Deciding which people to keep is far more important than deciding which jobs to eliminate; and there is a huge and important difference.

Too often, companies make the mistake of overlooking employee value and taking the easier approach of eliminating jobs based on pay grade and job description. Cutting higher paid employees means less total employees have to be severed. Eliminating employees based on job description is easier because it depersonalizes the severance; associating it with the job, not the individual.

The best approach is to rank all corporate employees based on their value to the company, regardless of current job position. Identify your severance group by working from the bottom up of that list until you have met your budget goals. Next, determine which jobs (not people) can be cut and then rotate the employees you are keeping yet whose jobs have been eliminated into new positions.

Keeping the highest value employees and placing them in roles where they will provide the most benefit is critical to the long term success of a trucking company.

Labor costs and operating efficiency are the benefits of the General Manager Staffing Model (GMSM).

Depending on your specific wage and bonus structure, the GMSM applied to a group of three terminals will reduce labor costs in the range of $25,000 - $50,000. That estimate combines the reduced salaries and bonuses at the two Assistant Manager locations with a higher salary and bonus opportunity for the General Manager (GM).

The GM should have a higher earnings potential than what the eliminated Terminal Manager positioned paid. He/she has greatly increased responsibility and the potential to significantly improve operating efficiencies for the terminal group.

Network efficiency, as measured by laden mile performance, should increase as one person in now accountable for combined terminal performance. That will result in a more equitable exchange of loads as dispatch planning will now favor group vs. individual terminal goals.

Operating improvements in other areas will also be realized due to the stronger leadership abilities of the GM. Remember the concept of the GMSM is that the strongest performing Terminal Manager is promoted to the GM position. That leadership ability should drive increases in driver and fleet productivity along with improved cost control.

Wages reductions should be proportionate to salary levels. Higher paid jobs should receive more of a cut than lower paid jobs. Keep in mind that a $1,000 reduction for an employee making $80,000 might be uncomfortable but for an employee making $30,000 it could be a life changing event.

Pick a wage floor where wages wouldn’t be reduced – for example anyone making $33,000 or less per year will not have their wages cut. From there, use a graduated scale such as a 1% reduction for employees making $34 - $40,000, a 2% reduction for employees in the $41 - $50,000 range and so on.

Consider an offsetting bonus program to supplement wage reductions. Establish company, terminal and individual goals that, when reached, generate significant enough savings to fund employee bonuses. Providing additional earnings opportunities, particularly after wage reductions, could spur significant performance improvements from many of your employees.

If you have no other choice but to keep a vendor that won’t provide a discount, there are several other ways that vendor can help you with your costs.

The first is credit terms. Payment cycles impact cash flow so requiring a vendor to provide more favorable terms (i.e. move payment cycle from 30 to 60 days) will improve your cash flow situation and reduce near term borrowing needs.

The second area is inventory levels. Place the inventory burden on parts suppliers where possible. Require increased delivery frequencies so you don’t have to stock as many parts and thereby reduce the amount of cash you have sitting on the shelves.

Finally, examine the service levels that vendors provide to see if you can do with less (at less cost) or more (at no additional cost). For example, reduce lawn mowing or floor cleaning frequencies from weekly to bi-weekly to reduce costs while requiring parts providers to stock shelves or provide training as part of their services at no additional cost.

Candid and frequent communication is the best way to restore confidence and build morale after reductions in jobs, wages and benefits have occurred.

Immediately after the cuts and reductions have been made, schedule a series of conference calls with your employees. Make sure that the schedule provides an opportunity for all shifts and locations to hear the discussion.

During the call, explain the impact the recession has had on the industry using specific examples of other trucking companies and the cuts they have been forced to make. Let them know that the severance and wage reduction decisions were difficult as you consider all employees part of the company family but you also realize that for the company to survive, jobs had to be eliminated and wages reduced.

Be honest about the budgeting process. Explain that you believe you have made sufficient cuts to survive reduced revenues but if freight levels decline further, additional action may be necessary. While it would be comforting to assure everyone that the last of the cuts were made, it would seriously damage your credibility if further reductions became necessary.

Finally, let your people know that you were personally involved in the budgetary process to make sure that the highest performing employees were retained. Emphasize that productivity and quality of work are critical going forward because controlling costs while increasing driver, fleet and network performance are the surest ways to maintain the employee base that remains.