Owner-Operators: A Measure Of Success

June 1, 1998
Fleets bent on filling empty driver seats with independent contractors must work to fit square pegs neatly into round holes.It's tough work driving a square peg into a round hole. Unless you have a big enough sledgehammer -- or better yet, a fine enough chisel to ensure a clean, smooth fit.Whether the gap in a fleet's driver ranks results from a true shortage of available people or is the consequence

Fleets bent on filling empty driver seats with independent contractors must work to fit square pegs neatly into round holes.

It's tough work driving a square peg into a round hole. Unless you have a big enough sledgehammer -- or better yet, a fine enough chisel to ensure a clean, smooth fit.

Whether the gap in a fleet's driver ranks results from a true shortage of available people or is the consequence of rapid turnover, it forces managers to become more adept at recruiting and retaining these essential workers.

Indeed, things have gotten so tough on the hiring line that many over-the-road fleets are heading back to the future -- to tap an old source of drivers capable of meeting today's challenges.

Taking the stance that if you can't find 'em or keep 'em, you better let 'em join you, many fleets are either expanding their owner-operator base or seeking independent contractors for the first time.

Only a few years ago conventional wisdom still regarded company-owned and -operated equipment as the most efficient and least risky way to haul freight. Owner-operators, so went this thinking, were valuable only as a means to quickly and cheaply grow -- or shrink -- a fleet.

By the late '80s, owner-operators were out of vogue. Rugged individualists or not, they were written off by fleets as lacking the foresight and capital to keep pace with changing times.

But the death of the owner-operator was greatly exaggerated. The knights of the road are being dusted off and recast as viable entrepreneurs vital to trucking's future.

By their own hard work and example, thousands of individuals have helped forge a new identity for the owner-operator as a can-do, can-succeed businessperson. That has helped fleets not to view the use of independent contractors as a "control issue." Instead, more than ever, fleets are seeing their equipment as non-owned assets well worth leveraging.

Still, old lessons die hard. Fleets -- especially those with excellent customer-service and safety reputations -- are not necessarily flinging their doors open to just any owner-operator. They are after only the cream of the crop.

But owner-operators with the right stuff stand to gain, too. They are being wooed to sign with perks running from attractive equipment lease/purchase plans to assistance in managing their operations. In return for good rates and support, these independents are willing to "buy into" a fleet's business approach and stick around awhile to see it through.

There's a theory behind this give-and-take that certain fleets hope will pay off over the long haul. By marrying their fortunes to a fleet's goals, these contractors are less likely to contribute to "churn" than company drivers and casual owner-operators, who risk little upon leaving.

But offering a business partnership in lieu of a marriage of convenience only marks the beginning of the relationship. To keep everyone happy, productive, and profitable, fleets should make tangible -- and visible -- commitments to managing all aspects of a deal.

At first glance no dark cloud appears attached to this silver lining. Then again, only cockeyed optimists never want to see what may lurk in the shadows.

An intermodal fleet manager, who prefers to remain anonymous, insists he's not about to don rose-colored glasses for the sake of expediency. He contends that overreliance on owner-operators amounts to a risky business decision. In his estimation, giving up too much control -- by using too many contractors -- could destroy a fleet's safety record and tarnish its image.

"We do use owner-operators to handle the seasonal peaks in our business," he allows. "But for the bigger picture, we believe a fleet should be willing to invest in its own operation, its local community, and its employees. We don't want to become dependent on owner-operators. That's the difference between a trucker and a broker."

No, turning to owner-operators is not a quick or easy fix for the driver shortage. But if these contractors are approached with proper forethought and followup, a potent and satisfied driving force can be formed from their ranks.

With that in mind, here's a look at some positive experiences fleets are having with today's owner-operators. The four fleets profiled here represent several types of over-the-road operations now common. To one degree or another, all rely on independent contractors to help get their customers' freight hauled in a safe, timely, and profitable manner.

After Mike Starnes founded Memphis-based M.S. Carriers Inc. 20 years ago, he built the fleet up exclusively with company drivers. But about three years ago, the fleet adjusted its recruiting message to attract owner-operators.

Now the nationwide truckload carrier fields 3,500 trucks, 975 of which are owner-operated. "Turning to owner-operators was a quick way to add capacity," points out advertising manager Jim True. "It's an approach that has worked well for us and for the independents we've signed up. We're not cannibalizing our company ranks, either. If our drivers want to get their own trucks, though, we'll work with them."

In fact, last December M.S. Carriers began offering an equipment lease/purchase plan to help qualified drivers get into business for themselves. "Unlike other carriers that regard these plans as profit centers," True states, "our intention is to help create 'real' owner-operators. With that goal in mind, we put a lot of study in before launching our program."

So far, 120 operators have signed up for the '98-model Volvo tractors offered under the plan. According to True, most participants will own their trucks within 24 to 54 months.

"We decided to offer only new trucks," he relates, "because having OE warranties in force affords them greater productivity from the start."

M.S. Carriers also cushions the blow for new owners by picking up the cost of the truck's base registration plate and permits; paying fuel-tax reporting for the life of the lease; and reimbursing them for tolls and scale fees.

The carrier also offers discounted fuel at its terminals and through a network of truckstops. And it allows the fledgling operators to purchase tires at a discount from three of the fleet's vendors.

Lease payments are made via settlement deductions. M.S. Carriers currently pays owner-operators 80 cents per dispatch mile. Those on the lease/purchase plan make their payments conveniently via settlement deduction.

Other perks the company offers its independents include a "no forced dispatch" policy that, in effect, enables them to pick where and when they run in the lower 48 and Canada.

Owner-operators bringing along their own trucks must meet certain equipment requirements, as well as driving criteria that mirrors what's asked of company drivers. The rules are fairly general: equipment must meet operational needs; be no older than five years; and any exterior "artwork" must be tasteful in the eyes of M.S Carriers.

True reports that some of the trucks leased to the company actually belong to owner-operator fleets that field from two to twenty or more trucks each. "We're seeing an increase in these," says True. "Our profitability in turn fuels their growth."

Of course, M.S. Carriers hasn't forsaken company drivers, who still pilot over two-thirds of its trucks. Incentives for these drivers to join up -- or stick around -- include no forced linehaul dispatches to New York City and pay rates that increase incrementally with experience. The fleet's most experienced drivers can now earn up to 30 cents/mi.

Knight Transportation Co. divides its truckload service into three regional operations. The carrier covers the West out of its home base in Phoenix; the South Central area out of Houston; and the Midwest and East Coast out of Indianapolis.

"Trucks tend to stay within one region there," says the carrier's CEO, Kevin Knight. "We employ a total of 750 drivers, including local drivers and casuals, for our 600 Freightliner and Volvo tractors. And we contract with 200 owner-operators as well." The fleet also fields some 2,200 trailers, mostly dry vans, and all 53 ft. in length.

"The fleet's about one-fourth owner-operator right now," Knight points out. "That's a flexible number, but we expect it will stay between 25% and 30%. As we see it, company drivers and owner-operators are both vital to our continued growth objectives.

"We tend to look at being an owner-operator as a different step drivers can take in their career path," he continues. "It can be a good move for those who want the freedom of being self-employed."

Knight says he encourages company drivers, which he terms associates, who seek to embark on ownership. However, he speaks openly to them of the pros and cons. "There's the potential to make a lot more money as an owner-operator," he emphasizes, "but there's more risk involved than life as a driving associate."

Perhaps reflective of this non-judgmental stance, Knight says the carrier will help prospective independents secure outside financing, "to get them into a new or used truck -- whatever they want to take on." In fact, Knight has a separate department dedicated to working with its prospective and existing owner-operators.

In general, Knight looks to bring veteran drivers into its fold. "We mainly recruit existing owner-operators," he says. "There's a long list of entry requirements, including significant driving experience," he notes. "In addition, their equipment must not inhibit our customer-service goals in any way."

Knight associates who want to take on their own truck must have at least two years of over-the-road driving experience under their belts. "We want to ensure they have a good understanding of the business -- and that they enjoy it -- before making such a big decision," says Knight. "Buying a truck is a four-to-five-year commitment. Someone who quits after a year or so has no equity in that purchase and can wind up upside down financially."

According to Knight, the carrier's multi-regional operation makes it attractive to owner-operators. "Since our routes tend to be short hauls -- averaging 500 miles -- we can offer them lots of miles with fairly high per-mile revenues every week. Besides paying more on a per-mile basis than most carriers, they also know we operate as a safe fleet."

Started in 1983 with all owner-operators, Fox Midwest Transport Inc. gradually began switching to company drivers. Although 55 owner-operators now account for only 25% of its driving force, the Green Bay-based truckload carrier continues to court "good quality" independent contractors.

"When discussing opportunities with owner-operators," says recruiting manager Charlie LeMaire, "we discuss what's important to them, such as covering the cost of permits and our per-mile pay.

"Our regional operation, which serves the Midwest only, also makes us attractive. We can get our drivers home weekly -- and we make no East Coast runs.

"As for our requirements," he continues, "owner-operators must have at least one year or 100,000 miles of over-the-road experience and operate a truck that's seven years old or newer and capable of hauling 46,000-lb. loads."

Recruitment efforts for both company and independent drivers extend to print advertising, booths at trade shows, and an Illinois-based field recruiter. "Her primary responsibility is to recruit at truck-driving schools in her area," LeMaire notes.

Fox Midwest also operates its own truck-driving school in Green Bay. It opened its doors in '96 and is run on a tuition-fee basis. "Since they pay for their schooling," says LeMaire, "graduates canapply for work anywhere. But we've found it's been a worthwhile effort that helps us meet our own hiring needs."

The carrier has also taken a step to aid company drivers and outsiders to join up as owner-operators. "We started a lease/purchase program early this year," LeMaire explains. "Financing comes from outside, but drivers can purchase any currently available truck in our fleet, as determined by the equipment manager.

"All the trucks offered are under our three-year trade cycle," he continues, "and persons leasing them can avail themselves of our maintenance facility here at a reduced cost. We also have a breakdown network established that they can tap into."

According to LeMaire, Fox Midwest has had several inquiries already about the lease/purchase option. "We started it in the hopes it would help us hold onto some drivers who might have moved on, as well as to attract qualified candidates, with an easy route into the business."

Just as when it was formed 18 years ago, Indianapolis-based Frontier Transport Corp. delivers truckload shipments east of the Mississippi entirely with owner-operators at the wheel.

Three hundred independents are contracted to haul the fleet's 1,000 48- and 53-ft. dry vans, which carry both general-commodity freight and hazardous materials.

"We enjoy a very low turnover rate," reports safety manager Stan Kindred. "They operate under long-term leases that continue until canceled. We recruit mainly to grow the fleet, roughly by 10% a year. Targets are set by load-per-day performance and by consulting with our customers on their needs."

The fleet mans booths at trade shows and has a full-time recruiter/ driver-relations manager on staff. But Kindred says "word of mouth by way of our current operators" is its primary recruitment tool.

"Our pay structure and permit package are big draws," he relates. "We pay a percentage of the gross revenue of each load and furnish all permits and operating authority at no charge." On the other hand, our owner-operators must attend to all maintenance and repairs themselves.

Although its equipment requirements may be less stringent than some fleets -- trucks can be up to ten-years old as long as they can pass DOT inspection -- Fox Midwest is pretty stringent about personal qualifications.

"To sign on," Kindred advises, "owner-operators must be at least 23 years of age and have at least two years of experience over the road in our type of operation. They can have no more than three moving violations or preventable accidents -- and must have no accidents within the last three years. They must also be haz-mat qualified on their CDLs, and pass a DOT physical and drug screen."

Like other fleets using independents, Kindred also reports seeing a rise in the number of small-fleet operations involved. "About 5% of our trucks are run by contractors operating two to eight trucks. Their drivers go through the same orientation all our operators do, but remain employees of the contractors who have leased to us. And most of these small fleets are enjoying low driver turnover, too."

These fleets and many others are finding it's worth investing some energy and money to fill the big round hole of their driver shortages with qualified owner-operators.

Fleets that haven't yet tapped into independent contractors may find a little give-and-take will smooth the rough edges enough to make these square pegs fit their operation. And contribute to their mutual success.

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