Bottom Line Improvement through Performance

1 CostControlPresentation Copyright: CostDown Consulting 2009 Developed By:CostDown ConsultingPrograms and Training that ImproveDriver and Fleet Performance If we keep doing what we're doing, we're goingto keep getting what we're getting -Stephen R CoveyBottom line Improvement throughPerformance ManagementPerformanceManagementIntroduct ion to Performance ManagementIndustry analysts forecast that 2009 and 2010 are going to be toughyears for trucking companies as lower freight levels and excesscapacity continue through most, if not all, of the next two response, most truckers have already cut costs, reduced capitalspending and captured all the technology efficiencies possible;but formany that will not be presentation provides an overview of Performance Management a program that uses goals, training and financial incentives toimprove the Performance of your employees-and thereby improvethe Performance of your Bottom truckers do not have in place an effective PerformanceManagement Program.

2 Many do not even have assigned performancegoals for their employees. That is a huge opportunity employees direction, training and financial reward forimproved Performance is the most effective action truckers can taketo reduce costs, improve profitability and survive a difficult OverviewPresentation Overview: Outline the 4 basic steps of developing an effective PerformanceManagement Program that will improve Bottom line Scope: Discussion and examples deal primarily with PerformanceManagement of Terminal Operations Management Personnel Terminal Managers and Driver Managers those employees thatmost influence and control Driver and Fleet Significance: As you review this presentation, imagine the impact on your bottomline if every employee in your organization improved performanceby just to 1 percent. What would happen to profitability if LadenMile, Driver Productivity, Maintenance Cost per Mile, by to 1 percent?

3 That s the mission of PerformanceManagement to elevate the Performance of your employees inthose areas that most impact of Performance ManagementPerformance Managementis a program that improvesprofitability through the establishing of goals and a plan forachieving training presentation will overview the four basic stepsrequired to develop an effective Performance kpis ( Performance Goals) the Activities required to make those Reports & Financial Incentives for Goal AchievementBegin Establishing kpis ( Performance Goals) Performance Management Step 1 Establishing kpis A man without a goal is like a ship without a rudder. -Thomas CarlylePerformanceManagement1. Establishing kpis ( Performance Goals)The first step in developing your Performance ManagementProgram is to define your kpis ( Performance Goals).KPIis an acronym for Key Performance Indicators. kpis are theperformance areas most critical to your organization's trucking, examples of Operations kpis Mile Cost per Time DeliverySelect as yourPerformanceGoals the KPIsthat mostinfluence Establishing kpis ( Performance Goals)KPIsneed to be established for each employee type, with afocus on the areas of Performance those employees Examples by Employee Type Field OperationsDriver kpis : Miles Driven / Hours Worked / On TimeDeliveries / Accident Frequency / Damages / Idling TimeDriver Manager kpis : (For assigned Driver Group )LadenMiles / Driver Retention / Average Miles Driven / OnTime Performance / Average Hours Worked / Idling TimeTerminal Manager kpis : (For assigned Terminal )DriverManager Goal Performance / Laden Mile / AccidentFrequency / Injury Frequency / Maintenance Cost perMile / Driver Retention / ProfitabilityKPI Examples by Employee Type Field OperationsPerformanceManagement1.

4 Establishing kpis ( Performance Goals) Performance goals for each KPI are defined by starting with baselineperformance and then adding an aggressive but obtainable increaseNote: In the above example, we increased our Chicago TerminalManager s Quarterly 2009 KPI for Driver Productivity by ,22195,44294,90496,839 Improvement KPI by Quarter94,61996,87496,32898,2922008 Actual PerformanceAverage Miles Driven by all OTR Drivers: ChicagoTerminalKPI Calculation:Terminal ManagerPerformanceManagement1. Establishing kpis ( Performance Goals)Don t assign too many kpis as you will dilute employee at most 5 kpis in your Performance Management Manager KPIsQ1Q2Q3Q41 Driver Productivity (Avg Miles)94,61995,77796,00096,2002 Laden Time (Avg. ) Occurances00002009 Performance GoalsNote: Employees must believe that they have the ability andresources to influence (improve) their assigned kpis or yourPerformance Management Program will lack Establishing kpis ( Performance Goals)REVIEW:Establishing kpis for each employee typeDriver kpis : Miles Driven / Hours Worked / On TimeDeliveries / Accident FrequencyDriver Manager kpis :-For assigned Driver Group-LadenMile / Average Miles Driven / On Time Performance /Average Hours WorkedTerminal ManagerKPIs:-For assigned terminal-DriverManager Goal Performance / Laden Mile / AccidentFrequency / Injury Frequency / Maintenance Cost perMileKPI Examples by Employee Type Field Operations2.

5 Define goals using baseline plus anxxaggressive but obtainable increase3. Use at most 5 kpis for eachxxemployee typeQ1Q2Q3Q4 Baseline93,22195,44294,90496,839 Improvement KPI by Quarter94,61996,87496,32898,2922008 Actual PerformanceAverage Miles Driven by all OTR Drivers: ChicagoTerminalKPI Calculation:Terminal ManagerDriver Manager KPIsQ1Q2Q3Q41 Driver Productivity (Avg Miles)94,61995,77796,00096,2002 Laden Time (Avg. ) Occurances00002009 Performance GoalsPerformanceManagement1. Establishing kpis ( Performance Goals)DISCUSSION: Establishing KPIsKey Performance Indicators ( kpis ) are those Performance areasthat are most critical to your company s financial first step in establishing a Performance ManagementProgram is to select the 3-5 most appropriate kpis foreachemployee group, keeping in mind that employees within thosegroups must be able to influence (improve) their assigned Performance goals to each KPI involves adding an Improvement multiplier to each KPI baseline.

6 Therefore, uponmaking their goals, employees deliver a higher level ofperformance and increased profitability to the kpis are selected and calculated (baseline plus), thesecond step in development of your Performance ManagementProgram is to define the Activities required to make each Defining Activities to Make GoalsPerformance Management Step 2 Defining the Activities Required toMake Your Goals Setting a goal is not the main thing. It is deciding how youwill go about achieving it and staying with that plan. -Tom LandryPerformanceManagement2. Defining Activities to Make GoalsFor each KPI, you should define the most effectiveActivitiesthat will help employees from each group make their the best way to define these activities forfield management employees is to brainstormwith each employee group, list all activitiesthat might influence (improve) a particular KPIand then select the most effective conducting the brainstorming session, use the following3 step all Activities currently used to manage each KPI and thenhave the group select the most effective to your list New Activities that could improve performancebut currently lack supporting reports or the best Activities and make Notes on needed approvals,reports and resourcesPerformanceManagement2.

7 Defining Activities to Make GoalsAt the end of the brainstorming session, select and summarize theActivities to be used and include notes of supporting issues andresources that need to be Performance Goals for DriversNEED TERMINAL MANAGER TODEFINE GOALSC onduct Driver Performance ReviewsBI-WEEKLY OR MONTHLY?Use 'Weekly Mileage & Hours Worked Report'to monitor individual performanceCURRENT REPORT NEEDSREFORMATINGUse Recognition ProgramDEVELOP RECOGNITION PROGRAMI dentify individual driverobstacles/patterns: Start Time, Home Early,Too Much Eqpt Shopping ..CURRENTLY BEING DONE BYSEVERAL DRIVER MANAGERS - VERYEFFECTIVEC heck shop reports dailyREPORTS CURRENTLY AVAILABLEUse discipline where neededNEED FORMAL DISCIPLINE POLICYKPI Activities: Driver ProductivityPerformanceManagement2. Defining Activities to Make GoalsThe next step is to Resolve the issues identified in the Notes from yourbrainstorming that the COOresolved Driver Goalsand MeetingFrequency, and thatthe HR and ITDepartments also needs toguide development ofthe PerformanceManagement Programto ensure speedyresolution to problemsand consistency ingoals and RESOLUTIONNEED TERMINAL MANAGER TODEFINE GOALSG oals approved by COO: Local = 53 hrs On = 2008 avg miles/mo + OR MONTHLY?

8 Monthly per COO. Bi-Weekly would be too hard toschedule and negatively impact REPORT NEEDSREFORMATINGF ormat given to IT Department. New report will be ready3 RECOGNITION PROGRAMHR Department has completed. Includes plaques andgift certificates (ordered) for top 7% of BEING DONE BYSEVERAL DRIVER MANAGERS - VERYEFFECTIVED river Manager Jim Bonnor wrote summary of hisprocedures and shared with others. His trackingspreadsheet will be used by CURRENTLY AVAILABLENo Action FORMAL DISCIPLINE POLICYHR Department has completed. Policy alreadydistributed and training scheduled for 3 Defining Activities to Make GoalsFinally, summarize the Activities into a Standard Operations Procedures(SOPs) Manual for current and new hire Terminal Operations the SOP Manual Simple. Use outline format withat most one page per :How to Conduct a Driver Performance ReviewFREQUENCYOnce/MonthPURPOSER eview Current Performance &compare to goals. Issuenecessaryrecognition,coaching or Operations SOPsforTerminal Managers&Driver ManagersXYZ TruckingPerformanceManagement2.

9 Defining Activities to Make GoalsREVIEW:Defining Activities and Resource Needswith individual Employee Groups2. Assign Responsibility & Resolve ResourcexxNeeds (Corporate Oversight required)3. Outline Activities into a SOP Manual forxxExisting and New EmployeesACTIVITYNOTESSet Performance Goals for DriversNEED TERMINAL MANAGER TODEFINE GOALSC onduct Performance ReviewsBI-WEEKLY OR MONTHLY?Use 'Weekly Mileage & Hours Worked Report'to monitor individual performanceCURRENT REPORT NEEDSREFORMATINGUse Recognition ProgramDEVELOP RECOGNITION PROGRAMI dentify individual driverobstacles/patterns: Start Time, Home Early,Too Much Eqpt Shopping ..CURRENTLY BEING DONE BYSEVERAL DRIVER MANAGERS - VERYEFFECTIVEC heck shop reports dailyREPORTS CURRENTLY AVAILABLEUse discipline where neededNEED FORMAL DISCIPLINE POLICYKPI Activities: Driver ProductivityNOTESISSUE RESOLUTIONNEED TERMINAL MANAGER TODEFINE GOALSG oals approved by COO: Local = 53 hrs On = 2008 avg miles/mo + OR MONTHLY?Monthly per COO.

10 Bi-Weekly would be too hard toschedule and negatively impact REPORT NEEDSREFORMATINGF ormat given to IT Department. New report will be ready3 RECOGNITION PROGRAMHR Department has completed. Includes plaques andgift certificates (ordered) for top 7% of BEING DONE BYSEVERAL DRIVER MANAGERS - VERYEFFECTIVED river Manager Jim Bonnor wrote summary of hisprocedures and shared with others. His trackingspreadsheet will be used by CURRENTLY AVAILABLENo Action FORMAL DISCIPLINE POLICYHR Department has completed. Policy alreadydistributed and training scheduled for 3 Operations SOPsforTerminal Managers&Driver ManagersXYZ TruckingPerformanceManagement2. Defining Activities to Make GoalsDISCUSSION: Defining Activities to Make GoalsOnce your employees know where they are going (PerformanceGoals) they need to know thebestway to get there (Activities).Define Activities for every KPI within each employee group. Forexample, Driver Managers might need activities defined thatimprove Driver Productivity while Terminal Managers might needactivities that improve Terminal Laden Mile must be involved in every step of developing , Corporate s role is to ensure that the most effectiveActivities for each KPI are captured and published in the SOPM anual, and that all supporting resources are Field management team runs your daily operations andmanages a significant amount of your costs.