost ratios are usually greater than 2 to 1, so companies can (realize a positive return) on these accident reduction efforts. Two companies interviewed as part of this project reported benefit-cost ratios of 3 to 1 for their programs. In both cases, insurance rebates due to reduced claims as a result of the program covered the employee bonuses paid under the programs.”
The Canadian project’s report lists the following key requirements for an effective safety incentive program, though many of the requirements apply equally as well to driver incentive in other areas:
1. Strong managerial vigor and commitment
2. Program planned in consultation with the target population
3. Incentives extended to different levels in the organization
4. Simple rules
5. Fair adjudication of responsibility for accidents
6. Rewards focused on not having an accident
7. Attractive rewards
8. Progressive accumulation of safety credits
9. Rewards perceived as equitable
10. Rewards perceived as attainable
11. Supplementing incentives with safety training considered
12. Under-reporting of lesser accidents discouraged
13. Peer pressure toward safe conduct enhanced
14. Short incubation periods
15. Proper program evaluation
A core element of human nature is that people will always act in their rational self-interest, so incentives will virtually always produce those behaviors which are rewarded. If you can measure an operating statistic, and recognize those who meet or exceed that statistic, you will improve that statistic.