The 12 Traits of Highly Profitable Trucking Companies: Transparency and Financial Literacy as Core Values
KSM Transport Advisors (KSMTA) has worked with over 200 trucking companies since our inception. Our primary service focuses on guiding trucking company leaders in understanding their freight network and determining strategies to improve the density, velocity, and ultimately the profitability in the geography in which they operate. In delivering this service, the KSMTA team has observed and documented 12 key traits of highly profitable trucking companies. This article is part of a series highlighting one of those 12 traits.
The term “Quiet Quitting” came out of nowhere in 2022 and has become a popular topic in keynote speeches and workplace-related articles. Despite the term’s rise to prominence, the behaviors associated with the catchphrase have been around since the dawn of the industrial age.
Quiet quitting refers to doing the “minimum requirements of one’s job and putting in no more time, effort, or enthusiasm than absolutely necessary.” Aside from being a great way to generate clicks and followers for social media influencers, it does highlight the reason for this type of conduct: a misalignment of organizational values with those of its employees. The key question becomes, “what are the key values a company can embody that will be embraced by its stakeholders and lead to alignment?”
A common denominator of many trucking companies is the path taken in their growth from being a single truck owner-operator to a 200, 500, or even 5,000 truck fleet today. Along that path, each company has experienced their fair share of turmoil, existential moments, and milestones that had never been thought possible when their motor carrier registration was secured. Along that path, some companies diverge from the pack and can generate a consistent return on investment that might be found in an industry that does not share the endless variables and risks that are common in transportation.
Transparency and Financial Literacy
Central among the values that exist within each of these organizations are transparency and financial literacy. Being transparent in life and business means openly sharing information and embracing the feedback of others, solicited or not. However, some feedback doesn’t pertain to the information shared. With the right systems in place, companies can capture enough useful (good) ideas to achieve a compound effect. Being transparent is one thing, but not providing the necessary skills to understand the open flow of data and communication is counter productive. This would be akin to providing access to a swimming pool, but not providing swimming lessons. That’s why it’s critically important to provide ongoing training in financial literacy to all levels of employees.
Before a company can embrace transparency, the shareholders must overcome their fears of the concept. What does transparency mean? At a high level, it means that every employee has access to the same revenue, cost, and profitability numbers as the executives. Plain and simple. The typical fears that this thought elicits are predictable, as is the response. The top fear that owners share about potentially adopting more of an open-book management model is an immediate visualization of a steady stream of employees asking for a raise. Based on our experience, this fear is completely unfounded. In fact, we will wager that most employees, once they understand the true profitability of a traditional truckload carrier, will be underwhelmed at the profitability of the company.
Want to test this? Over the past five years, we have conducted multiple surveys on behalf of our clients to gauge their employees’ estimate of average profitability. As part of another regular employee feedback survey, we included the following question:
Please provide your best estimate for the following:
- For every $1 of revenue generated by the company, how much is left after paying all expenses (i.e., wages, fuel, truck and trailer payments, insurance, etc.)?
Without fail, every client that has conducted this survey has experienced a similar distribution of responses. These responses always range from $0.01 to $0.65, with a heavy distribution toward the $0.01 to $0.06 range.
Gauging employees’ estimation of true profitability does not equal organization transparency. Again, this exercise is only meant to shed light on an employee’s understanding of the company’s profitability thus helping to address the owner and shareholder’s underlying and unfounded fears.
Sharing Data Responsibly
The next step is to establish a controlled cadence of meetings to begin to disseminate the key financial and operating statistics of the business which include the true unmodified profit number. Of this step, the most important factor is that the communications are “controlled.” Simply distributing the information can leave lots of room for misinterpretation. Doing this in a group setting allows for open discussion but, more importantly, provides instruction on what the numbers actually mean. It’s best to ask someone from the finance team to explain how the numbers are derived, and pair that person with an operations team member to describe the methods and tactics being taken to improve on some of them. This education can be paired with online learning. There are endless numbers of online courses available for all levels of sophistication on popular learning applications such as Coursera, Udemy, and EdX.
Over time, this continued practice of dissemination and discussion will instill transparency and financial literacy as core values, which will ultimately enhance the alignment between the company and its people. Additionally, it will generate new and unique ideas to build or enhance processes and systems to improve the business. This is the compound effect mentioned above. The values of transparency and financial literacy create empowerment as an adjacent value.
Once the foundational values of transparency, financial literacy, and empowerment are established, the next step will be understanding the levers for continuous improvement. One of the most proven levers for continuous organizational improvement is incentive compensation, which can be used to drive higher margins and employee retention. However, it must be implemented the proper way.
To learn more or discuss any of the ideas shared above, please contact a KSMTA advisor or complete this form.
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