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June 27, 2011 8:00 AM, EDT

By Rip Watson, Senior Reporter

This story appears in the June 27 print edition of Transport Topics.

Driver turnover at larger truckload fleets reached the highest level in nearly three years during the first quarter as higher pay, aggressive recruiting and increased freight demand prompted drivers to find new positions, according to American Trucking Associations.

Industry representatives said turnover, or churn, would continue to increase.

The ATA’s June 23 report said turnover reached 75% in the first quarter of 2011 for fleets with revenue of $30 million or more, nearly doubling the record low of 39% in last year’s first quarter and reaching the highest level since the second quarter of 2008, when it was 85%.

Smaller truckload fleets, those with sales less than $30 million, saw turnover rise at the slower pace of 50%. By comparison, the turnover in that group was a record low of 35% a year ago.

“The driver market is tightening, as we hear reports nearly daily of carriers not finding enough drivers,” said Bob Costello, ATA’s chief economist. “When the driver market tightens, turnover increases, as drivers tend to jump from carrier to carrier for various reasons — including carriers aggressively recruiting drivers.”

The increased turnover also was apparent on a quarter-to-quarter basis from the fourth quarter of 2010 to this year’s first quarter.

Turnover rose six percentage points from 69% in last year’s fourth quarter among larger fleets and inched up from 49% to 50% among smaller carriers during the same period.

Turnover remained low at less-than-truckload fleets at 8%, up slightly from 6% in the year-earlier period.

Experts agreed that turnover will keep rising.

Former driver and recruiter Kelly Anderson, CEO of Impact Transportation Solutions, said he believes second-quarter churn will reach nearly 100%.

“There is a lot of pent-up turnover,” Anderson told Transport Topics on June 23. “Drivers are looking for greener pastures. Drivers are looking to make some money.”

Anderson said that during the recession, carriers “were spending zero recruiting dollars, but they had three times the number of applicants, and they were the best qualified,” which was a sign of driver restlessness.

Steve Prelipp, an industry consultant and former Schneider National executive, agreed that turnover will continue to increase as demand increases and fleets are forced to raise pay.

“The trend is definitely up,” Prelipp said. “How fast and how far will be hard to say. The driver shortage will get more severe, and that will drive turnover up and capacity down.”

ATA’s Costello agreed.

“With the economy continuing to recover from the ‘great recession,’ the implementation of new regulations and the number of retirees outpacing the number of drivers entering the industry, I expect to see the turnover rate continue to rise,” Costello said.

Fleets have “a desire to grow, but there is not the ability to grow,” Prelipp said, because some driver training schools have closed and the number of new drivers entering the industry has dropped 50%.

Prelipp said that despite a driver shortage, turnover is being triggered both by companies that remove unwanted drivers and drivers who want to find a new fleet.

ATA’s report showed a marked change in turnover patterns between larger and smaller fleets, as the gap of 26 percentage points between larger and smaller fleets’ first quarter 2011 turnover was the largest since late 2007, when the gap was 30 percentage points.

During the first quarter, larger fleets’ linehaul driver hiring rose 18.7%, but 18.8% of drivers left the companies. Smaller fleets increased their linehaul driver ranks by 15.2% during the quarter, while losing just 12.7% of drivers for those trips.

Anderson said the personal touch could help smaller fleets.

“Smaller fleets’ drivers tend to be more informed, Anderson said. “They know things are better there, that there are more opportunities there. The management knows everybody.”

Richard Mikes, a former Ruan Leasing chief financial officer, agreed that smaller fleets “seem to relate better to their drivers. The driver is definitely viewed on a personal basis.”

Mikes, now a principal at Transport Capital Partners, said smaller fleets tend to have shorter lengths of haul, which gives drivers more time at home, near company headquarters.

“We have seen over the last year that larger carriers are having more perceived concerns about finding drivers than smaller carriers,” Mikes said. “The personal relationship can’t be understated — it’s important in any organization’s team building. You can get by with less of that when drivers’ alternatives were limited.”

Anderson and Prelipp offered tips to manage turnover. Drivers also want the predictability of a regular schedule and home time, Anderson said, which will force fleets to “get on the communications bandwagon” to improve driver relationships.

Prelipp believes drivers’ early experience with a carrier is a key to retention because half of turnover occurs within 180 days of hiring.