Case Incident

JP Transport

Kendall Smith, the CEO of the large trucking company JP Transport, is faced with a persistent problem. Year after year, the company has seen the driver turnover rate continue to increase. High driver turnover is characteristic of the entire trucking industry. Still, Smith is determined to find a long$-$term solution to this problem. In total, turnover costs the trucking industry roughly $$8$ billion annually. Smith attributes the primary reason for high turnover to long hours and requiring employees to be away from home for long periods. Smith is concerned that the lost productivity is a significant cost for the company.

Smith concludes that these lifestyle factors are simply part of the job, and as such, this job might not be the best fit for everyone. Unfortunately, these lifestyle factors are essential to the job, and truckers can do little to mitigate these effects. Instead, Smith proposes that the company institute an increase in driver pay. This pay increase would offset the job's less desirable qualities and hopefully attract new drivers looking for a high salary. Smith believes the additional personnel costs will be less than the cost of unmotivated and thus unproductive drivers. Ultimately, Smith thinks a pay increase will lower the turnover rate.

One year later, Kendall Smith is dismayed to find that the turnover rate only decreased moderately despite the substantial increase in drivers' salary.