Innovators: Plan of Action
By Avery Vise
Last summer, the key managers for O&S Trucking convened to review their performance according to the business plan for 2004. Heading into its annual mid-year review, the Springfield, Mo.-based carrier seemed to be following the financial and operational objectives it had set six months earlier, but there was a glaring problem.
President Jim O’ Neal and Charlotte Eckley, chief business development officer, lead the strategic planning efforts that have resulted in major changes at O&S Trucking.
“We saw that we weren’t hitting our numbers because we weren’t filling all the trucks,” says O&S Trucking President Jim O’Neal. The game plan was based on operating 390 trucks, but O&S Trucking was operating only 350. Management left the session, which spanned several days, with a resolve to tackle the problem. “We needed to do something to offset empty trucks and the loss of owner-operators.”
O&S Trucking started by reallocating resources. “We took an outside salesperson and put him in truck stops looking for drivers,” says Charlotte Eckley, O&S Trucking’s chief business development officer, who is responsible for marketing, strategic planning, recruiting and other functions.
But soon a bigger opportunity arose. One of O&S Trucking’s large shippers was using another carrier that filed for Chapter 11 bankruptcy protection and announced that it would be filing Chapter 7 and liquidating. Despite the carrier’s financial troubles, it had good freight that would fit well within O&S Trucking’s business.
More importantly, the failing carrier had a great driver force – generally five to 25 years of experience – and an excellent safety record.
O’Neal quickly began negotiating a solution that would keep the operation together under O&S Trucking ownership. In December, O&S Trucking brought over 53 drivers as well as two fleet managers in a mostly seamless transfer.
The drivers were happy, and O&S Trucking had solved its problem. “We filled our empties, which put us back to plan,” O’Neal says. “By the fourth quarter, we were within 3 percent of plan.”
The management of O&S Trucking didn’t need a mid-year review to tell it that it had a driver recruiting challenge. But the review pinpointed driver supply as the fundamental reason O&S Trucking wasn’t making its numbers and brought everyone together to seek a solution. That resolve opened O&S Trucking to the opportunity.
A major new direction
If 2004 sounds like a triumph of planning at O&S Trucking, it has nothing on 2003. The problem addressed at the mid-year review was different but no less challenging. The carrier’s largest shipper – representing as much as 50 percent of its business – was planning to rebid all existing lanes without giving an edge to incumbents. The carrier risked losing a huge piece of the account at the end of 2003.
O’Neal and his team also discussed an emerging economic rebound and tightening capacity due to thousands of trucking company failures and the upcoming revision in hours-of-service regulations. O&S Trucking needed to diversify to protect itself from the possible loss of business, and the carrier could capitalize on the industry’s capacity crunch by growing its own operation.
The mid-year review led to a decision to diversify into food as freight because it wasn’t vulnerable to economic cycles. And O&S Trucking managers agreed family-owned businesses were good targets for capacity in that segment. Many had entered the market after the 1980 deregulation act and were facing succession challenges. So O&S Trucking, which operated only dry vans and had always grown internally, set out in July 2003 to grow through acquisition in the refrigerated sector.
In three separate acquisitions completed between Thanksgiving and New Year’s Day, the carrier created a new division, O&S Refrigerated, that today represents approximately 45 percent of the overall operation’s trucking revenues.
As vital as the company’s planning sessions are to O&S Trucking’s strategic success, they also bring benefits that are more fundamental, Eckley says. Key managers are expected to examine their areas of responsibility, identify key issues and deliver PowerPoint presentations to the whole management team. That process has led to greater self-confidence among managers, Eckley says.
Gaming the system
Planning at O&S Trucking isn’t just a twice-yearly event. The process starts several months before the beginning of the year when managers begin drafting plans and projections for the coming year. By yearend, there is a plan for the year with specific numbers set as goals. Each week, key managers in all departments huddle to report key metrics – about 25 of them – and compare them to plan. They can also play with numbers, estimating the impact of squeezing out another tenth of a gallon in fuel economy, for example.
O&S Trucking wasn’t always so committed to planning. Like many other carriers, the trucking company grew rapidly in the 1990s, realizing annualized growth of about 18 percent from 1992 to 1999. And also like many other carriers, O&S Trucking’s growth wasn’t according to any strategic plan. “We could grow, so we decided to,” O’Neal says.
The carrier hit a crisis in 1995. “We were growing fast, and we were literally growing broke.” O&S Trucking had to determine what was wrong and fix it. O’Neal and his team decided that they needed to enhance their measurement capabilities, examine work processes for efficiencies and capitalize on the latest technologies. They dabbled with some of the popular business fads, such as total quality management, or TQM, and other concepts of continuous improvement.
O’Neal credits the formulation of his company’s management approach to developments at another company based in Springfield – SRC Holdings. Taking over the heavy-duty component remanufacturing business as part of a management buyout in 1983, Chief Executive Officer Jack Stack led a dramatic turnaround based on the principles of open-book management and instilling employee empowerment and ownership. He chronicled those achievements and philosophies in The Great Game of Business, a best-selling business book published in 1992.
O’Neal got to know Stack personally and saw that the Great Game principles meshed well with the direction he was already taking O&S Trucking. He even hired Eckley from SRC about three years ago to help set strategic direction. O&S Trucking has adopted quarterly and annual incentives based on company performance and in January 2000 advanced the cause of ownership by establishing an employee stock ownership plan.
“We believed in psychic ownership,” O’Neal says. “Now we wanted to create real ownership.”
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