Bonus & Incentive Programs: Do They Work?
Why recognition can help improve driver performance, and some tips for designing programs that work.
Patricia Smith
Senior Editor
Trucking, from its earliest history, has sought to bring out the best in its drivers through recognition and rewards. No doubt those efforts have regularly raised the question: Do these programs work? Do safe driving awards really reduce accidents and traffic violations? Will bonuses improve fuel economy or customer service? According to most human behavior experts, the answer is yes.
Numerous books and articles delve into the sometimes complex psychology of motivation and behavioral modification, but putting together a workable recognition system doesn't require a PhD. "It's not rocket science," says safety consultant Lawrence Lonero, Northport Associates. "A lot of effective programs are just common sense."
Basically, incentive programs work because they focus attention on specific areas such as safe driving or fuel economy. At the same time, they reinforce desired behavior by rewarding and recognizing a job well done.
Gerald Wilde is emeritus professor of psychology at Queens University in Kingston, Ontario, and author of "Target Risk: A New Psychology of Safety and Health." The book, now sold in an updated edition "Target Risk 2," argues that rewards may be more effective than punishment in motivating for safety.
"Punishment brings negative side effects; one of these is a dysfunctional social climate, a climate of resentment, uncooperativeness, antagonism and sabotage," he explains. "As a result, the very behavior that was to be prevented may in fact be stimulated. Punishment may increase the inclination to beat the system." The most common example: Studies indicate that 40-70% of drivers (all drivers, not just truckers) whose licenses have been suspended or revoked continue to drive.
"In contrast to the interventions that often backfire, incentive programs for safety have both the effect for which they are intended - greater safety - and usually the positive side effect of creating a more favorable social climate," Wilde says.
Safety is the most common focus for bonus and incentive programs, but they have also been used successfully to improve fuel economy, increase productivity and even improve driver retention.
In a survey done last year for the Federal Motor Carrier Safety Administration, carriers said that safety incentive programs had reduced insurance claims, workers' compensation claims and crashes by 65%.
"How to Implement Incentive Programs for Safety and Productivity," a guide developed by the Canada Safety Council for Transport Canada and FMCSA, outlines two cases where incentives were an integral part of a program to improve driver retention.
The first involved a non-union less-than-truckload carrier with one terminal and about 80 trucks. The company targeted safety and turnover with three programs:
• Team recognition. To create a sense of belonging, drivers were asked to join certain categories of operations or teams. Teams with good safety records received company t-shirts or jackets.
• Individual recognition. Drivers with the best safety performance in two categories - city and highway - received plaques and trophies. Annual awards were presented at a company banquet.
• Probation period safety bonus. New drivers who completed their first six months with the company without a preventable accident were given a per-mile safety bonus. If a driver was involved in a preventable event, the direct cost of that event was deducted from the bonus.
In the two years following introduction of the programs the company's turnover rate for new drivers dropped from 98% to 15%-20%. The cost per driver retained by the program was approximately $2,000. The cost to replace a driver was estimated at $8,000.
Despite a 15% increase in miles driven, the total number of accidents was down almost 25%. The number of events per unit and per million miles dropped about 35%. Total savings was estimated at about $228,000 per year. Cost of the programs was about $60,000 annually.
The second case involved a truckload carrier operating 350 power units. Turnover had been as high as 100% for several years. Over a period of three years the company initiated a number of educational, recognition and incentive programs.
Periodic symposiums for dispatchers, managers and safety supervisors stressed team building and a corporate culture that was positive toward drivers.
With input from a Driver Advisory Board the compensation package was revamped. Inconsistencies were eliminated and there were clear guidelines regarding pay for non-driving tasks. The package was then periodically evaluated and problems were addressed. Performance criteria for terminal managers was revised to include safety and personnel issues.
One year the company put up billboard signs during saying "thank you" to drivers during National Driver Appreciation Week. The second year they marked the week with special caps, which were personally presented to drivers by branch managers. The company stepped-up efforts to increase feedback to new drivers and make them feel more accepted and welcome.
It also initiated a Driver of the Year safety program with recognition awards and cash bonuses that increased with each incident-free year. In the first year 92 of 350 eligible drivers were recognized at a banquet with spouses.
Over a period of about three years, turnover was reduced by nearly 40% for an estimated savings of $800,000. Total cost of all programs was estimated at $150,000.
Clearly, successful programs often involve efforts on many fronts, but incentive programs seem to address a key reason drivers leave carriers or the industry: lack of respect and recognition.
A well-designed program includes regular communications with drivers that effectively tells them "we like what you do and we're going to reward you," explains Don Doster, president and CEO of Global Behavioral Solutions (GBS), an Atlanta-based company that designs and administers driver recognition, reward and retention programs. "They feel part of the culture, they feel seen and appreciated. That emotional factor may do more to lower turnover than any other single thing."
WHAT MAKES A GOOD PROGRAM?
"While an incentive program can be a powerful tool, it's still only one tool in the whole management package," cautions Lonero. "Safety is one piece of the management package and incentives are one piece of the safety package. You're probably not going to have an effective safety incentive program if you don't have a good safety program within a well-managed business."
The planning process must start with a review of the operation to identify problems you can't solve. Then management can begin to consider what problems might be addressed with bonuses or incentives.
"We recommend that recognition programs focus on core values, on what matters most to the company," says Adrian Gostic, director of marketing and corporate communications for O.C. Tanner Recognition. "Maybe it's safety, maybe it's on-time deliveries, maybe it's courtesy. Recognition must focus on the three or four things that you believe are most vital."
For GBS, program design begins with a questionnaire to help identify and prioritize each client's problem areas. Once that is done, the company reviews fleet performance and cost data to determine what those problems are costing the company and how much money can be saved with projected improvements.
"We do a cost/benefit analysis," explains Doster. "We say, 'if you can improve this area X%, here's what you'll save.' "
There is no such thing as a standard incentive program because no two trucking operations are exactly alike - but there are some standard rules.
The program should be simple and easy to understand. It should be perceived as fair and equitable. Drivers who aren't eligible for a reward should understand why. Those who are eligible should be seen by others as someone who deserved it.
Wilde recommends that incentive programs reward the outcome variable, not variables within the process. For instance, a safety program should reward drivers for not having accidents, not for individual actions to achieve that goal such as obeying the speed limit. "The risk is that while the reward behavior may improve, other related safety behaviors may deteriorate," he explains.
GBS programs typically have a point system that rewards various aspects of the performance objectives. For instance, if safety is a targeted area for improvement, the reward system might focus on preventable accidents, SafeStat violations, roadside inspections, safety meeting attendance and training.
Rewards shouldn't be limited to the top few. A Driver of the Month program means that only 12 drivers are winners, the rest are losers. Instead, the program should be set up so that everyone who meets the stated objective is recognized and rewarded.
Recognition should come quickly and frequently. A long waiting period may, in fact, hurt more than help. For instance, if safety awards are only given annually, a driver who has an accident or gets a speeding ticket in January is out of the running for the entire year.
"They need a chance to get back in the game," says Doster. Instead of a single bonus awarded for annual safety performance, GBS-designed safety recognition programs award points for each month without a preventable accident, points for each accident-free quarter, and a graduated number of points for each accident-free year.
Incentives should accentuate the positive. Recruiters and recruiting ads often lump cash incentives with regular pay: "Earn 45 cents a mile" and in smaller print, "including bonuses."
That's a mistake, says Lonero, because your incentive can easily become a penalty. "When you get it, it's an incentive and a reward. But if you don't get it, it's punishment."
Successful programs have "managerial vigor," says Wilde. "Workers or drivers should not only be informed of the program, they should also be frequently reminded of it in attention-catching ways."
The possibilities are numerous: company newsletters sent to drivers' homes, pay envelope stuffers, in-truck communications, posters, company web sites. Awards like pins, watches, rings, jackets or specially painted trucks help identify top performing drivers to colleagues and customers.
Banquets or awards ceremonies give managers a chance to publicly recognize drivers. The good ones don't just hand over the trophy, they talk about the driver and the good job he or she has done, which supports the claim that drivers are more than a faceless name or number to management. Says Gostic: "The idea is to give these managers the tools to recognize their people in a more specific and effective manner."
Not every program is going to work for every driver, and supervisors or managers need to be able to recognize what motivates each one. "People need different things," Gostic says. "One may prefer a personal note thanking him for the job he's done. Another may need a public celebration every month. It's the manager's job to figure that out and keep them going."
Successful programs typically ask drivers or special driver committees for input regarding goals, reward criteria and rewards themselves. Non-driving employees should be familiar with driver incentive programs, especially if their job affects the driver's ability to perform as expected.
Incentives can promote teamwork. If one of the issues a fleet wants to address is driver turnover, GBS often recommends that drivers and even non-driving employees be rewarded when the company meets or exceeds monthly retention goals.
"It focuses the whole organization on reducing driver turnover," Doster says. "If you're a driver and another driver from your company tells you he's got problems and is going to quit, you're going to try to help him solve those problems. You're going to do what you can to convince him to stay."
As for involving non-driving employees, he recalls the story of a driver who collared a fleet executive at the company picnic to tell him he was going to leave the company. The problem: he had mistakenly signed up for health insurance even though he was covered by his wife's plan at work. When he contacted the payroll department to cancel the insurance he was told he'd have to pay premiums until the next bi-annual enrollment period.
"If the people in payroll had some incentive to reduce driver turnover, their answer might have been quite different," he notes.
Improvement can be a tall order without proper training. For instance, an incentive program aimed at fuel economy should offer instruction on fuel-efficient driving techniques as well as rewards for improvement.
"You can motivate drivers but if they're not trained to do what you want them to do, nothing may change," notes Doster. "Conversely, you can train drivers but if they're not motivated to do what you train them to do, nothing may change. It's when you combine training with behavior modification that you start impacting your bottom line."
Management needs to keep an eye on incentive programs and be willing to make adjustments if problems occur. But patience is necessary. "When you're looking for a behavior change and, beyond that, a cultural change, you're not going to get it overnight," says Doster.
Because dramatic results don't come quickly, GBS requires a three-year commitment; but it answers that commitment with performance guarantees. Through a program with AON Truck Group, a major provider of insurance and risk management services, GBS has essentially pledged to credit back its profits if the program hasn't achieved agreed-upon results after the first year. If the program still isn't performing as expected after the second year, the client can bow out.
"We're willing to give away our profits. We'll just hold back what we need to redeem driver awards," he says. "We want them to stay with the program because we believe we can make the changes happen."
CASH OR PRIZES?
"Overall, it doesn't matter if you're a trucking company, a fast food company, or IBM, employees will always say 'I want cash. I don't care if it's $4.17 more in my paycheck, I would rather have that than any recognition or award," says Gostic, "but the research and case studies just do not support that."
One reason non-cash rewards may be more effective than cash bonuses is that cash is often short-lived and quickly forgotten. "Pay just goes into the big bucket we use to pay our Visa bill, our rent or our mortgage," Gostic says. "Effective recognition is typically something that's earned, it's more memorable, it's presented in more of a public setting."
American Express Incentive Services refers to "sticky" awards versus "slippery" awards. Slippery awards have a fleeting impact and often "slip" through the recipient's mind. In one study, 29% of workers said they spent their last cash bonuses to pay bills, 18% couldn't remember how they spent the money. Sticky awards, on the other hand, stick in the recipient's mind and reinforce the relationship between the reward earner and the reward provider.
A driver who earns a big screen television in the company safety program will be reminded of his achievement every time he watches television. Moreover, he's likely to show it off to family and friends.
People often perceive non-cash awards as being worth more than their cash price. In fact, awards are often viewed as luxury items they wouldn't buy for themselves. And while most cash bonuses are taxable, merchandise awards that meet IRS limits and guidelines are generally tax-free.
In "Managing with Carrots," a book Gostic co-authored with O.C. Tanner Vice President Chester Elton, he tells of a large beverage distributor that gives drivers a Super Bowl-style gold ring when they log five years without an accident or traffic violation. Every year thereafter they can earn a diamond for their ring. The company says the program has helped reduce accident related costs by 70% since the early '90s when it was started. Moreover, management feels it has improved driver loyalty.
Equally remarkable is the story of one driver who was six months away from earning his safety ring when he got a speeding ticket. Gostic says he was an excellent employee and the ticket was for only a few miles over the speed limit. The company was willing to bend the rules a bit so he wouldn't have to start over, but the driver refused. "He didn't want an asterisk associated with his ring," says Gostic. "It took him 9<+>1/<->2 years but he eventually earned his ring, and he earned it free and clear."
GBS' recognition and award programs offer merchandise and other prizes, but not cash. "These are not compensation programs," explains Doster. "They are performance improvement programs using performance tracking coupled with incentives to help focus on certain problem areas and to reward drivers for meeting goals that will help solve those problems."
Points can be redeemed for jewelry, toys, sports equipment, household appliances or other merchandise. Drivers can also choose gift certificates from popular local restaurants, family vacations, even tickets to local sporting events. Companies can add promotional merchandise like logo jackets or even special watches or rings.
"One reason a lot of incentive programs fail is because the company decides what they think is best for the drivers," he notes. "For instance, management decides that drivers would really like a plaque or a leather jacket. We don't believe the company should decide that. We think the driver should choose."
"We have the philosophy that you have to give a little of a lot of different things to motivate the masses," says Angie Buchanan, director of human resources for Melton Truck Lines. "Not one thing is going to work for everyone, so if you do a lot of different things chances are that you're going to hit that hot button."
The Tulsa-based flatbed carrier has a broad variety of programs for its 700-plus drivers. A Driver of the Month recognition is based on productivity and safety. "Top Fuelers" get cash, recognition and other awards for fuel economy. Company drivers get a cash per/mile bonus for safety. Independent contractors get a lump sum and a gift certificate for merchandise. The company is just getting ready to roll out a new safety contest that will involve all employees.
Drivers who log more than a million miles with Melton join the Ambassador of the Road program. Members of this exclusive club - about 40 drivers so far - are assigned to a new Kenworth W900 or T600 (their choice) with $1,500-$2,500 worth of options, which they also choose. They also get cash bonuses, special attire, special designations on their trucks and other recognitions and awards through the year.
"There are a lot of little perks that may not sound phenomenal but are important to the drivers themselves," says Buchanan. "Everybody knows who our Ambassadors are. It's a pretty big deal."
Drivers are always consulted before implementing a program to make sure it's meaningful to them. But that doesn't always assure success. "We've scrapped a couple of programs that didn't work. Maybe they were too complicated or not pointed enough," she admits. "But we're not unwilling to try new things. We're always trying to be on the cutting edge. If it doesn't work, we move on. We try to be pointed and strategic, not frivolous. We want programs that are meaningful and motivating. We just won't stop until we get a perfect safety record and no turnover."
For More Information
Following is contact information for the programs, companies and resources mentioned in this article.
"Target Risk 2: A new Psychology of Safety and Health," Gerald J.S. Wilde, PDE Publications, Toronto, (416) 767-4885, www.drivers.com/store.
"Managing With Carrots," Adrian Gostic and Chester Elton, Gibbs-Smith Publisher, (800) 748-5439, www.gibbs-smith.com.
American Express Incentive Services, Fenton, Mo., (888) 853-0162.
Global Behavioral Solutions, Atlanta, Ga., (404) 949-0541.
Northport /Associates, Cobourg, Ontario, (905) 377-8883.
O.C. Tanner Recognition Co., Salt Lake City, (800) 543-7490.
Dealing With Drivers continued...
