KNIGHT TRANSPORTATION: CEO maintains ‘hands-on’ approach to assure quality of growth

KEVIN KNIGHT

The Trucker News Services

12/15/2006

PHOENIX — Hollywood is famous for those acres of sprawling land they call movie studios.

Usually, you’ll find each studio has a closed front gate, usually characterized by ornamental ironwork, a guardhouse and swaying palm trees.

Within those studios, there are a collection of buildings and open spaces where they actually shoot the movie.

Most people called it “the back lot.”

Actors move from set to set, doing their best imitation of make believe.

A few hundred miles to the east in Arizona’s largest city, there’s another sprawling acreage of land with its own set of characteristics.

The front gate stands wide open, unmanned, extending its own nonverbal welcome to visitors.

Instead of palm trees, there are countless tractors and trailers.

There are a few buildings here and there, including one a few hundred feet inside the gate.

Kevin Knight, chairman and CEO of Knight Transportation and the man responsible for the place, calls what’s inside that building “the back office.”

But you won’t find any actors in this building nor others on the Knight lot, only real people who support a network of driving associates and employees at the company’s 27 service centers throughout the United States.

And Knight’s office is right in the middle of most of those 350 “back office” employees, close enough almost to communicate without a telephone or e-mail.

It’s a “just walk over and tell them what you need” sort of atmosphere and it’s by design.

“We’re a very hands-on bunch and always have been,” Knight said. “It’s very much an open architecture in our organization and I would say it’s by design. I like to be involved.”

Knight says the open architecture strategy has been a primary factor in the development of a strong and positive corporate culture.

“Very, very committed, very hard working and very intent on learning and improving is how I would describe our culture,” he said.

It’s that culture to which Knight also attributes much of the company success in the 16 years since he and his family founded it — success that saw the company post revenue of $499 million in 2005, up 21 percent from 2004, and a net income of $61.7 million, up 28.8 percent from 2004. (Comparable 2002 figures were $279.4 million revenue and $27.9 million net income.)

But rather than dwell on numbers, Knight likes to talk about the quality of the growth.

“I would call it fast, but I would also call it quality,” Knight said. “The development of our people far and away is what we do far superior to anybody in the truckload business. We not only develop them, but we keep them because they are shareholders. So they are owners, too. I would say that if you had to pick one thing [that has contributed to the growth], that would be our ability to select, develop and retain high quality people.”

Retention includes the driver pool, too, he emphasized.

“Our driver turnover is probably about 50 percent of the average of larger truckload carriers and 70 percent of the smaller TL carriers,” Knight said. “Our brand is national carrier, local service. Our tagline is “Your Hometown National Carrier.” We have 27 service centers spread throughout the U.S. and each one of them feels small, feels nimble and feels unbureaucratic. Our drivers know that we value them. They know where to get an answer. We keep them informed. Every one of those service centers has its own newspaper and leadership and so we keep a small feel, yet we’re a larger company. We have a lot of resources, we have a lot of reach and capabilities that others don’t have.

“When you look at the truckload business, I don’t think anybody can match us. When you say I’m looking for a national carrier that provides local-feeling service, that’s who we are and I think that helps us a lot in terms of driver retention.”

The company works hard to maintain that local feel, beginning with how the company trains its future managers.

“We start our managers at the bottom and they learn from those of us who’ve been here longer,” Knight said.

Each service center has its own group of managers, financial statements, trucks and driving associates.

“Those managers have their own driver development people, safety people and shop people,” he said, “so they have their own team. We give them a lot of support [from the back office], but it’s really up to them to make things happen every day.”

Making things happen no doubt comes easily for Knight, because he and his family learned the business from a well-known trucking family.

Right out of high school, Knight went to work for Jerry Moyes and his father Carl at Swift Transportation.

“The Knights and the Moyes were always good friends,” Knight said. “We grew up in the same small hometown and I had the opportunity to go to work for Jerry and his dad Carl, who was somewhat active. I grew up in a small town, Plain City, Utah, which we consider to be the trucking capital of the world because you have Swift and you have Knight and you have C.R. England and Pride Transport that have all come out of that small town.”

Knight learned the business from the bottom up.

“The first thing I did was work out in the yard,” he said. “Occasionally, we’d have loads that needed to be unloaded or trans loaded. The first job I did inside was in the safety and driver recruiting and working with the drivers. Swift had about 25 trucks and maybe five, six or seven owner-operators, but it wasn’t very big.”

He worked his way up in the Swift organization in various jobs, including dispatch and the development of new terminals and facilities.

By 1990, he was executive vice president Swift and president of Cooper Motor Lines, a division of Swift.

His brothers also had Swift connections.

Gary was executive vice president of Swift Transportation, Keith was vice president and manager of Southern California operations and Randy was a 25 percent shareholder of the company.

But in 1990, Swift was getting ready to go public, so the Knights decided to venture out on their own and start Knight Transportation.

Randy was chairman, Kevin was CEO, Gary was president and Keith executive vice president. Today, Kevin is chairman and CEO, Gary is vice chairman, Keith is chief operating officer and Randy is a director.

“Our family had invested an enormous amount of time in the Swift organization and Swift was in the process of going public, so we thought it was time to try it on our own,” Knight said. “We wanted to build a better trucking company, felt like we could and felt like we had the experience to do it. We wanted to build a highly profitable, high service, very close to our driving associates type of business. I wasn’t afraid of a little risk, but left a very good job and took on a considerable amount of debt to do it. We really never looked back and really expected to do well. We definitely expected to do well.”

Knight recalled his time spent with Moyes as an excellent experience.

“Jerry was very entrepreneurial and I was fortunate to spend a lot of time with Jerry and with his dad and brother and with Randy [the oldest of the four Knight brothers]. They [Jerry Moyes and Randy Knight] were older than Gary, Keith and I. I really learne