Trucking companies that don’t control risk don’t last. And it all starts with a strong safety culture.
There’s no shortage of great ideas about how to become a safer company. But time and time again, we see these great ideas come up short. They never get implemented. Or they just don’t catch on.
This is what happens when you forget to lay the foundation.
On the other hand, there are many companies where the leadership team not only buys in, but is relentless in their commitment to culture and safety. In these companies, the leadership teams live it every day. And everyone takes notice.
This is something that you can’t fake. It must be non-negotiable and you cannot be caught making exceptions to get a load delivered.
Each step that you take towards improving your safety culture will be questioned (and to some extent, resisted). It’s important to always be able to explain the WHY behind each of these decisions. When people understand why something is done, it’s a lot easier to support the mission. As Jeff Shefchik, President of Paper Transport, says:
“Each time you make a change, you need to explain why you made that change to the drivers so that you get their buy-in. At the end of the day, they will really understand how important safety is as a part of the culture and the values of the company.”
If there’s a single example that epitomizes the ideal safety culture it is Nussbaum and their focus on driver performance and accountability. Nussbaum and HNI launched Nussbaum’s Driver Excelerator program to measure performance in the areas of Safety, Operations, and Fuel. Brent Nussbaum, CEO, led the charge and explained how this program reinforced the company’s values.
Over the past 5 years, Nussbaum has pushed the program farther than anyone else in the industry – and now it is simply part of their culture.
When a loss does occur, simply reporting it to the insurance company isn’t enough.
There are many factors that go into determining the volatility of a settlement. We use the following Claim Volatility Formula to assess how likely you are to get stuck with a big verdict.
Claim Volatility = PA + S + AF + D + UJ
PA: Plaintiff Attorney that is highly competent and well-funded; S: Serious injury or death; AF: Aggregating Factors (Hour of Service, Drug Use, CSA, etc.); D: Disorganized defense or strategy team; UJ: Unpredictable Jury or poor venue
At this point, you have built a culture that takes ownership in behaviors. You’ve put processes in place to proactively address claim settlements. And you are positioned to double down.
You are an elite company. Which means it’s time to up the ante and bet on yourself.
When you have the confidence that you are doing the right things, you can start to take more ownership of your risk (by selecting insurance tools that put your performance on the line). You’ll have more skin in the game. Your culture will get stronger. And you’ll be less dependent on insurance.
This extreme ownership pays dividends across the board.
Let’s go back to that big insurance check that you’re going to write over the next 5 years and reframe the way you look at insurance. The size of that check is determined by 3 factors: Cost of Risk, Expected Loss, and your Dependency Factor.
Cost of Risk: Your cost of risk is a combination of your insurance costs, plus what you are paying out-of-pocket for claims. This is the number we want to reduce.
Expected Loss: Your expected loss is based on your actual loss experience, paired with some ‘modifications’ that are used to predict how you’ll perform in the future. This is what drives your insurance rates.
Dependency Factor: Your insurance dependency factor is calculated by dividing your insurance premium by your Cost of Risk. This number, from 0 to 1, represents how dependent you are on insurance companies. If this number is close to 1, then you’re owning such little risk that you are at the mercy of your insurance company to determine how much you’re going to pay to finance your risk. The goal is to drive this number down in a responsible way.